Prem Sikka
16 February, 2024
Columnists Left Foot Forward Opinion
The evidence of class interests in shaping and reinforcing laws isn’t hard to find.
Columnists Left Foot Forward Opinion
The evidence of class interests in shaping and reinforcing laws isn’t hard to find.
The rule of law is considered to be a pillar of neoliberal democracy but all is not what it seems. All too frequently it preserves the privileges of the wealthy, and justice and fairness seem secondary. Increasingly, the Tory government is devising laws that deny people access to the courts, and ministerial diktats are becoming the final words.
The evidence of class interests in shaping and reinforcing laws isn’t hard to find. In the UK, wages are taxed at the rates of 20%-45%, but returns on wealth in the forms of capital gains are taxed at the rates of 10%-28%. Dividends are taxed at the rates of 8.75% – 39.35%. The recipients of capital gains and dividends do not pay national insurance even though they use the National Health Service and social care.
Anyone dodging taxes faces the possibility of criminal prosecution, but dodges can be regularised by laws permitting the use of trusts or shifting of corporate profits to low/no tax jurisdictions. Such laws are the outcome of class interests deeply embedded within the state. It is hard to think of any mass marches or petitions demanding that the return on investment of human capital be taxed more highly than the return on investment of wealth.
Insolvency is another area shaped by class interests. In the event of a business bankruptcy the secured creditors, primarily banks, hedge funds and private equity, must be paid first from the proceeds of the sale of a bankrupt business’s assets. This usually exhausts the proceeds and little is left for unsecured creditors, usually connected with trade and employee pension schemes. The law favours the welfare of finance capital over other stakeholders even though banks hold diversified portfolios and are in a better position to absorb risks, compared to employees and trade creditors. The law is not based on equity or fairness and legitimises the power of big money.
There is a widely held view that powerful organisations, including governments, are answerable to the courts, in accordance with the contemporary discourses on resolving disputes and securing proper conduct. This presupposes that challengers can muster sufficient resources and parliament and courts are not neutered by suppression of information, manipulation of legal processes and frustration of accountability.
In August 2019, amidst the Brexit hysteria, the Queen with advice from Prime Minister Boris Johnson suspended the UK parliament for five weeks. In September 2019 the Supreme Court ruled that the prorogation was unlawful. The government’s response was to introduce the Dissolution and Calling of Parliament Act 2022 which empowers the Prime Minister to dissolve parliament without a vote to that effect in the House of Commons.
The independent Electoral Commission has overseen fairness of the UK elections and called out unacceptable practices. It has fined the Conservative Party for breaches of electoral laws. The government responded by enacting the Elections Act 2022 and the Commission is now under the control of the government.
The Elections Act 2022 also introduced compulsory voter photo ID to enable people to vote. The rhetoric was that this was necessary to control electoral fraud though there is hardly any evidence to support the claim. Critics said that the real reason was to deter the poor and disabled, normally not Conservative voters, from voting. However, it backfired. After heavy defeats in the 2023 local council elections, Tory MP Jacob Rees-Mogg said that the purpose of the voter ID rules were an attempt to “gerrymander” the electoral system – “We found the people who didn’t have ID were elderly and they by and large voted Conservative, so we made it hard for our own voters and we upset a system that worked perfectly well.”
In the 2019 general election, the Conservative government secured a majority of 80 seats in the Commons, enabling the government to push legislation through parliament with perfunctory scrutiny. A major aim has been to oust the courts and deny rights to people.
In April 2022, the UK government announced that it would forcibly transport a certain group of asylum-seekers to Rwanda and their claims for asylum would be processed in that country. If successful they would be given asylum in Rwanda, not in the UK. In November 2023, the Supreme Court judged that amongst other things Rwanda was not a safe place for asylum seekers.
Rather than accepting the judgment, the government has introduced the Safety of Rwanda (Asylum and Immigration) Bill to overturn the Supreme Court’s factual determination that Rwanda is not safe. The Bill ousts the jurisdiction of domestic courts to reconsider facts. The Bill empowers the government to ignore interim orders of the European Court of Human Rights. In effect, the Bill threatens both the domestic rule of law, especially the separation of powers between the Executive and the judiciary, and the international rules-based order. Through the Bill the government is forcing parliament to say that Rwanda is safe, even when evidence overwhelmingly suggests otherwise and courts will have no powers to consider the contrary evidence.
The government has developed a particular penchant for disliking the rule of law and court interventions when it comes to workers’ rights. After decades of struggles, workers won the right to withdraw labour, but the Strikes (Minimum Service Levels) Act 2023 has changed that position. Despite lawful strike ballots, millions of workers will not be able to take strike action. The law requires the relevant trade union to order workers selected by the employer to cross the picket-line. Those refusing can be sacked without any compensation or legal redress.
In March 2022, P&O Ferries dismissed 800 members of its shipping staff without any regard for the employment laws. The company admitted that it knowingly broke the law and the then Prime Minister Boris Johnson said: “P&O plainly aren’t going to get away with it.” However, the company faced no sanctions from the government.
Instead, in July 2022 the government enacted the Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2022 to enable employers to fire striking workers and replace them with cheaper agency staff. In July 2023 the High Court ruled that the Regulations were unlawful because the Secretary of State failed to comply with his statutory duty under the Employment Agencies Act 1973 to consult before making the 2022 Regulations, as well as breaching his duty under Article 11 of the European Convention on Human Rights (ECHR) to prevent unlawful interference with the rights of trade unions and their members. The government has announced its intention to reverse the High Court judgement.
Until 2013, UK workers could appeal to employment tribunals to protect their rights and seek redress for unfair practices. There were no fees. The Employment Appeal Tribunal Fees Order 2013 (SI 2013/1893) introduced fees for taking cases to employment tribunals; something which penalised the poorest workers because they would struggle to pay the fees. On 26 July 2017 the Supreme Court declared the Fees Order to be an unlawful interference with the common law right of access to justice, and quashed it. Undeterred, in January 2024 the government launched another attempt to quash the Supreme Court judgment and introduce employment tribunal fees.
So, how do we explain changing patterns in the rule of law? To be clear, there never was a golden age of justice and fairness as the rule of law is constructed by institutions colonised by the interests of the moneyed classes.
The above examples show that the rule of law is being replaced by ministerial diktats, a common practice in elected dictatorships. A minister says Rwanda is safe and therefore it is safe, akin to a minister saying that a dog is a cat and despite all the evidence no one is permitted to challenge it. Courts are being ousted not only in the Rwanda example, but also in the anti-strike legislation which denies the sacked workers the right to seek redress. The class bias of the state is abundantly evident.
The rule of law is being eroded because parliament is weak. The Executive is able to ride roughshod over political processes because legislators obediently follow the party-line. This majority needs to be diluted by replacing the First-Past-The-Post voting system with proportional representation, which holds out the possibility of creating an effective opposition in parliament. A written constitution must rebalance the powers of the government with those of the people and the judiciary.
Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.
The role of the state in profit-making today
Alex Callinicos critiques a recent argument that a new ‘political capitalism,’ where profitability is determined by political lobbying, is taking shape
Tuesday 03 January 2023
Alex Callinicos critiques a recent argument that a new ‘political capitalism,’ where profitability is determined by political lobbying, is taking shape
Tuesday 03 January 2023
SOCIALIST WORKER Issue 2836
Alex Callinicos
The US Federal Reserve pushed up interest rates. But does this represent a fundamental change in the nature of the the state’s relationship to capital?
Looking back on 2022, one thing has become clear, and that’s a sharp turn taken by leading capitalist states. They worked to force up interest rates in response to the inflationary upsurge since 2021. One question this shift has raised is the role played by the capitalist state today.
The Covid-19 pandemic has seen an intensification of the trend since the 2007-09 financial crisis for states to intervene massively in markets. The obvious explanation is that deepening instability means that capitalist economic structures will need more and more to be propped up by state intervention.
But two noted Marxists, Dylan Riley and Robert Brenner, deny this in an article in the latest issue of the journal New Left Review. It follows an article by Brenner early in the pandemic. The title “Escalating Plunder” summed up his argument.
In response to the lockdowns, The US central bank, Federal Reserve Board and Congress adopted measures to prop up prices and incomes. Brenner dismissed this as simply an attempt to transfer wealth upwards to the bosses of the big corporations and their allies.
At the end of the article Brenner promised a “second part” that would set “these trends in their historical and global context” and explore “their sources”. The new article with Riley seems to be a step towards fulfilling this promise.
Its premiss is correct. Advanced capitalism is suffering from what Brenner earlier called the “long downturn”—slow growth caused by the low level of profitability in manufacturing industry.
The result, Riley and Brenner now argue, is “the rise of a new regime of accumulation” which they call political capitalism. “Under political capitalism, raw political power, rather than productive investment, is the key determinant of the rate of return.”
They aren’t just saying politics serves capital. They are saying that influencing politics—for example, by investing in lobbying governments—increasingly determines capital’s profitability.
They even compare this with precapitalist forms of class society. “The dramatic intensification of lobbying could be understood as a form of ‘political accumulation’, different of course from its feudal forebear, but nonetheless highly distinctive,” they say.
But, as another Marxist economist, Tim Barker, has pointed out, “every single item in the Riley/Brenner laundry list of new forms of political extraction—tax breaks, the privatisation of public assets at bargain-basement prices, low interest rates, stock market booms with irrational consequences, massive state spending aimed directly at private industry—existed at different points in the 1945-1973 ‘golden age’.”
This is when the rate of profit was much higher. States have always played a formative role in capitalist economic relations. They facilitate the exploitation of workers and help their firms compete against their rivals.
Of course, when states intervene in the economy, they materially benefit specific groups of capitalists. In March 2020 the US Federal Reserve responded to the panic sweeping through the money markets by buying up government and corporate bonds on a huge scale.
This certainly facilitated what Brenner calls the “upward distribution of wealth.” It benefitted the already ultra-rich holders of financial assets whose prices soared thanks to this programme.
But one of the main changes capitalism has experienced in recent decades is that investment and trade increasingly tend to be financed by borrowing in global money markets. Leading government bonds are used as collateral for these loans. The Fed and other central banks boosted their bond buying to ensure these crucial markets kept working.
Interventions can be contradictory. When the central banks more recently reversed this policy and pushed up interest rates, they created huge problems for some sectors, notably pension funds. But this policy turn was driven by the need to defend profits by forcing up unemployment and thereby undermining workers’ ability to defend their wages against inflation.
Capitalism remains a global system of competitive accumulation. It imposes its imperative demands on all state managers, however corrupt or deluded they may be.
Alex Callinicos
The US Federal Reserve pushed up interest rates. But does this represent a fundamental change in the nature of the the state’s relationship to capital?
Looking back on 2022, one thing has become clear, and that’s a sharp turn taken by leading capitalist states. They worked to force up interest rates in response to the inflationary upsurge since 2021. One question this shift has raised is the role played by the capitalist state today.
The Covid-19 pandemic has seen an intensification of the trend since the 2007-09 financial crisis for states to intervene massively in markets. The obvious explanation is that deepening instability means that capitalist economic structures will need more and more to be propped up by state intervention.
But two noted Marxists, Dylan Riley and Robert Brenner, deny this in an article in the latest issue of the journal New Left Review. It follows an article by Brenner early in the pandemic. The title “Escalating Plunder” summed up his argument.
In response to the lockdowns, The US central bank, Federal Reserve Board and Congress adopted measures to prop up prices and incomes. Brenner dismissed this as simply an attempt to transfer wealth upwards to the bosses of the big corporations and their allies.
At the end of the article Brenner promised a “second part” that would set “these trends in their historical and global context” and explore “their sources”. The new article with Riley seems to be a step towards fulfilling this promise.
Its premiss is correct. Advanced capitalism is suffering from what Brenner earlier called the “long downturn”—slow growth caused by the low level of profitability in manufacturing industry.
The result, Riley and Brenner now argue, is “the rise of a new regime of accumulation” which they call political capitalism. “Under political capitalism, raw political power, rather than productive investment, is the key determinant of the rate of return.”
They aren’t just saying politics serves capital. They are saying that influencing politics—for example, by investing in lobbying governments—increasingly determines capital’s profitability.
They even compare this with precapitalist forms of class society. “The dramatic intensification of lobbying could be understood as a form of ‘political accumulation’, different of course from its feudal forebear, but nonetheless highly distinctive,” they say.
But, as another Marxist economist, Tim Barker, has pointed out, “every single item in the Riley/Brenner laundry list of new forms of political extraction—tax breaks, the privatisation of public assets at bargain-basement prices, low interest rates, stock market booms with irrational consequences, massive state spending aimed directly at private industry—existed at different points in the 1945-1973 ‘golden age’.”
This is when the rate of profit was much higher. States have always played a formative role in capitalist economic relations. They facilitate the exploitation of workers and help their firms compete against their rivals.
Of course, when states intervene in the economy, they materially benefit specific groups of capitalists. In March 2020 the US Federal Reserve responded to the panic sweeping through the money markets by buying up government and corporate bonds on a huge scale.
This certainly facilitated what Brenner calls the “upward distribution of wealth.” It benefitted the already ultra-rich holders of financial assets whose prices soared thanks to this programme.
But one of the main changes capitalism has experienced in recent decades is that investment and trade increasingly tend to be financed by borrowing in global money markets. Leading government bonds are used as collateral for these loans. The Fed and other central banks boosted their bond buying to ensure these crucial markets kept working.
Interventions can be contradictory. When the central banks more recently reversed this policy and pushed up interest rates, they created huge problems for some sectors, notably pension funds. But this policy turn was driven by the need to defend profits by forcing up unemployment and thereby undermining workers’ ability to defend their wages against inflation.
Capitalism remains a global system of competitive accumulation. It imposes its imperative demands on all state managers, however corrupt or deluded they may be.
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