[lbo-talk] Gallup on bailout

Bill Bartlett billbartlett at aapt.net.au
Thu Oct 9 03:24:22 PDT 2008


At 10:13 AM +0100 9/10/08, Lenin's Tomb wrote:


>Yes, the market price of rents is affected: rents tend to rise when house
>prices fall, because buy-to-let mortgages become more expensive and more
>difficult to secure. If you were right in your assessment, there would not
>be a sharp rise in both official and unofficial homelessness during periods
>of capitalist slump.

The market price of rents is not in the least influenced by the social need for housing, but only by the 'effective demand', that is to say the demand for rental housing by those able to pay. Those unable to pay don't come into it at all and those who do have an ability to pay can only pay what they are able to pay. No use setting your rents above that, imagining that people desperate for housing can conjure up money out of thin air.

(Although of course I could be wrong. Come to think of it, that exactly what happened in the home purchase market, people paid prices they couldn't afford by any stretch of the imagination with funds conjured up out of thin air. That's where this whole crisis originated.)


>It requires, quite often, class struggle to achieve said market
>rates. And the rhythms of such struggle are overdetermined by politics,
>namely the extent to which antisystemic movements can mobilise working class
>militancy.

I remain to be convinced of this. Perhaps. Marginally. The alternative explanation is that the link between militancy and better conditions for the working class or sections of it is quite the opposite. That militancy is rather an effect, rather than a cause of improved conditions and that the improved conditions are entirely a result of random fluctuations in the relative market power of workers. There's some evidence for this latter explanation, particularly in the correlation between higher rates of union militancy in those very industries and occupation which enjoy inherently greater bargaining power. It may be that they have unions because they can, whereas people at McDonalds don't simply because they don't have any bargaining power to leverage with a union in the first place.

But as I say, I'm not sure what the truth is.


>What will restrict the consumption of the working class is the profit system
>> itself. Dramaticalloy higher taxes could make it unprofitable for the owners
>> of the means of production to produce things, which creates shortages.
>
>
>It would be more pertient to say that what *ultimately* restricts
>consumption is the profit system itself. But the demands of the profit
>system can make themselves felt in a number of ways. One of the
>achievements of the UK profit system in the 1980s was to effect a shift in
>the burden of taxation from higher incomes, inheritance and profits to
>indirect taxation on goods and services which are disproportationately paid
>by the poor.

Oh dear. I thought were making progress. The VAT in Britain is paid not by the poor, not even nominally (as sales taxes are nominally paid by buyers in the US). VAT is nominally as well as in reality paid by registered business who sell goods and services. It is an input cost.

You can't possibly believe that the price merchants are able to get in the market is determined by their costs, surely? They can't just pass such costs on regardless of the other market forces. They must take market prices, so extra cost must therefor be subtracted from profit margin. The VAT is an extra cost. It isn't added to retail prices, unless market forces have magically been suspended in the UK.

I recall we went through the process of implementing a value added tax in Australia even more recently. (Called a GST here.) I know how it works, I know its effect. Prices did go up in some cases, because there were loads of compensatory benefits, like increased welfare benefits, nominal income tax cuts etc attached. The the price increases that did result were attributable to increased effective demand, not increased input costs. All the same, the costs were not always able to be passed on. There were distortions, because food was kept GST-free for political reasons. Prices of food still rose, because of increased effective demand. Some other areas, such retailers of clothing and textiles, that did not have exemption from the GST nevertheless had great difficulty trying to pass on the costs. They couldn't, and just had to wear it ;-)

Anyhow, enough, I'm getting worn out thinking too much.

Bill Bartlett Bracknell tas



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