An Evaluation of John Maynard Keynes

[p008] AN EVALUATION OF JOHN MAYNARD KEYNES Whatever his feelings in the matter, or those of his followers, we shall argue that in all essential respects Keynes continued in the method of the old system and was unable adequately to break from it. In other words we shall challenge Keynes’ interpretation of the development of economics during the nineteenth and early twentieth cen- turies. In particular we shall reject the central importance which he ascribes to Say’s Law. Keynes, at the commencement of the General Theory, has a very important passage in which he comments, in passing, upon these matters: ‘“The Classical economists’ was a name invented by Marx to cover Ricardo and James Mill and their predecessors, that is to say for the founders of the theory which culminated in the Ricardian economics. I have been accustomed, perhaps per- petrating a solecism, to include in “the classical school” the followers of Ricardo, those, that is to say, who adopted and perfected the theory of the Ricardian economics, including (for example) J. S. Mill, Marshall, Edgeworth and Prof. Pigou.’? This passage, a mere footnote on the first page of Keynes’ work, has been quoted in full be- cause it provides the key to the understanding of his role in the evolution of bourgeois economics. What Keynes is here suggesting is that there is an essential unity in the evolution of economic method throughout the nineteenth century up to and including the contribution of Marshall and Pigou. This unity, according to Keynes, as he makes clear in the first chapter of the book, was based upon a common acceptance of Say’s Law, of the automatic regulation of the capitalist system. This view of the development of political economy during the nineteenth century is funda- mentally different from that of Marx and his followers.!0 Marxists place the break in the unity of the Classical School with the death of Ricardo and the attacks upon his theoretical system. In Marx’s view, the Classical School reaches the high point of its achievements with the systematic treatment of the social relations of capitalism found in the work of Adam Smith and especially of David Ricardo. In the work of these two writers is found the most objective and coherent understanding of the laws which regulated produc- tion under capitalism. Their work represents the high-water mark of the achievements of English Classical Political Economy. In Smith’s Wealth of Nations and Ricardo’s Principles is found, in Marx’s view, an examination, in scientific terms, of the real relationships of ‘modern’, that is capi- talist, society. Their work was ‘objective’ in the sense that its starting-points were the laws, 165. independent of man’s will or consciousness, which operated in the process of production and ex- change under capitalism. After the death of Ricardo there was, in Marx’s opinion, a general retreat from this method and towards a more abstract method which had little in common with political economy. After Ricardo the leading figures in what Marx called the ‘vulgar school’ in contradistinction to the ‘Classical School’, were concerned with the relationships between the con- sumer and ‘material goods’. This was revealed above all in the evolution of value theory—the cornerstone of political economy— which assumed an increasingly subjective form, in sharp contrast to the labour theory of value in the Classical School, which, despite many crudities and even inconsistencies, was an attempt to express value in social terms as an expression of the social relations between men when they entered into relations of production. The movement away from the method of the Classicists started in the 1820s and ’30s with the work of writers such as Bailey, Longfield, Nassau Senior and others, amongst them those ‘neglected Economists’ in the history of economic analysis.!! By the 1870s this process was virtually complete, and economic orthodoxy, in the field of theoreti- cal work at least, was dominated by one variant or another of a subjective form of value theory. Thus although Jevons, in his well-known egotistical outburst, was largely mistaken, when, in the 1870s, he arrogantly claimed: ‘In the last few months I have, fortunately, struck out what I have no doubt is the true Theory of Economy so thorough going and consistent, that I cannot now read other books on the subject with- out indignation.’!2 he was correct to the extent that his work did give a systematic form to developments which had been taking place over the previous fifty 9, Ibid., page 3. 10. Karl Marx, Theories of Surplus Value, Moscow, FLPH, 1964, Vol. I. In what follows the term ‘Classical Economics’ will be used in the sense in which Marx uses the term, i.e. to denote that phase in the evolution in political economy in France and England which culminated in the work of David Ricardo. For post-Ricardian developments the term ‘neo-Classical’ will be used. ll. E, A. R. Seligman ‘On some neglected British Economists’ Economic Journal Vol. xiii, 1903. R. L. Meek ‘The Decline of Ricardian Economics in England’ Economica, Feb. 1950. 12. Letters and Journal of W. Stanley Jevons, edited by A. Jevons, London, 1886, pages 151-152.

[p009] 166 years. These developments were, to emphasise our main point, to turn away from an examination of the social relations of production as the basis of the discipline: to move from ‘political economy’ to ‘economics’ as the study of the rewards and sacrifices encountered in the course of production. Or, as Jevons put it, economics was from now on- wards to be based upon a ‘Calculus of Pleasure and Pain’.!3 The logic of these developments was, as Oscar Lange has recently reminded us, to trans- form political economy into a branch of praxiology. In this sense it was left to Marx and his followers to continue in the great methodological tradition of the Classical School. Keynes did not accept this interpretation of these developments in the subject. Indeed his redefinition of the ‘Classical Economists’ testifies to this. For Keynes, acceptance of Say’s Law was the crucial and central factor. But Say’s Law was only one aspect of the development of economic theory in the nineteenth century, and by no means the most vital. Marx made stringent criti- cism of post-Ricardian economics, with its vulgar theory and method. This does not imply that Marx accepted the whole of Classicism as a finished and complete body of doctrine. He was acutely aware of its serious limitations. His main attack upon Ricardo and Smith centred upon their ahistorical approach to social phenomena: he criticised the inability of both these writers to see capitalism as an historically limited social system. Further, he proceeds to show that the illogicalities in their theoretical work—their con- fusions over value theory, their inability to dis- tinguish accurately ‘productive’ from ‘unproduc- tive’ labour—stem precisely from this anti-histori- cal approach. One aspect of this approach lay in the inability of the whole Classical School, includ- ing Ricardo, its leading representative, to achieve an understanding of the possibility of crisis in the development of the capitalist system. Ricardo had explained crisis in terms of factors imported from outside the system, in his case from the sphere of agriculture. In Theories of Surplus Value, Marx demonstrated that this profound weakness in Ricardo’s understanding of crisis stemmed from the fact that his vision was confined to the limits of the capitalist mode of production: that he was unable to see outside the ‘parallelograms of Mr. Owen’.!4 Ricardo’s implicit acceptance of Say’s Law was treated with a mixture of scorn and dismay by Marx. ‘This is the childish babbling of a Say, but unworthy of Ricardo.’ If only Keynes had possessed the consciousness to explore those ‘underworlds’ which he treats with such contempt FOURTH INTERNATIONAL, NOVEMBER 1966 his ‘struggle of escape’ might have been con- siderably less protracted and painful and more successful. Dismissing Say, Marx points out: ‘Nothing could be more childish than the dogma that, because every sale is a purchase, and every purchase a sale, therefore the circulation of com- modities necessarily implies an equilibrium of sales and purchases. ... No one can sell unless someone else purchases. But no one is forthwith bound to purchase because he has just sold. . . If the split between the sale and purchase become too pronounced the intimate connections between them, their oneness, asserts itself by producing—a crisis.’!5 The inability of the Classicists to achieve a coherent crisis theory was not due to any intellec- tual deficiency on their part, as Keynes seems to imagine. This School contained in its ranks men of outstanding achievement, even genius. Their failure stems from the fact that they were trapped in categories of thought which were limited to the capitalist form of production. In any case, their theoretical work played a vital ideological role in the struggle against the landed interest, the lead- ing representative of which was Malthus. To admit that the process of capital accumulation might suffer from internal contradictions which would lead to crises and dislocation would have been a powerful weapon in the hands of those who were opposed to the emergence to a position of dominance of the capitalist system. The rapid expansion of the capitalist system in the latter part of the eighteenth and early part of the nine- teenth century was reflected in the absence of a systematic crisis theory in the work of the ideologues of this process. This, at least in part, explains the eventual triumph of the Ricardian economics over that of its opponents. Because Keynes. has no real understanding of the ideologi- cal, as opposed to the ‘scientific’? and narrowly ‘positivist’ role of social science he is unable adequately to explain the continued existence of the glaring weaknesses of his intellectual ante- cedents. The long dominance of Say’s Law re- mains ‘something of a curiosity and a mystery’!6 although he does at one point appear to see a glimmering of the real factors involved. In the 1930s capitalism had now reached a point in its advanced development (imperialism) when Say’s Law as an expression of the smooth functioning of the system was hopelessly outdated as Keynes 13. Ibid., 14. Peter Jeffries, ‘On the Development of Marxist Political Economy’, Marxist Vol. 3 No. I. 15. Karl Marx Capital, Vol. I. 16. General Theory, pages 32-33.

[p010] AN EVALUATION OF JOHN MAYNARD. KEYNES instinctively realised. He was however unable to see the material and intellectual basis of this degeneration in terms of the degeneration of the methodology of political economy and the social sciences in general. Presumably he was ignorant of the heated debate which had been proceeding amongst Marxists since the beginning of the cen- tury about the nature of capitalist crisis, including amongst others Lenin, Rosa Luxemburg and Bukharin.!7 Keynes’ lack of clarity and understanding about the real significance of these developments is, on this view, crucial. He does not stand alone in these respects. Alfred Marshall, the outstand- ing representative of the neo-Classical School prior to Keynes, was also guilty of serious mis- understandings. In his famous Principles he con- sciously tries to show that his theory of value shares much in common with that of Ricardo and attacks people such as Jevons who had pointed openly to the newness and novelty of their approach.!8 This attempt to reinterpret the ‘history of the theory’ was noted at the time by Wicksteed, although he explains it in terms of Marshall’s ‘modesty’.!9 Joseph Schumpeter, in a similar manner, divides up his history of economic analysis at the 1790s; that is Ricardo is included in the later phase of developments (com- pared to Smith) which embraced the growth of marginal and other subjective forms of value theory.2° Eric Roll, in his popular work in this field, adopts an historical periodisation of theory which, broadly speaking, would be shared by most Marxists. He notes in passing that his treatment of the Classicists differs from that of Keynes, although the significance of it appears to escape him,?1 These are not pedantic points. An objec- tive history of the development of economic analysis requires a scheme which is able to ex- plain and highlight the qualitative changes in method between different periods and to explain this as part of the evolution of society as a whole. Otherwise, there is a great danger, as Engels and others have pointed out, of an abstract and formal view of social development which can explain nothing.22 The decisive question in evaluating Keynes’ role and the significance of the so-called ‘revolu- tion’ for which he was supposedly responsible is whether Keynes was able to extricate himself from the formal and subjective method of his predeces- sors. This demands an investigation of the methodological foundations of Keynes’ most thoroughly worked-out statement of position, the General Theory. 167 The General Theory is constructed around three ‘independent variables’ which, in combination, deter- mine the limits within which the capitalist system fluctuates. These three variables are the ‘marginal efficiency of capital’, the ‘rate of interest’ and the ‘consumption function’.23 They are ‘independent’ in the sense that the value of any one cannot be deduced or inferred from the others. The ‘con- sumption function’ is the relationship between movements in income and movements in con- sumption. In Keynes’ view a rise in income tends to produce a less than proportionate increase in consumption. As income rises, that is, the average propensity (or tendency) to consume diminishes. The ‘gap’ between income and con- sumption tends to grow: in Keynes’ terminology this ‘gap’ is designated ‘savings’, As income grows, the tendency, or propensity, to save in- creases. The ‘marginal efficiency of capital’ Keynes defines as the anticipated return on any additional unit of capital investment. When, in the opinion of investors, the marginal efficiency of capital (characterised in the General Theory in the form of a stream of anticipated income) falls too close to the current rate of interest, that is to the cost of borrowing money, the rate of addition to the stock of capital will tend to fall. In other words the rate of investment will slacken off. The ‘rate of interest’, Keynes’ final ‘independent variable’, is determined by (i) the strength of the ‘natural’ desire which people have for holding their assets in ‘liquid’ form and hence the payment (interest) which they demand for parting with this liquidity and by (ii) the quantity of money in existence, 17. E.g. V. I. Lenin Imperialism, Rosa Luxemburg The Accumulation of Capital. 18. Alfred Marshall, Principles London, 1920 Appendix I. 19. P. H. Wicksteed Common Sense of Political Economy, Vol. II, London 1933, page 819. 20. J. A. Schumpeter History of Economic Analysis, New York, 1954. 21. Eric Roll A MHistory of Economic T hought, London 1953 page 483. In some respects this particular history of the development of economic thought is nearer to Marxism than most expositions. But Roll misunderstands the place of Keynes. He looks upon his work as constituting something of a return to the early traditions of Classicism (page 480) and he looks upon the Keynesian ‘Revolution’ as one not in the form which particular aspects of traditional theory took (the view expressed in this article but rather as a revolution in the basic methodology of the subject (page 486). 22. See especially F. Engels, Anti-Duhring. 23. General Theory, pages 245-246. (Eighth Edition)

[p011] 168 which can be controlled by the Central Bank. These are the ‘key variables’ which we shall analyse in more detail. They are related in the Keynesian model in the following way: as total income increases with the development of society, there is a tendency for both the absolute and rela- tive amount of resources which are saved (that is, not consumed) to increase. Unless this increased volume of saving is successfully channelled into investment (that is, into additions to the stock of capital) the value of the national income will fall to a point where savings (this time out of a re- duced volume of income) are once more forced down into line with investment. Savings, at the end of the process, will always be equal to in- vestment but the equality will be produced via fluctuations in the level of national income.?4 The crucial question for Keynes was therefore an examination of the conditions under which profit- able investment could occur. He explained the stagnation of the ’30s largely in terms of the increased difficulties in finding profitable invest- ment outlets for an increased volume of savings. The situation was made worse, in Keynes’ view, by a tendency which he felt was in operation, which produced a steady fall in the rate of profit, or more strictly, to use his vocabulary, in the marginal efficiency of capital. Because of this tendency it was the responsibility of the state to force down the rate of interest as a means of in- ducing more investment. If investment could be stimulated in this way, then enough income would be generated to provide sufficient savings to ‘match’ the initial increment in investment. The process by which income would be generated and the size of its increase, Keynes explained in terms of his concept of the ‘multiplier’.25 Briefly, if the marginal propensity to save were known, the multiplier would be its inverse. In other words, an increase in investment would generate extra income which was limited in size only through the ‘leaks’ which would occur as a result of savings. The rate of interest, in Keynes’ view, could be altered, given a known schedule of liquidity preference, by variations in the money supply. An increase in the money supply, under conditions postulated above, would cause a fall in the general rate of interest. The most important variable in the system was undoubtedly the marginal efficiency of capital, or the anticipated rate of profit. As the rate of in- vestment proceeds and the volume of capital grows greater so it becomes ‘less scarce’ and its marginal efficiency, argues Keynes, tends to decline. As Keynes admits, the marginal efficiency of capital FOURTH INTERNATIONAL, NOVEMBER 1966 is a highly psychological phenomenon: or as he expresses it, it represents ‘the psychological atti- tude to future yields from capital assets’ and is largely dependent upon ‘expectations’. Thus Keynes has no conception of the social origin of profit: its movement is also highly dependent upon subjective factors. As Keynes explains, his expectations are born of ‘animal spirits’ and based upon the irrationality of the stock market. Keynes is here guilty of inverting reality: the movement of profit is reflected in the movement of stock prices and not the other way round. This is not to deny the role of an analysis of the place of the stock exchange in a fully worked out picture of the development of crises. But these factors are strictly secondary ones which may explain the form taken by a particular crisis, but can never determine its basic form. They can never, that is, determine the ‘laws of motion’ of the economic system. How does Keynes explain the process whereby the marginal efficiency of capital tends to decline over time? He does so in terms of the neo- Classical theory of distribution: in terms of the ‘scarcity theory of capital’, As more capital is accumulated in relation to the other ‘factors of production’, it becomes less scarce and therefore its ‘marginal productivity’ tends to fall. Under this ‘law’ the rate of return going to capital (profit) tends ‘naturally’ to fall. Such a ‘law’ has nothing to do with political economy. It abstracts com- pletely from the social relations of production and is a mere formal statement of identity. Further- more, it is based upon certain implicit assump- tions. Most important, it operates in a determi- nistic and mechanical way and only in one direc- tion (downwards). What is missing from the law is any conception of quality. It can recognise only quantities and can therefore recognise nothing new in the world. The process of capital accumula- tion is characterised not merely by changes in the quantity of capital but, decisively, by changes in its composition, organisation, complexity, etc. The marginal theory of distribution which Keynes 24. In this sense Keynes departed from the neo- Classical conclusions which had asserted that move- ments in the rate of interest always tended to bring savings and investment into equilibrium. 25. Thus if, for example, the marginal propensity to consume were 3/4, the marginal propensity to save, by definition, would be 1/4. An increase in invest- ment of £1 mn. would, assuming a stable mpc, pro- duce a £4 mn. increase in the income. 26. General Theory page 247.

[p012] AN EVALUATION OF JOHN MAYNARD KEYNES takes over from the main stream of economics in the nineteenth century was posed in static terms: this was why orthodox theory was unable not only to explain the development of crises but also to account for the emergence of mono- poly during the latter part of the century. Keynes, that is to say, takes over what is essentially a static concept and transports it into what is usually assumed to be a dynamic theory of development. Keynes, we are suggesting, completely abstracts from technical factors. In fact he makes this abundantly clear at more than one point: ‘We take as given the existing skill and quantity of labour, the existing quality and quantity of available equipment, the existing techniques.’27 As Schumpeter notes,?8 such a theory is con- cerned only with extremely short-run considera- tions and is in no way truly ‘dynamic’. As such it can have no status as a theory explaining the main driving forces operating in the economic system. Even a glance at the alternative theory developed by Marx reveals the superiority of its method. In the accumulation process Marx saw changes in the quality of capital as a central feature, changes which are embodied in his con- ception of the ‘organic composition of capital’. This concept embraces not merely narrow, techni- cal, factors but is an expression of value rela- tionships. From it Marx derives his concept of the ‘tendency of the falling rate of profit’, which does not rely upon formal, mathematical equa- tions for its ‘solution’ but is based upon real relations of production. That it often is assumed to take a ‘deterministic’ form is the responsibility not of Marx, but of his undistinguished followers. Marx’s method and analysis has nothing in common with that of Keynes.?9 In a similar way, Keynes’ ‘explanation’ for interest is couched in purely subjective, asocial terms. Speaking of this concept he refers to it as ‘the psychological attitude to liquidity preference’. Normally, because of the uncertain- ties associated with the business (capitalist) world, a person will usually prefer to hold his assets in a liquid rather than an illiquid form. This ‘pro- pensity to hoard’ can be overcome only on the basis of the payment of a reward-interest. ‘Thus the rate of interest at any time, being the reward for parting with liquidity, is a measure of the unwillingness of those who possess it to part with their liquid control over it.’30 It is payment for ‘not hoarding’. Keynes treats interest, that is, in an abstract, even psychological, 169 manner. Once more he gives no indication of the social source of income. Interest is not seen, as in Marx, as a component of total surplus value and dependent, under modern capitalist conditions, upon the rate of profit. Keynes’ treatment of interest is also historically incorrect. By making the marginal efficiency of capital dependent upon the rate of interest, he inverts the real relations operative in modern society. In his Theories of Surplus Value, Marx makes similar criticisms of the Physiocrats. This school, reflecting the historical conditions at that time in France, believed that rent was the ‘prime mover’ of the economic system and hence attacked the ‘sterile’ manufacturing class. Marx shows that this mistake stemmed from their lack of historical un- derstanding. In a similar way, Keynes reveals weaknesses of this same order. His treatment of interest as a separate, independent category re- flected an earlier stage in the evolution of capital- ism before the close merging of bank and industrial capital. As we shall see, this mistake has important implications for a judgment of the adequacy of Keynes’ practical proposals. This particular weakness reveals another aspect of the problem which goes far beyond a critique of Keynes. It displays a serious fragmentation in the development of social science generally: namely the divorce between ‘theory’ and ‘history’. The essential unity of Classicism, with its attempt to explain the structure and development of society in theoretical terms (later taken to a high point in Marx’s Capital) was broken after the death of Ricardo, as far as orthodoxy is concerned. In the place of this unified structure two quite dis- tinct branches of the social sciences develop, largely independent of each other. On the one hand develops a branch of social science con- cerned with the emovirical description of historical phenomena: the Historical School of Roscher, Hilderbrandt, Knies and Schmoller, with writers in 27. Ibid., page 245, 28. ‘John Maynard Keynes’ in J. A. Schumpeter, Ten Great Economists, London, 1952, page 283. 29. Karl Marx Capital Vol. Il passim. Joseph Gill- man (The Falling Rate of Profit, London, 1957) makes formal references to these complexities but then pro- ceeds to ‘explain’ movements in American profit rates during the present century on the basis of a reformulation of Marx’ categories ‘c’ ‘v’ and ‘s’. John Strachey, The Nature of Capitalist Crisis, Lon- don, 1935, pages 237-264, provides an outstanding example of an extremely mechanical exposition of the Marxian laws of political economy. 30. General Theory page 167.

[p013] 170 England adopting a similar position such as Cunningham and later Clapham. These writers in many cases argued against the thesis that there was any discernable regularity in the development of society, that it was ‘law-governed’ in fact. Political economy was transformed into ‘economic history’. On the other hand the ‘theoretical’ side of the science was concerned with static technical problems of resource allocation amongst the ‘factors of production’.3! Alongside these two branches, the ‘history of the theory’ plays a minor and secondary role. What work did appear in this field was often guided by a teleological approach, as Professor Meek has pointed out: that is the history of political economy and eco- nomics consists of a gradual elimination of error, ‘revealed truth’ being found in present day ‘posi- tive’ equilibrium analysis.32, In Keynes’ work this fragmentation is very evident. What comments there are in the General Theory on historical matters are incidental to the main theoretical work and not embodied into it. His comments on the history of theory are equally revealing: his dis- cussion of both the neo-Classical School and of underconsumptionist explanations of crisis are designed simply to reveal the intellectual errors of the writers concerned.33 He is unable to ex- plain the forces which produced and sustained these ideas for so long. Keynes’ last ‘independent variable’ is the ‘mar- ginal propensity to consume’; the ‘consumption function’. Its importance in the structure of his thought is that as the level of income rises so the proportionate amount of savings increases. Unless this rising share of national income finds its way into investment there will be a tendency towards stagnation and under-utilisation of re- sources. As we have seen above, Keynes believes that there is a quasi-automatic tendency for the rate of profit to fall with the development of capitalism and hence a tendency towards semi- permanent stagnation, unless, that is, means can be found to stimulate investment at the required level to generate sufficient income to ensure a full utilisation of resources. The dynamic factor is the rate of investment: in his model the level of consumption is dependent upon the rate of investment. Keynes has often been accused, by Marxists and others, of being an under-consumptionist. I do not think that this is strictly correct. In the General Theory, Keynes stresses that the dynamic factor in the development of capitalism is the rate of investment. Certainly he was conscious about the FOURTH INTERNATIONAL, NOVEMBER 1966 effects of a declining propensity to consume as income rose, but he believed that if the conditions could be provided for a sufficient rate of invest- ment the problem could be surmounted. Con- sumption, for Keynes, was the ‘passive’ factor in his system.34 Most of his practical proposals were, as we Shall see, designed to stimulate invest- ment. Keynes’ weakness was if anything, that he posited a too rigid dichotomy between production and consumption. He is concerned primarily to expose the illogicalities of Say. Marx had accused the latter of reducing the relationship of sale and purchase to a formal, tautological unity. The same charge, but this time from the opposite point of view, may be levelled against Keynes. In Keynes’ system investment in the main determines consumption which responds in a passive manner to changes produced in income through move- ments in’ the rate of investment. In fact his categories ‘investment’ and ‘consumption’ do not correspond to the real categories in capitalist society.325 ‘Consumption’ does not include only the purchases of individual consumers. . ‘Invest- ment’ does not include only the additions to the capital stock made by capitalists to produce the required volume of consumer goods. Lenin pro- vides the key to the establishment of the correct, although complex, relationships between these 31. Oscar Lange Political Economy: General Problems, London 1963 Ch 6. Sydney Pollard ‘Economic History—A Science of Society?’ Past and Present, No. 30, April, 1965. 32. R. L. Meek, op cit., and ‘Is Economics Biased?’ Scottish Journal of Political Economy, 1957. 33. General Theory, Ch. 23. 34. In one of the best known expositions of the Keynesian system, Professor Dillard makes this clear: ‘ . changes in the amount of consumption depend mainly on changes in the amount of income and not on changes in the propensity to consume out of a given income. To repeat for emphasis, this con- clusion makes investment the strategic variable in the general theory of employment. The implicit pro- position that employment can increase only if invest- ment can increase presupposes a stable propensity to consume’ Dudley Dillard The Economics of John Maynard Keynes, London, 1958, pages 84-85. Also General Theory, page 96. 35. The distinction between ‘consumption’ and ‘savings’ is, typically with Keynes, made on personal lines. ‘The criterion (for the distinction between investment and consumption) must obviously correspond to where we draw the line between the consumer and the entrepreneur’ General Theory, page 62.

[p014] AN EVALUATION OF JOHN MAYNARD KEYNES two categories.26 In his polemics against the Narodniks he points to the very important category ‘productive consumption’, that is, invest- ment made by the capitalists in the means of making goods which will then be able to produce goods for the final market. In other words, the relationship between investment and consumption is not an immediate and direct one. Keynes’ error was that, as opposed to the classic underconsumptionist position (which incidentally he treats towards the end of the General Theory) he gives too passive a role to con- sumption. In other words, the volume of current consumption does influence the level of invest- ment. They cannot be considered ‘independent’ categories, as Keynes suggests.57 That is to say, the ‘realisation problem’ is a real one for capital- ism, which at certain points in its development can become the dominant problem. Keynes assumes that the very process of investment would, acting via the ‘multiplier’, eventually generate income large enough to _ provide additional savings which would then bring savings and investment back into line. To main- tain this position with any degree of consistency, his system requires there to be a known and predictable relationship between income and sav- ings. If these ratios vary at different points in time, with changes in income or at different phases of the trade cycle in ways which are not capable of prediction the structure of his entire model of the economic system, even on formal grounds, is thrown into difficulties. If changes in income produce no predictable changes in savings and consumption it is impossible to estimate the impact, in terms of an increase in income, of a rise in investment.?8 Is Keynes justified in postulating this stable relationship between income, consumption and savings? Empirical evidence by his followers and others suggests that there is no such simple relationship in the real world. The ‘consumption function’, it would appear, varies with past income, with anticipated earnings, with price movements, and varies as between income groups in its stability and level. In the same way his rather vague comments about the changes in the con- sumption function at various points in the trade cycle have been disputed by some of his most eminent admirers.39 To the extent that a crisis produces a sharp rise in the volume of savings— by both individuals and companies—this produces considerable ‘leaks’ in the system which may overcome any rise in the level of investment undertaken either privately or by the state. The 171 growth of credit sales and the whole supe1- structure of hire purchase financing, etc., has only further undermined any stability in Keynes’ consumption function. To take up another important point of method about Keynes’ treatment of consumption: he deals with it implicity from the point of view of the ‘individual’. In fact, the idea of the ‘consumption function’ cannot be applied to a company: there can clearly be no ‘psychological’ relationship between the income of a firm and the volume of its consumption. It is meaningless to say that, as the income of a firm grows, its consumption tends to constitute a diminishing proportion of that income. In fact, to the extent that the larger firms have access to funds and can raise loans etc., they are in a position to allow their con- sumption to exceed their income. But in con- ditions of modern capitalism it is firms which aré increasingly responsible for a larger volume of consumption savings and investment.40 Keynes’ 36. V. L Lenin, Collected Works, Moscow, FLPH, 1960 Vol. I especially ‘On the so-called Market Question’, pages 75-129. Lenin stresses that the rela- tionship of the capital goods industries (Marx’s Depart- ment I) and the consumer good industries (Marx’s Department II) is not a formal technical question but one produced by the development of the capitalist mode of production. 37. John H. Williams has noted, along similar lines to Dillard but from a critical point of view, that Keynes’ system depends upon the assumption that ‘(1) . consumption is dependent upon income and (2) that there is a “regular” or “stable” or “normal’’ rela- tionship between them, such that the consumption function can be derived as a given datum of the system and used as a basis of policy and prediction.’ He is unprepared to accept either assumption, on the basis of the available historical evidence. J. H. Williams ‘An Appraisal of Keynesian Economics’ American Economic Review, Papers and Proceedings, May 1948 pages 273-290. 38. That is, the ‘multiplier’ can only be calculated given a stable or predictable relationship between consumption savings and income. Without a known ‘multiplier’ the result of any increment in investment on the level of income—or even less employment— must be unknown. 39. A. H. Hansen A Guide to Keynes, New York, 1953 James S. Duesenberry Income Savings and the Theory of Consumer Behaviour. 40. It is an interesting point that the role which a number of ‘revisionist’ writers assign to the giant corporations under managerial control—indepgendence from the immediate profit motive, control over invest- ment decisions etc.—are in conflict with the theoretical bases of the Keynesian system although many of them—Crosland, Jay, Strachey—base them- selves upon Keynes in their rejection of Marxism.

[p015] 172 system starts irom the viewpoint of the individual, faced with choices about the distribution of his income between consumption and _ savings. Having made this first decision he then chooses, our individual, how to hold his savings: either in liquid or illiquid form. In this way Keynes only follows the methodological path of his pre- decessors: one important aspect of the break-up of the Classical School was the drift towards the view of economics as the ‘science’ which studied the relationship of the ‘individual’ to ‘material goods’. On the basis of the summation of the <ndividual decisions of all consumers the goals of society were set. The ideological implications of such methods of analysis are obvious. Even Professor Galbraith has noted the complete in- consistency of the notions of ‘consumers’ sovereignty’ in modern capitalist conditions and noted the slowness of traditional economic theory to adapt to the new situation.*! . After discussing the three key variables in Keynes’ system we can now proceed to discuss their inter-relationships in more detail than when this was first sketched out above. That is, we shall discuss Keynes’ ‘model’ as a whole. We shall be particularly concerned with its ‘adequacy’ as a means of describing and highlighting the basic movement and structure of the economic system, capitalism. Maurice Dobb and others have outlined some of the qualities which a model must possess to be considered ‘adequate’ in the sense used here. They relate to the basis on which abstraction takes place.42 _ First, all the variables in the system must be considered to have a high degree of independence from each other. Otherwise any model will be indeterminate. Second, the variables, when taken in combination, must be adequate to explain the basis of the economic system which they are attempting to describe. That is, no exogenous features which the system takes as ‘given’ should, in fact, play a decisive role in determining the movement of the economic system. Keynes’ model, following from that of the neo- Classicist, may, in its simplest form, be represented by Y=C+I, where Y=income, C=consumption and I=investment. Such an initial formulation is inadequate in this sense: consumption, in part, depends upon the level of income, but income itself depends partly upon the level of con- sumption. Hence income is a function of income!* Keynes attempts to overcome this problem by reformulating the above relationships so that in- come (Y) is made a function of investment (I) and the propensity to consume. But this reformulation FOURTH INTERNATIONAL, NOVEMBER 1966 is open to the same type of objection in that the propensity to consume cannot be _ postulated independently of income.44 It can only be taken — as ‘given’ if we assume, with Keynes, that it is basically a subjective and __ psychological phenomenon. But if we insist, along with Schumpeter, that we probe behind these subjective categories to the economic bases which lie behind them we find Keynes guilty of circular reasoning. Other points could be made in the same manner: are consumption and investment independent categories? Can we assume, as Keynes does, that interest influences investment? Other writers have argued that, in fact, the rate of profit is the main determinant of the rate of interest. Secondly, and much more important how- ever, is the question of whether Keynes’ variables are in any way sufficient to explain the workings of the capitalist system. As we have seen, at every point he abstracts completely from the social relations of production. The implications of such a method can be seen when, at one point in the General Theory, Keynes assumes that changes in the level of production are uniquely related to changes in the level of employment. Such an assumption, which lies at the heart of Keynes’ method, allows us to understand nothing about the working of the world in which we live. The judge- ment of Joseph Schumpeter, written in reviewing the General Theory soon after its publication, makes the point adequately enough for any Marxist: . reasoning on the assumption that variations in output are uniquely related to variations in employment imposes a further assumption that all production functions remain invariant. Now the out- standing feature of capitalism is that they do not but that, on the contrary, they are being increasingly revolutionised. The capitalist process is essentially a process of the change of the type which is being assumed away in this book, and all its characteristic phenomena and problems arise from the fact that it is such a process. A theory Al. J. K. Galbraith, The Affluent Society. 42. M. H. Dobb ‘A Sceptical View of the Theory of Wages’ in On Economic Theory and_ Socialism, London, 1955. 43. L. Tarshis ‘An Exposition of Keynesian Economics’ American Economic Review, Papers and Proceedings, May 1948, page 265. 44. In other words, the three variables mutually condition each other: an equilibrium level of income can only be postulated for each level of investment if we assume a given relationship between two of them, namely the level of income and the level of con- sumption. If we reject this assumption as invalid the Keynesian system is invalid.

[p016] AN EVALUATION OF JOHN MAYNARD KEYNES that postulates invariance of production functions may, if correct in itself, still be of some use to the theorist. But it is the theory of another world and out of all contact with modern industrial fact, unemployment included.’45 Another aspect of the problem of abstraction must be taken up which, in my opinion, is not adequately dealt with by Marxists, including Dobb. This relates to the Aistorical nature of abstraction. Marx bases his theory of value—which as Dobb himself has pointed out is the central point for any economic theory—upon ‘abstract labour’. This category, ‘abstract labour’ is historically abstracted in the sense that Marx takes it as his ‘starting point’ only after a long and patient historical and theoretical study of the develop- ment and growth of the capitalist system. The dominance of commodity production, with the status of labour reduced to that of a commodity, was one of the specific features which dis- tinguished capitalism from all previous forms of production. This rise to dominance of commodity production had reduced all labour to a common standard which could now be _ subjected to quantitative measurement: ‘abstract labour’. Marx shows how this process—a reali process bound inseparably to the rise of capitalism— is reflected in the development of value theory in pre- capitalist and early capitalist society, which, starting with labour on the land, gradually develops in the work of the English Classical Economists to see labour ‘in general’ as the source and measure of all value. In other words, abstraction is not a technical question alone: it must conform to the real categories in society as they have historically arisen. Keynes’ abstractions have no such social or historical validity: they conform to no historical process. This in part explains Keynes’ ignorance of the development of economics which is the root cause of much of his inconsistency and confusion. To accept the concept of the ‘Keynesian Revolution’ is to ignore the fact that Keynes explicitly accepts much of the old neo-Classical structure: his role was essentially to add to this structure in an empirical way and not to revolu- tionise it: ‘But if our central controls succeed in establishing an aggregate volume of employment corresponding to full employment as nearly as is practicable, the classical theory comes into its-own from that point onwards... To put the point concretely, I see no reason to suppose that the existing system seriously misemploys the factors of production which are in use.’46 173 ‘Thus I agree with Gessell that the result of filling in the gaps in the classical theory is not to dispose of the ‘Manchester System’ but to indicate the nature of the environment which the free play of economic forces requires if it is to retain the full potentialities of production.’47 Keynes’ work did nothing, that is, to arrest the process of disintegration which we have mentioned above. Keynes tried to patch up the old structure in one direction. In another, writers such as Joan Robinson in Britain and Chamberlain in America extended the ‘marginal theory’ of distribution by including in its orbit market forms other than the ‘perfectly competitive’ type usually assumed in the mainstream of neo-Classicism: but even here the static method, which had undermined the old system and prevented it from explaining the development of monopoly, in large degree remained. At the same time the system of ‘Welfare Economics’ refined by Pigou and others remained as an explanation of the distribution of a ‘given’ income among the factors of pro- duction, without explaining why this given income was distributed in a certain way. It remains to make some comments upon the practical proposals which Keynes advanced as the basis of a solution to the ills of capitalism. Whatever other defects he may have had, Keynes cannot be accused of erecting a_ separate theoretical system which was divorced from practical economic and political questions. In essence, Keynes deals with three proposals which he saw as flowing from his analysis of capitalism. In the first place, he proposed action by the Central Bank as a means of lowering the rate of interest to stimulate investment. The rate of interest could, in his opinion, be lowered through 45. J. A. Schumpeter ‘Keynes’ General Theory of Employment Interest and Money’ Journal of the American Statistical Association. December 1936, Vol. xxxi (new series) page 793. 46. General Theory pages 378-379. 47. Ibid., page 379 ‘The division of Economics between the Theory of Value and Distribution on the one hand and the Theory of Money on the other, is I think, a false division. The right dichotomy [NB] is I suggest, between the theory of the individual industry or Firm and of the rewards and the dis- tribution between different uses of a given quantity on the one hand, and the Theory of Output and Employment as a whole on the other hand.’ Ibid., page 293.

[p017] 174 an increase in the supply of money.48 By lowering the rate of interest this would widen the ‘gap’ between it and the marginal efficiency of capital, thus making investment more rewarding. Keynes realised that this proposal would lead to the gradual ‘euthanasia of the rentier’ but he saw this as a necessary sacrifice which had to be made to preserve the system as a whole. Crucial objections, from the camp of orthodoxy, have been raised against the practicability of these proposals, Perhaps the greatest has been the large volume of evidence, both empirical and theoretical, to show that the rate of interest has little impact upon the level of investment.49 Increasingly, in modern capitalist conditions, investment is under- taken by the giant enterprises from their own internal accumulated funds and is not directly affected by the current rate of interest. Interest cannot be considered an ‘independent’ factor which determines the rate of profit, even in part. Rather it is a fragment of total surplus value accruing to the owners of capital In any case, to the extent that monopolistic or oligopolistic market structures are now ‘typical’, an increase in the rate of interest affected by the Central Bank can be avoided, within limits, by an increase in prices. In this sense, the attempt to reduce ‘effective demand’ by means of a ‘credit squeeze’ involving in part a raising of interest rates, probably accelerates the process towards the con- centration and centralisation of capital in that the smaller firms, unable to exert any marked in- fluence upon the structure of market prices, and more dependent upon external sources of finance, are driven out of business at the expense of their (bigger) rivals. A second objection to Keynes’ interest rate policy, which he himself partly recognised, is associated with the inability of the Central Bank, under conditions of the private ownership of the means of production exploited for profit, to drive down interest rates below a certain level. At very low levels of interest the dangers of large capital losses as a result of small movements in the rate of interest are very greatly increased. The second result of an increase in the volume of the money supply (apart from a reduction in the rate of interest) would be to reduce real wages through an increase in prices. The conception of the neo-Classical School, seen in its most prominent representative before Keynes, A. C. Pigou, was that unemployment could be reduced in normal circumstances only on the basis of a cut in money wages. This, by making investment more attractive, would lead to an expansion in FOURTH INTERNATIONAL, NOVEMBER 1966 the use of resources and hence an increase in employment (assuming static technical con- ditions of production). Keynes held an essentially Similar view, except that he realised that while attempts to reduce money wages would be difficult (because of resistance from the working class) the same result could be achieved by lowering rea: wages through an increase in the general price level He writes in the General Theory, discussing the postulates of the neo-Classical School: “Whilst workers will usually resist a reduction oj money-wages, it is not their practice to withdraw their labour whenever there is a rise in the price of wage goods.’50 ‘ . if employment increases, then, in the shor; period, the reward per unit of labour in terms oi wage goods must in general decline and _ profi increase.’51 The second of Keynes’ proposals concerned the Structure and incidence of taxation in modern capitalist society. He proposed some increase in the taxation of the rich: his proposals were however, very mild, on his own admission being ‘moderately conservative’ in their implication. In any case, to the extent that these proposals con- cern the sphere of consumption they cannot hope basicaily to alter the structure of income dis- tribution, which is generated in the sphere of pro- duction. This separation of the economics of ‘consumption’ and ‘production’ (it is difficult to see that orthodox economics has a true theory of pro. duction) was again one of the products of the break-up of the old classical system, starting in this case perhaps with John Stuart Mill who made a formal distinction between the two.52 Finally, the last of Keynes’ proposals was that the State should assume greater responsibility for the ‘socialisation of investment’ (a vague term which is never satisfactorily defined). Keynes was specifically opposed to socialism, as his biographer 48. Even this would be disputed by many orthodox economists today. It is now suggested that the supply of money is not the important factor in the monetary system, so much as the general availability of credit of various types, which may not be subject to immediate and direct control simply through action by the Central Bank upon the supply of money. 49. See, for example, the work of Andrews, Meade and Anderson soon after the publication of the General Theory, in which they concluded that changes in the rate of interest had little impact upon the level or rate of investment. Oxford Economic Papers, No. 1, October, 1938. 50. General Theory page 9. 21. Ibid., page 31. 52. John Stuart Mill Principles of Political Economy.

[p018] AN EVALUATION OF JOHN MAYNARD KEYNES Harrod makes clear. He was concerned that the State should provide the framework in which the ‘factors of production’ should continue to enjoy their ‘just’ rewards. The enlargement of the functions of the State he saw as the only alternative to chaos: ‘Whilst, therefore, the enlargement of the functions of government, involved in adjusting to one another the propensity to consume and the inducement to invest, would seem to a nineteenth century publicist or to a contemporary American financier to be a terrific encroachment on individualism, I defend it, on the contrary, both as the only practicable means of avoiding the destruction of existing economic forms in their entirety and as the condition of the successful functioning of individual initiative.’53 This cannot be the place for a full discussion of the impact, if any, of these policy recommendations on the functioning of the capitalist system since the publication of the General Theory. The relative stability and moderate expansion of the system both during and after the war cannot, we suggest, be explained in the terms of Keynes’ analysis. An investigation of this problem would require a full treatment of the role and impact of technological change—as we have seen almost entirely assumed away in the Keynesian system —which, many would argue, laid the basis, in the form of a cluster of ‘new industries’, for the post-war expansionary phase. In addition, one would have to examine amongst other functions the role of armaments expenditure and _ the relationships between the metropolitan and ‘underdeveloped’ areas of the world economy. Such questions are virtually excluded by the form and content of Keynes’ model. All these factors lie at the centre of the Marxian model of capital accumulation. The economics of Keynes, at least as far as the practical proposals are concerned, are closely related to the stage which capitalism had reached in the 1930s. The old days of the ‘perfectly com- petitive’ system which did guarantee, relatively speaking, a fairly rapid rate of expansion and a certain degree of stability were at an end. Keynes himself realised instinctively that 1914-18 marks a watershed in the development of capital- ism. Now monopolies, in close association with the banks and other financial institutions, increasingly dominated the economic, political and military life of the major capitalist states. The old economics, along with its parallel doctrine of laissez faire, was now at an end for ever. In particular, the capitalist system required in each country a closer drawing together of the monopolies 175 and the state. This was determined by the stage reached in the development of the productive forces which still remained privately owned and controlled. The Keynesian system, with its active encouragement of state intervention to strengthen the functioning of capitalism, met this need and was indeed a reflection, in ideological terms, of it. In particular, Keynes’ system represented the needs of the world economy, divided into nation states, in a situation of war or threats of war which were, and are, a semi-permanent feature of ‘modern’ society. The tasks of preparing for and waging war were now so great that they could not be made the responsibility of private capitalism unaided. It is interesting that the two major phases of state intervention into the domain of the capitalist economies have occurred during periods of war preparations: during the 1890’s and the first decade of this century and secondly during the 1930’s. Far from being a move in the direction of ‘socialism’, as many reformists suggest, Keynesian theory represented the exact opposite of this: it reflected the needs of the system at a definite stage in its development. Keynes was unable to analyse capitalism in satisfactory terms because he did not realise the ideological impact of the social sciences in a society divided into classes. In fact his view of the role of economics and economists is openly idealistic: ... the ideas of economists and _ political philosophers, both when they are right and when they are wrong, are more powerful than is com- monly understood. Indeed the world is ruled by little else ... Madmen in authority who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the powers of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.’54 This statement in fact underlines the methodo- logical position of the General Theory. His failure to understand the crisis in the development of political economy arose from the fact that he viewed it from the point of view of the ‘objective’ bourgeois intellectual. This is not to say that Keynes failed to recognise the existence of con- tradictions in society. Here he is speaking in the 1920’s before his major writings were undertaken: he is discussing the possibility of his joining the Labour Party. He rejects the idea in the follow- ing way: ‘To begin with, it is a class and party, 53. General Theory page 386. 24, Ibid., page 383.

[p019] 176 the class is not my class. If I am_ going to pursue sectional interests at all, I shall pursue my own. When it comes to the class struggle as such, my local and personal patriotisms, like those of every one else, except certain unpleasant zealous ones, are attached to my own surroundings. I can be influenced by what seems to me to be Justice and good sense: but the Class war will find me on the side of the educated bourgeoisie.’>> Keynes, as Harrod notes, believed in the power of intellectual leadership in the State. He saw the bourgeois stratum from which he came as vested with the powers of objectivity and detach- ment which allowed it to arrive at objective decisions in the interests of the whole of society. This although the working class might never be able to achieve a rational understanding of the functioning of society, the intelligentsia was in a different position. Although the question cannot be fully developed at this point it is interesting to note the similarities in Keynes’ outlook to those Sociologists of Knowledge, notably Karl FOURTH INTERNATIONAL, NOVEMBER 1966 Mannheim in Ideology and Utopia, who assign to the intellectuals the power to rise above ideology through their ability to understand the social pressures conditioning thought. We have tried to demonstrate the social and intellectual origin of Keynes’ ideas. We have tried to show that, despite his illusions to the contrary, he was unable, ‘educated bourgeois’ though he undoubtedly was, to understand the origins of these ideas and therefore unable to probe to the roots of the problems which he realised were gripping political economy along with bourgzois thought in general. That he is still rightly regarded as the outstanding representative of orthodox economics during this century is far from a testimony to its strength and vitality but rather to the continuing weakness of much of the ‘New Economics’. 55. J. M. Keynes, Essays in Persuasion, London 1951, page 324 (Keynes’ emphasis). 56. Harrod, op. cit. page 331. THE AGE OF PERMANENT REVOLUTION A TROTSKY ANTHOLOGY Edited with an introduction by Isaac Deutscher (with the assistance of George Novak). Published by Dell Publish- ing Co. Inc. Distributed in Britain by New Park Publica- tions Ltd. Price 9s. 6d. A concise and invaluable collection of Trotsky’s writings. The theoretical genius of one of the world’s great Marxists and co-leader of the first successful socialist revolution is brilliantly revealed in this book. It is an indispensable addition to the library of all communists who are serious about studying, understanding and grasping the method and programme of contemporary Marxism. Orders to: NEW PARK PUBLICATIONS LTD 186A CLAPHAM HIGH ST., LONDON, S.W.4

[p020] by J. Kiomenesekenegha THE SECOND MILITARY COUP which took place in Nigeria on July 2 this year reflects the general crisis of a decaying world capitalist system. The problems facing the nationalist leaders of the country are insoluble ones which they have inherited from their imperialist masters. They can- not be solved by the ruling class, including the army which is now the custodian-cum-watchdog of foreign capital and local interests. Nigeria is undergoing a crisis both economically and politically. Foremost of these problems is the growing unemployment which the famous military coup of January 15 relegated to the background temporarily. Every year school-leavers of both primary and secondary schools and _ university graduates roam from town to town and city to city looking desperately for jobs. Farmers thrown out from their communal lands by native and foreign plantation owners join the queue of unemployed in the cities. Workers become job- less as small firms are squeezed out of the market due to inability to compete with the monopoly 177 TODAY firms like ICI, Dunlop, Lever Brothers and Nestle’s Products. In addition to unemployment there is a roaring inflation. A cup of gari that formerly cost 8 for a shilling in Lagos and 28 in the pro- vinces, now costs 3 for a shilling and 6 for a shilling respectively. Bananas that formerly cost 6d. to 1/6, now cost 4/6 to 8/6 per lb. Asa result of the world cocoa crisis created by the imperialists who control and dictate the price in the world market, many cocoa farmers in the Western Region were reduced to a state of pauperism. Some of them were forced to leave their farms to look for jobs in the towns and cities. In spite of the fact that after a long agitation and pressure from the masses, the former military Government cut rent by two shillings in the pound, it did not in fact raise the standard of living; rather the landlords gained by increasing their rent through other ways. In Lagos a labourer earning £8 to £10 a month pays £4 10s. to £5 for a room. Thus more

[p021] by J. Kiomenesekenegha THE SECOND MILITARY COUP which took place in Nigeria on July 2 this year reflects the general crisis of a decaying world capitalist system. The problems facing the nationalist leaders of the country are insoluble ones which they have inherited from their imperialist masters. They can- not be solved by the ruling class, including the army which is now the custodian-cum-watchdog of foreign capital and local interests. Nigeria is undergoing a crisis both economically and politically. Foremost of these problems is the growing unemployment which the famous military coup of January 15 relegated to the background temporarily. Every year school-leavers of both primary and secondary schools and_ university graduates roam from town to town and city to city looking desperately for jobs. Farmers thrown out from their communal lands by native and foreign plantation owners join the queue of unemployed in the cities. Workers become job- less as small firms are squeezed out of the market due to inability to compete with the monopoly 177 TODAY firms like ICI, Dunlop, Lever Brothers and Nestle’s Products. In addition to unemployment there is a roaring inflation. A cup of gari that formerly cost 8 for a shilling in Lagos and 28 in the pro- vinces, now costs 3 for a shilling and 6 for a shilling respectively. Bananas that formerly cost 6d. to 1/6, now cost 4/6 to 8/6 per lb. Asa result of the world cocoa crisis created by the imperialists who control and dictate the price in the world market, many cocoa farmers in the Western Region were reduced to a state of pauperism. Some of them were forced to leave their farms to look for jobs in the towns and cities. In spite of the fact that after a long agitation and pressure from the masses, the former military Government cut rent by two shillings in the pound, it did not in fact raise the standard of living; rather the landlords gained by increasing their rent through other ways. In Lagos a labourer earning £8 to £10 a month pays £4 10s. to £5 for a room. Thus more

[p022] 178 than half of his income goes out for rent. Due to the hardship and inadequate salaries many work- ers Owe more than six months rent and they are forced to borrow money from callous money- lenders to pay for rent. Many have to mortgage their belongings to live. More than two workers share one room (sometimes with their families) to cut down the burden of the rent. In order to make ends meet, workers’ wives, children and near relatives depending on them are forced to do some sort of petty trade, farming, fishing or woodcutting to live. Apart from Lagos, where there is some sort of free education, in the rest of the country there are no free schools. Hospitals, whether privately owned by missionaries, doctors, or governments, are not free. In some towns and villages the nearest hospital is about 100 miles away. In some areas as big as Wales there is not a single hospital to serve the people who are taxed heavily by the. regional and Federal Governments. Whether one is unemployed or not, one is forced to pay tax. How can a man who at the end of the year has not earned a penny, pay tax of £3 10s.? He has no alternative but to steal. As a result, during the period of tax raids the prisons are overcrowded and theft cases increase in the law- courts. Petty crimes, highway robbery, house- breaking, hold-ups increase yearly as the people face more hardships. Even married women in some parts of the country sell themselves for prostitution so as to send home money to pay for the school fees of their children and to feed the family at home. While millions are living in abject poverty and squalor, while thousands plead for alms in the towns and cities, and while lepers mingle with people in the market places, buses and _ trains a handful of corrupt politicians and their business agents are amassing wealth rapidly. In the midst of this poverty and suffering of millions of people, the former bourgeois politicians and their business agents were saving millions of pounds in Swiss and other European banks over- seas. Some former Ministers of Balewa’s regime are believed to have saved between £12 and £24 million sterling in Swiss banks. Only a few months ago, it was revealed in some of the tribunals set up by the Military Govern- ment probing the affairs of the Government Cor- porations how within a year a man on a salary of under £2,000 a year saved over £11,000. Another one on a salary of £2,500 saved over £26,000 in his bank account. A former chairman of the Railway Corporation had two hospitals, ‘notorious FOURTH INTERNATIONAL, NOVEMBER 1966 over five buildings and five expensive cars in less than two years. The six years development plan had been a fraud as far as the toiling masses are concerned. The plan had benefitted only the capitalists and moneylenders of Nigeria and imperialist finance capital. The downfall of Ironsi’s military regime was due primarily to the sharpening contradictions within the ruling classes among the major tribes in the country; namely the Hausas and Fulanis (feudal lords) of the North, the native bourgeoisie of the Ibo tribe and Chiefs and bourgeoisie of the Yorubas of the South. The cause of Ironsi’s fall can be summarised thus: his appeasement of the feudal lords of the North, and his failure to carry out the limited social reform programme which the leaders of the January coup had promised. Ironsi and his group had no firm political roots, thus relying on the civil servants of the former politicians to guide his government from day to dav, and last, but not least, he failed to release the leaders of the January-coup from detention. The British colonialist government with its ‘divide. and rule’ policy conveniently divided the country to preserve its own interests a few years later before political independence was granted to Nigeria. And on the other hand, the then nationalist leaders whom the masses thought should have opposed the carving up of the country, accepted the regionalisation of the country because of their bourgeois class interests and their weak position and subservience to imperialist big business. From 1849 to 1857 Nigeria was a single entity. But in 1853 Britain broke the South into three separate colonies and named them as _ follows: Bight of Benin covering the present regions of the West and Midwest; Bight of Biafra covering the present Eastern Region and the island of Fernado Po, now a forced labour camp for Spanish imperialism; and Lagos, the capital of Nigeria, which was made a separate colony of its own. In 1866 Lagos was placed under Sierra Leone, 1,149 miles away from Nigeria. As it was incon- venient for them, they placed Lagos under Gold Coast (mow Ghana) in 1874, still 296 miles away from Nigeria. When there was trouble in Lagos among the warring chiefs the British did not have any effective machinery to deal with the immediate situation as Ghana was too far away, so they decided to separate Lagos from Ghana in 1886. In 1891 Eastern and Western Nigeria were united and called Southern Nigeria. Lagos was