Capitalism And The Importance of Lying

Posted on 27 December 2010

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The experience of Wikileaks has shown what has long since been known, but rarely discussed. Capitalism depends upon systematic lying. Over recent weeks we have had a succession of politicians and State bureaucrats from all the Capitalist states appear on TV, and tell us how terrible it is that their duplicity has been exposed. Of course, they have been forced to admit they have to be free to lie their heads off, both to other Capitalists and to their own people, if Capitalism is to operate smoothly. They don’t even now try to dress it up by claiming that Wikileaks exposures have been a threat to the lives of troops and agents, because that too was exposed as a lie, and also only highlighted the fact that those soldiers and agents were mostly at risk, because they had been sent by their Governments to do nasty things in other people’s countries!

But, the last week has seen that Wikileaks has now set a trend. The Daily Telegraph, no doubt emboldened by its success in building circulation from its MP’s Expenses exposes of the last year, has engaged in its own covert operations to bring into broad daylight the true views of Liberal and Tory Ministers. We find a whole series of duplicitous relations with Liberal Ministers telling us that they do not trust David Cameron and so on. The Liberals, who anyone who has been involved in politics knows have built their whole base by saying one thing to one person and something different to the next, again see nothing wrong in this. Of course, they say, we are two different parties with different policies, and different views. But, we are in a Coalition. Well, of course, that is fine, but why then do they tell us that these undercover operations have damaged the kind of relation they can have with their constituents? They say they will no longer be confident to speak openly to them, but why? If as they say they are two separate parties, and that they have different views to the Tories, should they not then feel free to vent their true views, even where they differ from the Government line, wherever, and to whoever they are speaking? Apparently, not. As usual they want it both ways. Of course, that is not surprising, because the kind of shambles that results from that was seen over the Tuition Fees, when Vince Cable found himself in the invidious position of being a Liberal Minister responsible for introducing a piece of legislation that he and his Party only months before had given a solemn pledge to oppose!!! He then found himself in the ridiculous position of considering abstaining on the vote on the legislation that he was himself recommending to Parliament!!! No wonder they find it much easier to simply lie about their real views.

But, its not just in the political arena that Capitalism relies on lying, or at least being economical with the truth. It is in reality the fundamental basis of the multi-billion pound advertising industry. And as one right-wing ideologist, Nicholas Taleb, has stated,

“Karl Marx, a visionary, figured out that you can control a slave much better by convincing him he is an employee.”

The whole basis of Capitalist exploitation, as Taleb admits here, is premised on convincing workers that their actual economic and social position is something completely different to what it actually is, and a huge State apparatus, including all of the Welfare State, is designed to imbue workers with precisely that ideology, and to shape them as a continuous supply of suitable Labour Power to meet the needs of Capital. In fact, the Capitalist State is a lie in itself – a lie that large sections of the Left have for the last 100 years or so helped perpetuate. It is portrayed as being some kind of neutral body, there to protect the nation from foreign threats, to protect all of its citizens from a range of dangers be it crime, or disease and ill-health, or unemployment or poverty. But, of course, it is nothing of the sort. Its function is to ensure the reproduction of labour power for Capital, and to protect the class interests of the ruling-class, of which the former is the prime need.

The early forms of Capitalism, more properly Mercantlism were premised on a lie of the most blatant kind. Merchant Capital makes its Profit – what Marx, following earlier Economists like Steuart calls Profit on Alienation – through buying low and selling high; what is known in the parlance as arbitrage. By its nature this means paying the seller less for a commodity than its value, and selling to a buyer a commodity for more than its value. The Merchant themselves adds no value in this process whatsoever. They are in the strictest sense mere parasites, which is why in previous centuries they were so despised, as in Shakespeare’s “Merchant of Venice”, or as Marx sets out in quoting from the works of Martin Luther, who described how they were viewed as worse than highway robbers. The bigger the lie – that is the better able the merchant to convince the seller that his product was of low value, and to convince the buyer that it was of high value – the bigger the profit he made, even though, in many cases, as in the Mediterranean City States, this actually led not just to the impoverishment of the actual producers, but the destruction of productive potential, and consequently the whole basis of making real profits, and creating real wealth.

We see the same thing today in the utterances of those such as Estate Agents, Mortgage Brokers, and Mortgage Lenders who not only were prepared to accept a lie themselves in order to lend to people who had little chance of paying them back, but who are always prepared to put a gloss on any situation in order to convince potential buyers and borrowers that house prices will continue to rise. The other day, I presented the chart below produced by Bloomberg from data collected by HBOS in its Consumer Confidence and House Price Indices. Yet listen to any of the commentators on the news programmes, or Business TV, and few will actually indicate that house prices are way too high, or that the indications are for a major fall. Even as they begin to collapse these commentators continue to talk about a modest fall of around 5% over the coming year – even though they fell by nearly that much in the last month alone! But, like the politicians and diplomats, of course, they believe that they should be free to garnish the truth, because the system depends upon it. A collapse in house prices now, would put a huge dent in confidence, and undermine the Government, and likely send the economy itself into a tailspin. Much better to continue to lie through your teeth, and if all those ordinary punters who believed you lose a packet, well, tough luck, at least the system was kept rolling for a while longer.

One of the best examples of this is Gold. After WWII, when the Bretton Woods Agreement was established, which made the dollar the world’s reserve currency and set up the IMF, the official price of Gold was fixed at $30 an ounce. Despite the fact that the US printed lots and lots of dollar bills to pay for its wars in Vietnam and elsewhere, and to pay its overseas debts, as during the 1970’s it began to import more than it could export, and despite the fact, that the costs of discovering and mining Gold, continued to rise, as the small amounts of it in the Earth’s crust, became smaller with each year, the price of Gold remained fixed at that 1947 price of $30. It was of course, just an official lie. Increasingly, the lie could only be maintained by denying reality via legal rules. When Charles deGaulle began to insist that France be paid in Gold rather than dollars, the US declared that the dollar would no longer be convertible into Gold, and the US Government made it illegal for US citizens themselves to hold Gold. But, the truth was out there, and despite all of the attempts to maintain the lie via legal sanction, it broke through. Despite the official price for Gold being $30 an ounce, when it began to be traded on world markets as a result of a global currency crisis in the 1970’s, its actual price soared to $800 an ounce.

During the late 80’s and 90’s, when the US was able to restore its position, and to once again impose the dollar as the world’s currency, Gold once again fell out of favour. Because Gold cannot be destroyed, and, therefore, every ounce ever mined continues to exist, and because it has little application in industry, only being used for jewellery, the price of Gold fell back to a low of $250 an ounce in 1999. It was not alone, the prices of other raw materials like Oil, also fell during the period, which has been the case during every other Long Wave downturn. But, after 1999, when the Long Wave boom began, the prices of these primary products began to rise sharply as years of underinvestment caused by low prices and profits, meant that new supply could not be rapidly, and certainly not cheaply brought on stream. Gold began to rise along with them, and increasingly, as it was seen that the US, in particular, had been paying its way by continuing to print more paper dollars, which in themselves were worthless, Gold once more began to attract the attention of those who saw the need to have a store of value in a real money commodity. But, the whole global Capitalist system depends at the present time on the dollar continuing to fulfill its function as world money. Moreover, the basis of Capital flows, of lending from surplus countries to debtor countries is also premised on the purchase of interest bearing Government Bonds. Around the globe, huge sums of value were tied up in these Government Bonds, held by Banks, Financial Institutions, Sovereign Wealth Funds, and Pension Funds. The consequence of a sharp rise in the price of Gold was clear. Money would flood away from paper dollars and into real money, and more importantly it would flood out of those Government Bonds – many of them dollar denominated Bonds – decimating their value, and decimating the Balance Sheets of all those Banks and other Financial Institutions that held them. It would make the Credit Crunch look like a picnic.

From around 2000, then the Authorities began to manage the rise in the price of Gold. When prices rose to quickly, Central Banks, and the IMF, who hold thousands of tonnes of Gold, began to sell it into the market, driving down its price. Gordon Brown was heavily criticised for selling large amounts of Britain’s Gold, but the reality is that this sale was part of this globally co-ordinated policy. Yet, despite that global drive to limit the rise in the Gold Price its price has continued to rise. From the low of $250 an ounce in 1999 it has risen to over $1430 an ounce. In fact, its price has risen so much that it has created a new business with first companies advertising on TV for people to send them their Gold, and as the profits from cheating people out of its true value were significant, the establishment in every town centre of several shops similarly encouraging people to give away real money in return for scraps of paper. Yet, despite the fact that these businesses have conned large numbers of people out of their money, and melted it down into bullion, the price of Gold continues to rise. Most Gold traders expect it to reach a short term high in the next few months of around $1650 an ounce. Many believe that its longer term price will rise to anything between $3,000 to $7,500 an ounce.

Certainly, China seems to believe that its price is rising inexorably. But as this article describes, even here the importance of lying is brought out again. The Chinese official figures for its Gold Reserves stand at just over 1,000 tonnes, but its thought the real figure is higher than this. Concerned that the dollar is falling in value, and needing at some point to break the peg of the Yuan to the dollar, China is in a Catch 22 situation. Sitting on trillions of dollars in its reserves, and holding trillions of dollars of US Bonds, a fall in the rate of the dollar to the Yuan, would mean that China would make a huge Capital loss. But, selling those dollars would be guaranteed to spark a run on the dollar, and bring precisely that situation about. China has been diversifying its reserves into Euros to try to avoid that problem, and has assisted in the problems the Eurozone has faced from the Credit Crunch by buying Eurozone debt. But, as this CNBC article suggests, China is losing patience with the Eurozone’s ability to resolve its problems, and as this other Report suggests the debt ratings agencies are themselves now concerned that the European austerity measures are sending their economies into a renewed recession, and creating the very conditions under which debts and deficits will be impossible to deal with, and where then the chance of defaults will rise. A similar view that the UK’s austerity measures will drive the UK into recession next year was also expressed by Bank of England Executive Director For Markets Paul Fisher, who also sits on the MPC.

But, as the Goldsilver.com article suggests, China is having to lie about its actual Gold purchases in order not to cause a massive increase in its global price. Its little wonder that crises emerge within such a system, and that the leading participants within it, are also led to say after the event – “No one saw this coming.” One wonders whether they are able to even know the difference between the real truth and the truth they have to convey to the world.

http://boffyblog.blogspot.com/2010/12/capitalism-and-importance-of-lying.html

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Posted in: Capitalism