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From Militant, No. 570, 25 September 1981, p. 7 & 14.
Transcribed by Iain Dalton.
Marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
The disastrous [policies] of Labour’s right wing have been completely rejected by the great majority of Labour Party members and active trade unionists.
The attempts of the right-wing ‘Solidarity’ spokesmen to justify the record of the last Labour government, claiming that it implemented most of its manifesto policies, cut no ice with Labour’s ranks.
Amazingly, Denis Healey himself, interviewed recently in New Socialist, says he now supports an expansion of demand, increased public spending, “new public enterprise and a strengthened NEB”, “reshaped” financial institutions to provide cheap long term credit, selective import controls and a massive expansion of industrial training.
All these are elements of the Alternative Economic Strategy (AES), originally put forward as an alternative to Healey’s monetarist policies during the 1974–79 government. The Party has moved left and, it seems, Healey has moved left with it.
The main components of the AES are now restated in the NEC’s conference document, The Socialist Alternative. The overwhelming majority of the Party supports the reforms proposed, reforms which would be an enormous step forward for the working class – if they could be implemented.
Does Labour’s economic programme really present a socialist alternative to monetarism? As the NEC’s new document (Statements to conference, pp. 1–33) quite rightly says:
“Our whole economic strategy should be the discussion and debate in the labour movement. Unless our policies are widely understood and supported both within and outside the party, we cannot hope to carry through the radical transformation they entail ...
“The crisis we shall inherit cannot be met by cautious tinkering or piecemeal measures. It demands an imaginative and sweeping programme, based on coherent strategy and guided by socialist values.”
The statement begins with a vivid and well-argued account of the effects of Thatcher’s policies. Scorn is poured on the theoretical pretensions of monetarism: “Milton Friedman’s equations have had a more devastating effect on British industry than Hitler’s bombs.”
It points out the absurdity of policies costing £18 billion a year in lost output (a less conservative estimate would be more than double that figure).
Moreover, in contrast to some previous denunciations of it as absurd and “outdated”, the political purpose of monetarism, an all-out attack on the labour movement, is clearly recognised: “Unemployment is not an accidental side-effect – it is the central weapon.”
The document boldly says:
“Just as the government demobilised three million servicemen and women returning from the war, so the next Labour government must demobilise the three million who have been conscripted onto the reserve army of the unemployed.”
It knocks on the head the idea that we cannot afford more public spending to provide jobs.
But it also admits that in the past the hostility of the capitalist class, expressed in a “fall in business confidence and the flight of capital has created an atmosphere of crisis in which Labour governments have been forced to abandon their social priorities in favour of economic orthodoxy ... we must be prepared to counter this disruption when it occurs.”
But how? The NEC calls for exchange controls and the “monitoring” of foreign investment; but even preventing the outflow of capital does not mean the controllers of finance will lend to the government to finance an expansion.
A “strike of finance” is in their power. How can what the document calls their “unwarranted degree of control” be ended?
The answer must be nationalisation of the major banks, insurance companies and other financial institutions. But unfortunately this vital component of any socialist programme is now dropped from Labour’s plans.
All we have in its place is the news (p. 17) that “we are looking at the possibilities for orderly sales of debt through agreements (our emphasis) with lending institutions.”
This would be how the Labour government would finance the increased public borrowing which the statement says would be necessary “in the short run” to finance increased public spending. The new arrangements would cut through the monetarist mystifications now surrounding monetary targets and the PSBR (public sector borrowing requirement) and reduce the “unwarranted degree of control by the financial institutions”.
But what price would the Labour government have to pay for such agreements? Surely it would be the abandonment of social priorities in favour of economic orthodoxy ...
The NEC believes that the risk of retaliation to import controls should be minimised by proceeding “through negotiation” with trading partners. But negotiation implies something is offered in return for closing markets to further import prevention. What has the NEC in mind?
The NEC points out that expansion will help to curb inflation as costs are reduced. It argues for price controls to “prevent companies taking advantage of new economic conditions just to increase profits.”
But providing a market is not simply a question of generating demand at any old price. There is enough demand in the world from the point of view of people’s needs to keep all Britain’s factories blasting at full stretch, if only they could produce profitably.
Increasing profits will be necessary to induce the capitalists to expand production in many of the worst hit industries. And even if a system of price control would be cunningly juggled to make an overall expansion worthwhile, what about increased investment, without which any expansion will peter out?
There is now way that the capitalists would contemplate ploughing back extra resources into their businesses in the absence of a significant increase in the rate of profit – now standing at around 2% and only a fraction of the rate even of the mid-1960s.
The establishment of a “publicly owned stake in each important sector of industry”, whether that is intended to mean a nationalised company or some form of government holding, certainly will not encourage the rest of the capitalist to invest. On the contrary big business – and they will not have to read Labour’s programme to understand this – will see it as a first stage to “the common ownership of the means of production.”
They will show how they feel by refraining from investment, which would be throwing good money after bad as far as they were concerned. Nor will planning agreements with major firms in each sector succeed in creating jobs and new investment unless this is profitable.
Indeed, the document seems to regard planning as a dialogue between government, trade unions and business:
“While some big companies will make political objections to Labour’s plans, they have good business reasons for welcoming arrangements by which industrial realities can be fully taken into account in government ...”
We have had plenty of experience in past Labour governments taking into account “industrial realities”.
The problem raised in implementing socialist policies are not unique to Britain. Proposals very similar to those in The Socialist Alternative are currently being put into practice in France.
Already, important reforms, in terms of a higher minimum wage, a shorter working week, better pensions have been brought in. The government is proceeding with its plans to nationalise a number of important industrial groups.
But already, only 100 days into office, the familiar attempt to reassure the industrialists is in full swing. The Financial Times reported (8 September 1981):
“The French government has embarked on a campaign to soothe employers’ fears over a socialist administration and to try to urge industry to boost investment ... The prime minister ... sought to reassure employers on two accounts.
“There was no question, he said, of interfering with the decision-making powers of the heads of companies or imposing on them a veto over dismissals. Trade unions have been claiming consultative powers over both management and dismissals that have frightened employers.
“He also said that is was necessary to halt the rise in social security costs payable by industry ...
“M Francois Ceyrac, head of the employers’ federation, queried last week some of the contradictions in the government’s policy. How was it possible, he asked, both to woo industry and to saddle it with new taxes, higher social security charges, restrictions on employers’ powers and now nationalisation?”
The previous week the Financial Times reported that the Minister for the Economy was resisting union demands for a freezing of some consumer prices. The likelihood is of inflation of 18% this year, and there is strong pressure to devalue against the D-Mark to restore French competitiveness (i.e. profitability).
Despite the government’s expansionary programmes, growth is expected to be only 3ΒΌ% next year, which would certainly not prevent unemployment staying above the 2 million mark.
If Mitterand has these problems in implementing his programme, despite his huge popular support and parliamentary majority, imagine the situation faced by the next Labour government with a crisis even more severe than in France.
British Business (4 September 1981) reported that the rate of profit was twice as high in France as in Britain according to the most recent figures.
The NEC’s Socialist Alternative warns that it would be dishonest to pretend that full employment could be quickly restored.
Yet the post-war experience to which they refer was that in two years, between 1945 and 1947, 2½ million jobs were created outside the armed forces, and unemployment in 1947 was less than 2% despite the demobilisation. Investment rose from 5% to 16% of total production, and consumption per head of the population rose by 13%, as the burden of military expenditure was reduced.
A crucial difference between then and now, however, is that profits were high in 1945 – 12% of domestic product. So the employers were quite ready to raise production and boost investment.
With profits a fraction of that level, and their position threatened by price controls, future nationalisation, etc. there is no way the next Labour government could get the same response whilst the economy remains dominated by private capital.
Yet just as rapid an expansion is needed now.
The document does state clearly that it believes that common ownership should be substituted for private ownership of the means of production. But this is said to be a “long-term goal”.
It cannot be relegated to the misty future in this way.
The NEC says:
“Transformation of the economy in a socialist direction is not (our emphasis) to be postponed until we have achieved a reconstruction of industry.”
But not even the reforms proposed in the document will be implemented in a lasting way within the rotten framework of capitalism. They could be achieved only through a fundamental socialist transformation, not through ‘half-way’ measures “in a socialist direction.”
To give reality to the social improvements outlined, therefore, the next Labour government must link them to a programme for the nationalisation of the banks, finance houses, and the 200 or so big monopolies which dominate the economy.
Nationalisation should not be with exorbitant compensation, as in the past, but minimum compensation on the basis of proven need. If the financiers and big investors are incapable of working and an prove they are hard up, they could be paid decent social security under a socialist government.
Nationalised industry should not be run by massive bureaucracies composed of ex-owners, ex-private managers, retired civil servants and super-annuated politicians, as they have been up until now.
Industry should be run under democratic workers’ control and management, under boards composed of a third from trade unions in the industry, a third from the TUC, and a third from the government.
Then there could be a socialist plan of production. Under a plan, there would be an enormous growth of production, science and technique, creating the conditions for rapid cuts in the working day and working year, and for immeasurable improvements in workers’ living standards.
Without a socialist plan, the irreversible decline of British industry will continue, with untold suffering for working people.
Transformation of the economy cannot be postponed. But transformation is possible only through the working class being mobilised to implement through-going socialist measures.
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Last updated: 29 October 2016