Archive for Economics

The Problem with Hizb-ut-Tahrir

Posted in Uncategorized with tags , , , , , , , on July 20, 2009 by Umer

by Taimur Rahman

Hizb-ut-Tahrir (HT) claims to be a pan-Islamist sunni organization. It proposes that the enforcement of Khilafah over the world is a solution to the miseries that afflict mankind.

Let us examine the political and economic views of Hizb ul Tehreer. If the politics of the HT is to be put a nutshell, they are reactionaries that want to take Muslim societies back a couple of hundred years. Here are their reactionary views:


Much like the Taliban, the Hizb ut-Tahrir rejects democracy as a western system and unislamic despite aspects of it such as elections existing in the Islamic political system. Hizb ut-Tahrir argues democracy as a system is:

the rule of people, for the people, by the people. The basis of the democratic system is that people possess the right of sovereignty, choice and implementation. … it is a Kufr system because it is laid down by man and it is not from the Shari’ah Laws.

In place of rule of by and for the people, they want to introduce the rule of by and for the mullahs. They call this the establishment of a Khilafah.

In this Khilafah non-Muslims will be prohibited from serving in any of the ruling offices, such as the position of the Caliph, nor vote for these officials, as these positions require those who fulfil them to believe in the system. Only Muslims have “the right to participate in the election of the Khaleefah [head of state] and in giving him the pledge (ba’iah). Non-Muslims have no right in this regard.”

Hizb ut-Tahrir believe Islam forbids women from ruling positions such as caliph, Chief Justice, provincial governor, or mayor citing Prophetic traditions. Article 109 of the party’s draft constitution prescribes segregation of the sexes in public activities such as school, sporting activities, etc. Article 114 of the constitution specifies that women should not be allowed to be in private with men other than their husband or members of their immediate family (father, brother, son). Article 116 stipulates that once married a woman is obliged to obey her husband.

HT says that Muslims who “have by themselves renounced Islam … are guilty of apostasy (murtad) from Islam [and] are to be executed.” That is the main pillar reserved for socialists, communists and others who may try to organize workers and peasants for a classless society.


The idiocy and reactionary nature of the HT can be guaged by their economic policy. Their ideal economic system is one in which modern economies are taken all the way back to a form of barter trade.

… it is the duty of the Khilafah State to make its currency in gold and silver and to work on the basis of gold and silver as it was during the time of the Messenger of Allah and his Khulafa’a after him

Anyone who does not have the common sense to understand that the substitution of the money economy by trade in gold and silver cannot be accomplished without utterly destroying the productive forces of modern society. To even suggest this as a serious proposition in the modern world is absolutely insane.

There is no point in going any further into their economic views since it should be blatantly obvious from this one quotation that it would be an utter waste of time.

These simple facts prove very clearly that the HT is a fundamentalist organization full of nutter, idiots, reactionary misogynist, and reactionary idiots.

Many on the Left may admonish me for using such words. They think that I must be kind courteous and polite to such organizations. They write long tracts about how the Left is isolated and unconnected to the people and that these right-wing organizations have come to represent the “aspirations of the people”. This is an utterly incorrect argument.

Mao said “We counted the mighty no more than muck.” And this is exactly what I think of these fundamentalist organizations that are reactionary to the core.

The post has been edited for clarity.

Economics of Socialism in USSR

Posted in Communist Movement, International Affairs, Marxism with tags , , , , , , , , , , , , , , on July 17, 2009 by Umer

Comrade Taimur Rahman of Communist Mazdoor Kissan Party discusses how a planned socialist economy enabled the primitive Tsarist Russsia to unlock the creativity of her people, transforming the USSR into a cultural, social, technological,  scientific, industrial, political, diplomatic and military superpower in a few short decades:

Part 1

Part 2

Comrade Harpal Brar of Communist Party of Great Britain (Marxist-Leninist) continues on Comrade Rahman’s theme, explaining certain aspects of rapid innovation, cultural and scientific advance in the USSR:

Part 3

Understanding Economics

Posted in Marxism with tags , , , , , , , , , on June 12, 2009 by Umer

A Marxist Guide to Understanding Economics

Tim Bowron

(from Workers Party of New Zealand)

Economics is a subject which is regarded by most ordinary people as mysterious and totally defying any rational understanding. This is true to an even greater extent today than 50 years ago, as we have increasingly seemed to move beyond a capitalist economy which deals with the production of real tangible things, to the dizzying world of currency hedge funds, financial futures trading and the explosion of the service sector.

No wonder then that many activists who are committed to trying to bring about radical social change shy away from the study of capitalist economics.

However this is deeply problematic because at the same time the one thinker who developed a thorough-going radical critique of capitalism – Karl Marx – is very little read among people on the left (even those calling themselves socialist revolutionaries).

In addition, there exists a widespread misconception that the writings of Karl Marx are so arcane, so mysterious, as to be only comprehensible to a select and gifted few. This is unfortunate because despite the perhaps slightly inaccessible style in which Marx wrote, the basic fundamentals of his philosophy are in reality breathtakingly simple.

Continue reading

Karl Marx’s guide to the end of capitalism: a primer

Posted in Marxism with tags , , , , , , , on October 26, 2008 by Umer

Sales of Marx’s Capital are reportedly soaring as the world realises that this was where he prophesied how capitalism will destroy itself. So it’s time for a Capital primer, time to talk fetishism (yay!) of commodities (d’oh!).

1. Commodities. A chair is a commodity – not because you can sit on it, but because it was produced by humans to be traded. Each commodity has a use value, measured by its usefulness in satisfying needs and wants.

2. Exchange value. How, you’ll be asking, can one measure the difference in value between, say, a 80GB iPod, and a new copy of Capital? It’s the exchange value, stupid. This is measured by the amount of labour that goes into making each commodity – such is the Marxist labour theory of value, and the source of what Marx called the fetishism of commodities.

3. Literary value. As Francis Wheen stresses in his biography of Marx, Capital is partly a racy gothic novel, a Frankenstein-like tale of how we created a monster from which we are alienated and which, by means of class struggle, we will slay.

4. Capital. This is money used to buy more money. Like God, capital seems mystical and immutable, but is really only a function of social relationships (Rowan Williams, a Marx fan, disagrees with the God bit). Capitalists think capital has magical significance. Socialist revolution will disabuse them of that.

5. Exploitation. Commodity sales increase the amount of exchange-value owned by capitalists, yielding profit and thus helping them accumulate capital. How? You accumulate capital by the creation of surplus value, which is unpaid labour appropriated by employers.

6. Crises. Capitalists aren’t especially interested in accumulating commodities (once you’ve got a hot tub for your Lear jet, it’s hard to decide what else to spend it on) and the incessant drive to amass capital causes crises. The over-expansion of credit by greedy capitalists recently resulted in more goods being sold than can be bought from income and savings. The result? Widespread debts, straitened circumstances (think coarse toilet paper) and happy days for repo men (boo!).

7. Profit. This falls when capitalism exhausts its capacity for growth. Also, as technology improves and productivity rises, more goods are produced, which are worth less.

*This post is prepared by Taimur Rahman and was posted at the CMKP Discussion Forum.

CMKP: US Financial Crisis Mocks at Regulation-Free Economy

Posted in Communist Movement, International Affairs, Law with tags , , , , , on October 3, 2008 by Umer

The following statement has been issued by the Central Secretariat of the Communist Mazdoor Kissaan Party Pakistan (Communist Workers Peasants Party – CMKP) on the US Financial Crisis.

The post-Cold War’s much trumpeted force of deregulated economy that was made an article of faith in monopoly-dominated new breed of capitalism has virtually fallen flat on its nose to the surprise of many chanting the mantra of this hue of economy. More amazing is its reversal of gear requesting the government’s intervention to rescue the financial and mortgage markets at the Wall Street through the government’s monetary assistance. The federal government led by President George W. Bush of the Republican Party, which strongly believes in free market economy immune from government’s regulation has, changed its clout and is busy in providing 700 billion US dollars to the collapsed giant financial companies.

This is the second major financial meltdown of the United States after the Great Economic Depression of 1933, despite being a wealthiest capitalist nation in the imperialist bloc. Commentators and analysts are discussing and focusing on the technical aspects of the financial institutions, but they ignore the fact that the higher stage of capitalist economy turns into bubble thanks to speculation, manipulation and deception in the hub of economic activities both in commercial and financial trading. Such economic bubble has once again burst with a big bang making the concerned traders paralyzed.
Since immoral deceit is the rule of the game prompted by the greed to pile up profit, uncertainty in the market remains a regular feature in the market, especially in the Stock as well as financial and mortgage markets, . It is no wonder that the America has been hit hard by the present serious crisis, as such nightmare is an inherent part of the fabulous dream of capitalism for the profit of some individuals at the cost of people directly or indirectly. But the main thing of this situation is to underline the dark aspect of the gospel of miracle of deregulated and competitive market economy. It causes circasm on the part of “Holy Warriors” of the deregulated economy. It is an irony that they and their supporters find no option other than the bailout through the financial help of the government.

The Bush administration, the strong protagonist of the deregulated economy, has all of a sudden made a new shift in its stance like the lizard that goes on changing its colours to deceive others. It has come out to salvage sank financial and mortgage markets, with the magic of $ 700 billion which, according to American economists, would not work. Even one trillion (one thousand billion) dollars are insufficient to revive the collapsed financial and mortgage companies. If one trillion dollars are provided to them, every citizen, including children, will have to bear the brunt for paying 3000 dollars each. Where from the Bush administration would generate this amount to help the bankrupt companies? 700 billion or one trillion US dollars are the tax money earned from the people. The burdens of commercial, industrial and service sector taxes are put on the shoulders of consumers indirectly by raising the prices of consumer goods and services.

Where is the magic of free economy that was projected as the Messiah of all ills. This unfolds the element of American state, the prime duty of which is to ensure and look after the supreme interests of private ownership, particularly the cartels which actually dominate, dictate politics and economy. .
The mother of all evils is essentially the devilish character of individual property in any form and manifestation. The current crisis what the United States of America, at the zenith of its economic power, actually encompasses the fallout of capitalism which is breathing in intensive care unit (ICU), getting oxygen from the massive neo-colonial loot and plunder of the developing nations in Third World. Capitalism’s clinical death already took place more than a century ago. Wars, recession, inflation and severe economic crisis all over the globe are related to this phenomenon. And it will continue to haunt the mankind until the monster of capitalist economy is eliminated through the collective wisdom and power of the working class of the world at large.

Meanwhile, the myth of the Democratic Party’s claim for good governance and welfare of the American people, rejecting the only interests of the business, has exploded when a slight numerical majority of the Democrats in the US House of Representatives voted for bailing out financial markets through the $700 billon package. As it is said the taste of pudding is in eating, the Democrats have unmasked themselves before the American people that they (Democrats) have nothing against supreme interests of the American monopolies and their (Democrats’) clout for the “people’s cause” is a misnomer.

According to reports, there is a move in the United States to nationalize a or two private commercial banks which have become bankrupt due to unfair banking practices. This negates the US ”solemn pledge” to preserve the sanctity of private ownership. Another American hypocrisy is its intense pressure on the developing countries, including Pakistan, to privatise the industrial, commercial, service units in the public sector.

Incoherent, incompetent capitalist system, jumping to and fro, could be gauged from the fact that when in 1933 crash shattered the financial market, the US had no option other than enacting the Glass-Steagall Act to overcome the malaise. This Act was put into action to separate the functioning of commercial rules from Stock brokerage companies, thus regulating the trading of the financial leverage, including banks and brokers for mortgage trading similar to Stocks and bonds. But this regulated economy was reversed during the Carter administration, giving free hand to the economy for its unilateral goal, with the contempt against government regulation. In the 1990 the American banks maneuvered for hedging their loan risks. The devise was called Credit Default Swap (CDS), through which insurance contract for protection between buyer and seller was brought in. Now, the free American economy wheels find roadblock, needing the government’s intervention and monetary support through legislation after about three decades. Capitalism is based on the hallucination of its best system for ever contrary to the law of development and its ugly fact of brutality and uncertainty.

A lot of so-called liberal economists and new converts of capitalism from yesteryears’ socialism, who have been immune from having the rationale of law of socio-economic development in the backdrop of contradictions, are beating the drum that capitalism, especially American economy, has the resilience to overcome the odds. They also lack the grasp what price the developing countries pay to energise the imperialist economy. Reduction in the prices of the farmer’s raw materials, semi and even their value-added goods for exports, and on the contrary, the enhanced prices of industrial raw materials and manufactured goods of the imperialist countries are the temporary remedy of their decease-ridden economy causing one financial crisis after another nature. Fluctuation in international oil prices, rise in the export of food commodities of the Western countries, side by side with the reduced values of the currencies of the developing widening deficit on their balance of payment in foreign trade help overcome the former’ economy. This partakes of the nature of resilience of the imperialist economies at micro level, while other details bring the facts to the fore at macro level. Their business interests even have crossed the national boundaries and are operating globally by hoodwinking the overseas ruling oligarchy elite and finally making them subservient to their (cartels’), ploy through carrot and stick policy.

China’s State Enterprises

Posted in International Affairs with tags , , , , on August 22, 2008 by Umer

China is the center of the debate. With the brilliant show of Olympics at Beijing, the debate regarding the character of the Chinese state and society has also resurfaced. What is China? Socialist? People’s Democracy moving towards capitalism or socialism? Degenerated workers’ state? Capitalist? Imperialist? I argue that China was never a socialist state. Since its birth in 1949 in a very backward terrain, China continues to be a People’s Democracy moving towards socialism. With the advent of the period of Deng Xioping, revisionism took hold of Chinese ecnomics and society and the movement towards socialism was reversed. However, lately new information has been emerging from China which provides an interesting perspective, i.e., the reversal of the process of reversal. I am posting here an interesting article (I am not in agreement with the analysis, but the facts are interesting) that appeared in The Australian regarding the role played by the State Owned Enterprises in China:

China’s state enterprises aren’t dinosaurs

THE Olympic Games comprise China’s most prominent state-owned enterprise.

In some other countries, including Australia, the Olympics, and sport in general, are chiefly the realm of volunteers, of corporations, of a discrete professional world.

But there is no disguising that these Olympics are inseparable from China Inc.

This is a good time, then, to take a look at the realm of state-owned enterprises (SOEs), mostly set up under Mao Zedong, which a few years back some portrayed as dinosaurs about to pass into extinction.

Instead, as Barry Naughton, professor of Chinese economy at the University of California, San Diego, says in the latest edition of the influential China Economic Quarterly: “Since their low point in the mid-1990s, China’s SOEs have made a stunning return to profitability.”

In 1997 the entire state-owned industrial sector returned a net profit of just below 0.6 per cent of China’s gross domestic product.

Ten years later, the sector’s profits constituted 4.2 per cent of a much, much larger GDP, while the non-industrial SOEs scored a further 2 per cent of GDP in profits.

One of the reasons, Naughton points out, is that “the Government has been willing to subordinate other agendas such as privatisation to the quest for a robust state enterprise sector that was financially self-sufficient and able to contribute to the government revenue base as well”.

This quest began with the closure of thousands of loss-making SOEs, described by economists in the mid-1990s as “zombie firms”, the living dead, kept alive mainly because no one else could think what to do with the millions of workers they employed.

Crucially, the Government removed from SOEs the responsibility for providing social welfare for their workers, the old “iron rice bowl”. The process of reinstating adequate provision of such services outside the workplace remains an arduous one, barely begun, but that’s another story.

The number of industrial SOEs dived from 80,000 to 26,000 in 10 years.

This enabled the Government to concentrate on a number of strategic sectors, in which it intends to retain a firm — even monopolistic, but more commonly, oligopolistic — grip. They include energy, power, industrial raw materials, defence, large-scale machinery, transport and telecommunications. Financial services are state dominated.

In some areas, non-government competitors are banned. In others, says Naughton, “high capital requirements combine with discriminatory regulatory treatment to discourage non-state entrants even when they are theoretically allowed”.

The core 153 enterprises answer to their Chinese shareholders via the state-owned assets Supervision and Administration Commission (SASAC), which reports to the State Council led by Premier Wen Jiabao.

There are now three national oil companies, four telcos, and three airlines that carry 82 per cent of domestic passengers.

China’s 31 provinces, regions and municipalities also each operate a large number of local SOEs, though their numbers have been pruned and their efficiency raised in a parallel drive to that at the national level.

Overall, in 1995 China had 7.6 million SOEs, more than 80 per cent of all businesses, of which two-thirds were collective enterprises, the others traditional SOEs.

In 2006, PetroChina, Sinopec, China National Offshore Oil, China Mobile, China Telecom, Baosteel, Chinalco, Shenhua Energy and the state Electricity Grid produced 69 per cent of the profits of all 153 centrally owned SOEs.

In Australia, a misleading perception has emerged, that we have been the winners out of the commodity boom and China has been the chief victim, having to cough up for the inputs of its insatiable industrial machine.

But Naughton points out the situation on the ground in China is very different.

“Control of resource extraction and processing sectors by central SOEs has meant that they have profited handsomely from the global resource boom, which in turn is largely a result of the Chinese investment boom that SOE restructuring helped to create, and changed global relative prices massively in favour of raw materials.”

Chinese SOE resource companies are also expanding production overseas, as Australians know.

Treasurer Wayne Swan says that every nine days he has approved a Chinese bid to invest, with China’s investment here as a result tripling from $3.5 billion in 2006 to $10 billion last year and being set to triple again, to $30 billion, by the end of 2008.

It is China’s retail manufacturers that pay, in squeezed margins, for the commodities boom and they are being forced to pass their higher costs on to global consumers.

As long as this does not cause massive job losses or inflation driven by food and oil prices, China’s Government is prepared to stand back and watch the trend continue.

Because manufacturing in China, unlike the resource industry, is increasingly privately owned, and the export sector involves substantial foreign ownership, about 60 per cent of China’s exports come from sources fully or substantially foreign owned.

All SOEs have been corporatised to a large degree, with boards that include an outsider or two. Managers mostly operate under three-year contracts with a performance component. In 12 years, the debt-to-assets ratio of industrial SOEs has been reduced from 68 per cent to 57 per cent.

This year — the icing on the cake for the Government — Premier Wen has succeeded in forcing almost all sectors to pay the state dividends, rather than retain their profits to boost management and board perks, and to reinvest them, sometimes before the equities collapse this year in the share market, sometimes resulting in overcapitalised assets. Most are now paying 5 per cent of post-tax profits back to the Government.

But although SOEs mostly lack accountability to the holders of the minority stakes sold on share markets, pressure to perform continues, from the Government itself.

Only the top three businesses in each sector will survive, SASAC has warned.

Thus in some paddocks of China’s Animal Farm, it’s dog eat dog.

Naughton says that SASAC “encourages firm strategies organised around commercial, service or investment markets, not just traditional industrial production”.

Under dynamic chairman Huang Tianwen, Sinosteel, principally a provider of logistic and technological services to China’s steel industry, propelled its revenues to $US15 billion in 2007, placing it fairly firmly on high ground if and when SASAC starts its next cull. Every one of the 22 Chinese corporations on the Fortune 500 list is state owned, 16 by SASAC, five financial institutions and just one — Shanghai Automobile — by a local government. Arthur Kroeber, managing director of research firm Dragonomics, and Rosealea Yao, research manager, say: “Chinese policy makers have succeeded in the task they set themselves in 1995 to zhuada fangxiao (keep the big, lose the small)”.

It is the fast-growing private sector, flourishing in areas like retail and manufacturing, that has sucked up many of the jobs shed by downsizing SOEs.

From 1995-2006, the state sector of employment fell from 77 per cent to 35 per cent. The private share soared from 20 per cent to 60 per cent. But, Krober and Yao stress that “economic power remains firmly concentrated in the hands of the state”.

In 2006, the top 10 SOEs were eight times bigger than the top 10 private firms.

They point out that the state share of revenues in banking is 94 per cent and in insurance 97 per cent.

Jonathan Woetzel writes in the latest McKinsey Quarterly: “The line between SOEs and private companies has blurred. Over the next five years their ownership structure will matter much less than their degree of openness, their transparency and receptiveness to new ideas.”

This is true to a degree.

The Chinese central Government has proved itself an adaptable and subtle manager of its own assets. But ownership and control continue to count a great deal.

Is there a real prospect for change?

Chen Zhiwu, finance professor at Yale school of management, says privatising China’s assets would “unleash a wealth effect and boost domestic consumption”, transforming the growth model from the present drivers of investment and exports.

Unlike eastern Europe and Russia when they embarked on their convulsive privatisations, he believes “China is operationally ready” for a change of ownership. That makes sense. But don’t hold your breath.