Tony Cliff

All that glitters is not gold

A Reply to Germain’s From the ABC to Current Reading: Boom, Revival or Crisis?

(September 1947)


RCP Internal document, September 1947.
Tony Cliff, Neither Washington nor Moscow: Essays in revolutionary socialism, London 1982, pp.24-39.
Downloaded from REDS – Die Roten
Marked up by Einde O’Callaghan for the Marxists’ Internet Archive.


Comrade E. Germain’s article From the ABC to Current Reading: Boom, Revival or Crisis? has as its objective, according to the writer, to break “through the curtain of fractional smoke that has been lowered over the debate” in the discussion on Britain. The article, according to its author, is written for educational purposes. But all that glitters is not gold. It abounds with the most elementary mistakes which are put forward as great truths; it reveals a gross lack of knowledge of the Marxist theory of crises and a mechanistic, superficial conception of capitalist decline. To prove this, let us follow Comrade Germain’s arguments.
 

Germain misquotes Marx

Germain quotes these sentences from Marx: “The enormous power, inherent in the factory system, of expanding by jumps, and the dependence of that system on the markets of the world, necessarily beget feverish production, followed by over-filling of the markets, whereupon contraction of the markets brings on crippling of production. The life of modern industry becomes a series of periods of moderate activity, prosperity, upswing (‘essor’), over-production, crisis and stagnation.[1] (Germain’s emphasis)

The most important part of this quotation for Germain’s analysis is the sentence he emphasises. He concludes from it that Marx’s synonym for the word “boom”, which is not to be found in Capital, is “upswing” (essor). Seeing that this is the key point of his analysis, one would naturally expect Germain at least to quote with meticulous care. In the sentence from Marx’s Capital under discussion, not six, but only five stages are mentioned: “... moderate activity, prosperity, over-production, crisis and stagnation”. The word upswing (essor) is added to Marx’s sentence by Germain.

I do not wish to imply that this is a conscious falsification. It is probably the result of carelessness and a lack of seriousness in dealing with theoretical problems. He copied too hastily from Kautsky’s edition of Das Kapital, in which to popularise the work, Kautsky added popular German words to the anglicisms or difficult words used by Marx. These he put in square brackets after the original word. In the sentence quoted by Germain, after the word “Prosperität’ two words are added by Kautsky in a square bracket: “Gedeihen” and “Aufschwung”. Germain overlooked the square bracket, arbitrarily deleted one of the two words, and out of the second made a special phase of the economic cycle.

This, to say the least, does not speak well for his scientific conscientiousness. [2]

Germain states that one must identify the boom with only one phase in the ascendance of the cycle: otherwise it “would lead to this schematism: reduce the whole cycle of capitalist production to two stages: the crisis and the boom”. This argument, which sets out to attack the RCP document, in truth attacks the whole concept of Marx, Engels, Lenin and Trotsky. Sufficient to remind Comrade Germain of the following quotation from Trotsky: “... capitalism does live by crises and booms, just as a human being lives by inhaling and exhaling. First there is a boom in industry, then a stoppage, next a crisis, followed by a stoppage in the crisis, then an improvement, another boom, another stoppage and so on.” (The First Five Years of the Communist International, p.200, our emphasis)

Of course, these two basic aspects of the cycle, the ascendance and the decline, can be divided into two or three sub-sections: the resumption, moderate activity, the peak of the activity, the beginning of the decline, moderate decline, the end of the decline, etc. For this purpose, we could divide inhalation and exhalation into different sub-sections also. We know that Marx divided the cycle sometimes into two, sometimes into four and sometimes into five parts. But if only one sub-section of the ascending curve is to be termed “boom” as Germain seeks to do, then Trotsky too must be accused of “distorting even the ABC” and vulgarising Marxism.

But there are none so confusing as those who forget what they say from day to day. Comrade Germain comes into conflict with what he had to say on another occasion. Thus, according to Comrade O’Daniel, in his document A Note on Discussion Methods, Comrade Germain, at the IEC, said: The RCP majority leadership make a fifth distortion ... The PB ... certainly could not have helped observing that it (the report of Jerome to the October Plenum of the IEC) described the revival of British economy as an ‘essor’ – a soaring one.”

To make the position perfectly clear, it must be mentioned that the third member of the IS who wrote about British economic perspectives, Pablo, mentions with approval in one and the same document, the analysis of both Germain and O’Daniel. Yet he himself, on another occasion, described the word “essor” as “boom”. (Quatrième Internationale, Dec. 1946). It is time the Majority IS members found agreement among themselves on this question, which, according to Germain, is the ABC!

Now let us read further and analyse the main traits which Germain considers characteristic of a boom. The first one is that production expands “in relation to the preceding boom” (Germain’s emphasis).
 

Does a boom require that production expand beyond the peak of the former boom?

Germain’s answer is in the affirmative. While he admits there is lively economic activity in Britain today (which affirms the perspectives of the British majority and contradicts those of the IS of a year and a half ago) he seeks to find a bridge whereby he can attack the RCP and defend the IS. All this amounts to nothing less than a mere sleight of hand trick. Production in Britain today, he asserts, is lower than the peak of the last boom. Ergo, there is no boom.

But if his assertion is correct, and a boom requires that production expand beyond the peak of the former boom, then the years 1924-29 in Britain were not years of boom at all, since production was below the level of 1913. In which case, Trotsky made a gross blunder in defining these years as a period of boom. Is this so, Comrade Germain?

More than this. By basing himself on this formulation he does not prove that there is not a boom in England. Unwittingly he proves quite the contrary. British industrial production in 1937 was higher by 23.6 per cent than in 1929. Thus 1937, according to Germain’s theory, was a year of boom! Now, is British production today higher or lower than 1937? According to Germain it is lower, proof of which, apparently, is merely the fact that Germain asserts it. Factual evidence he does not find it necessary to adduce. Possibly he relies on the same sources as Pablo did when he wrote: “The year 1946 ended with a total production which has been estimated at about 80% of 1938.

By whom was it estimated? And on what basis? Comrade Pablo lets the cat out of the bag by writing in reference (4) at the conclusion of his article: “The New York Herald Tribune of 30.3.47, basing its calculation on the indices of imports of raw materials in 1946, on which all industrial activity in Britain depends evaluated total production at only 72%.

Pablo forgot a few not unimportant factors – the shift from textiles to engineering, which relatively decreases the dependence on foreign sources of raw material; the change in exports from steel to engineering; the big expansion of the chemical industry – all factors which make it fallacious to estimate Britain’s production on the basis of her imports of raw materials. But for Comrade Pablo, as it appears for Comrade Germain, it is enough that the imports of raw materials to Britain is about 75 per cent of pre-war for them to conclude that British production today relative to pre-war, must also be about this figure!

A document of the RCP Minority states this even more bluntly. It says: “A revival of economic activity is taking place in Britain today. It has now reached 72% of the 1938 level of production (Herald Tribune, 30.3.47).” (Some Comments on the PE Reply to the IS Letter, by the CC Minority.)

Pablo and the British Minority at least explain how they arrived at the idea that production in Britain is lower than pre-war. Germain does not find this necessary. His pontifical declarations, it would appear, are infallible.

What are the facts? According to The Economist, the Financial Times and other reliable economic journals, employment is higher in Britain than ever before, and furthermore, productivity of labour on the average has risen by at least 10 per cent. It is therefore impossible that production is lower than pre-war. The Economist of 2 August, 1947, says: “There is really very little room for doubt that the aggregate output of the British community today is from 10 to 20 per cent higher in volume than it was in 1938.” An earlier issue of The Economist comes to the conclusion that the gross national income is up by 17 per cent in real terms, in comparison with pre-war, or net national income up by 13-14 per cent (19 April, 1947). Labour Research of May 1947 comes to the same conclusions. We could cite similar conclusions from all the serious economic journals.

If we accept Germain’s definition of a boom we will arrive, to say the least, at some very odd conclusions: in 1913 there was a boom; in 1929 there was not a boom; in 1937 there was a boom; yet in 1947, when production is higher than the IS’s “boom” of 1937, Germain says there is not a boom! Also, between two periods of boom, there are sometimes two cycles, and sometimes one cycle! But no matter how he contradicts himself, even if we accept his definition and base ourselves not on his and Pablo’s “facts” but on real facts, the British Majority are right. There is a boom in Britain.
 

Is abundance of raw materials and their cheapness a condition for boom?

Germain writes:

Throughout the period of stagnation and resumption, sufficient stocks of raw material have been built up to create abundance in this field. The prices of the raw materials – the principal constituent of the total price of the production of a capitalist commodity – stand at a level relatively lower than the prices of finished commodities, allowing in this way a very accentuated rise in the average rate of profit, which constitutes the basis of this extraordinary impetus received by industry during the period of boom. (Germain’s emphasis.)

There are at least four errors in this one paragraph.

Error No.1. It is false to say that “The prices of the raw materials” are “the principal constituent of the total price of the production of a capitalist commodity”. In order not to waste too much space, I shall quote only one figure which answers Germain with the facts. In the United States in 1929, raw materials constituted 32.8 per cent of the price of production of total industry. (L. Corey, The Decline of American Capitalism, p.114.)

Error No.2. It is false to say that it is a condition for a boom that at the beginning of the revival the prices of raw materials should “stand at a level relatively lower than the prices of finished commodities”, or that at the end they are relatively dearer. Sometimes it is the case; as often it is not. Sufficient to state that in the years 1866, 1873, 1890 and 1900, which were all years of maximum employment, were peak years of boom, the prices of raw materials were the lowest in the whole cycle as against the prices of finished goods. On the other hand, in the years 1825, 1839, 1847, 1857, 1882, 1929 and 1937, also years of the highest peak of production, the prices of raw materials were the highest in the whole cycle as against the prices of finished goods. (See The Conditions of Economic Progress, Colin Clark, 1940, p.454.)

To make it absolutely clear that this second allegedly necessary condition for boom, which for Germain is a condition sine qua non, is absurd, we add a diagram which makes the position perfectly clear. (See graph 1.)

United States Group Prices
(Wholesale)

Diagram 1

(Joseph A. Schumpeter, Business Cycles, Vol. II, New York, 1939, p.478.)

* Includes the prices of 30 basic commodities, farm products, minerals, textiles, and the like.

A little knowledge of the history of capitalism, a little seriousness in relation to it, and more care than to make statements that have no foundation, would have restrained Germain from making the question of price one of prime importance. Fluctuations in price can deepen the fundamental disproportionalities that arise in capitalism, but they are always a secondary factor. We can thus find the interesting fact that there were upswings connected with constant prices (1873, 1893), by rising prices (1907, 1920), and again by constant prices (1929). (Lewis Corey, op cit., p.186.)

Error No.3. It is false to say that necessarily at the beginning of the economic ascendancy of a cycle there are abundant stocks of raw materials. Again, a little knowledge of the history of capitalism will demonstrate the incorrectness of this assertion. Marx dealt with the situation of the weaving industry in England which, despite its acute shortage of cotton yarn due to the backwardness of the spinning industry, experienced a tremendous boom. The American Civil War, which caused a “cotton crisis” – an acute shortage of cotton – did not prevent Britain experiencing at the same time, a tremendous boom even in the spinning industry. (Capital, I, Modern Library Edition, p. 457.)

Error No.4. It is not true that the relative cheapness of raw materials as against the price of finished goods is a necessary condition for a high rate of profit. The increasing rate of exploitation, the full use of the productive capacity, the low rate of interest, the quick circulation of capital, the cutting of capital values – by these and many other means, does the crisis prepare the ground for the rise of the rate of profit and the boom. The relative cheapness of raw materials as against finished goods was an important factor in many cycles. But it is not the only factor, nor the main one, and certainly not the sine qua non of a high rate of profit. If it were, many economic cycles of the nineteenth century would have passed by without experiencing any boom, and such a conclusion is too fantastic, even for Germain.

Germain writes:

Far from being a result of the boom the coal shortage is a factor limiting the revival and making its development towards a boom impossible.

This conclusion could have some foundation if not for the fact that already today, the consumption of coal in British industry is higher than ever it has been. So that the coal crisis of under production is another proof of the correctness of the characterisation of the existing period in Britain as one of boom. [3]
 

The boom and the reserves of labour power

The third characteristic of a boom that Germain lays down arises also from a misunderstanding of Marx: “Sufficient reserves of man power,” he writes, “must be present in order to allow a serious expansion of industry. According to Marx, the essential basis of the boom is proletarian over-population.” (Germain’s emphasis.)

True, Marx says that the process of capitalist accumulation finds “a check in the natural limits of the exploitable labouring population”. (Capital, I, p.694.) But this does not mean that if there are not big reserves of unemployed there cannot be a boom. Nor, conversely, (even if one accepts Germain’s first characteristic of a boom that production is higher than in the previous boom) that development towards a boom is impossible because of the lack of labour power. It is very easy to prove this. Let us take the percentage of unemployed among industrial workers in Germany [4] for the years 1887-1913. It was as follows:

Year

%

1887

0.2

1888

3.8

1889

0.2

1890

2.3

1891

3.9

Year

%

1892

6.3

1893

2.8

1894

3.1

1895

2.8

1896

0.6

Year

%

1897

1.2

1898

0.4

1899

1.2

1900

2.0

1901

6.7

Year

%

1902

2.9

1903

2.7

1904

2.1

1905

1.6

1906

1.2

Year

%

1907

1.6

1908

2.9

1909

2.8

1910

1.9

1911

1.9

Year

%

1912

2.0

1913

2.9

(A Short History of Labour Conditions in Germany, 1800 to the Present Day,
by Jurgen Kuczynski, London, 1945, p.163.)

Even Germain could not say that during these 27 years, because the percentage of unemployed was higher than 3 per cent in only four cases, the economy could not reach the level of a boom. His argument becomes clearly ridiculous when we notice that the year 1887 which was the beginning of the ascendancy of the economic cycle, showed an unemployment of only 0.2 per cent, and that other years similarly placed in the cycle showed: 1893, 2.8 per cent unemployment, 1902, 2.9 per cent, 1908, 2.9 per cent. How on earth did the cycle of production reach a boom if, from the beginning, there was almost full employment?

Has Germain heard of the process of rationahisation, the raising of the productivity of labour, etc.? There is in Britain today, about 2 per cent unemployment. This has not prevented a rise of production.

Germain writes that “... the number of active men has declined by 211,000 in relation to 1939.” And he adds: “Really this is a funny kind of boom in man power ...” (Germain’s emphasis.)

What is funny is that Germain does not mention at the same time that the number of active women rose by 671,000. More than this, it can happen that during a boom the number of employed men and women not only does not rise, but even declines. This takes place if the volume of production rises less rapidly than the productivity of labour. Thus, for instance, in the years 1920-29 the number of workers in American manufactures, railroads and coal mining decreased by 1,003,000. (L. Corey, op. cit., p.227.)

To say that the hack of labour power proves either that there is not a boom in Britain, or that there cannot be a big rise in production to higher levels even than exists today, is ridiculous.

At the beginning of the existing boom in Britain there were about 5.2 million people in the armed forces. Today the number is only 1.2 million, besides which about a million women left employment after the end of the war. This means that about 4 million served as a reserve of labour power. Germain forgets this. But even if this reserve did not exist, the boom in Britain would not have been impossible.
 

The rate of profit and the boom

Germain writes:

We have limited ourselves to these four points, but it is obvious that the boom has still other characteristics that one only needs to take the trouble to look up in the works of Marx. Let us note this essential point: It is the movement of the average rate of proflt ... which determines the unfolding of the cycle of capitalist production. (Germain’s emphasis.)

Of the four characteristics given by Germain as the sine qua non of the boom at least three, we have seen, were wrong. It is the point which he adds here about the rate of profit which is really the factor which characterises the boom. Since the profit motive is the driving force of capitalism, there cannot be a boom without a high rate of profit. The extraction of surplus value and its transformation into capital, are thus necessary attributes of a capitalist boom. They are, in fact, its basis. If, therefore, it could have been proved either that the rate of profit in Britain is low, or that the rate of accumulation is low, then we may have said with certainty that there is no boom in Britain. As usual, Germain finds it sufficient to assert whatever comes into his head, without adducing any facts. He writes:

The average rate of profit (in Britain – TC ) is kept to such a low level and the new investments bring such little hope of immediate and abundant profit that an enormous mass of capital refuses to converge towards industry – exactly the opposite phenomenon to that which is produced during a period of boom. (Germain’s emphasis)

What abysmal ignorance! That the rate of profit is very high, and the rate of investment extraordinarily high, will become only too clear from a few cold facts. Of the total national income in 1947, according to the Government White Paper Economic Survey of 1947, 20 per cent will be devoted to capital equipment and maintenance, or 13 per cent to capital equipment alone. This will be the highest investment in volume to be made in the last hundred years. (See Colin Clark, op. cit., p.396.) This represents the tremendous sum of £1,700,000,000 against which about £600,000,000 must be set off for depreciation and maintenance, leaving a new net capital formation of £1,100,000,000. As against this, the annual investments in Britain in 1860-69 were on the average £150 million; in 1907, £246 million; in 1924, £327 million; in 1929, £314 million; in 1932, £29 million; in 1935, £325 million; in 1937, £354 million (including £60 million in armament production).

Taking into account the price changes that have occurred, there is no doubt that British investments today are the highest in volume for the past hundred years. (See Colin Clark, op. cit., p. 396.)
 

A few more weeds from Germain’s garden

Germain poses the question: “Is there a ‘feverish push of production in all the branches of industry’ (Marx) in Britain?”

He answers simply: In Britain today “there is nothing which resembles” this. It is difficult to comprehend what Germain understands in this reference from Marx. Is almost full employment a sign of such a “feverish push of production in all the branches of industry”? Are tremendous investments a sign of it? Is a rapid increase in the productivity of labour a proof of it? One is driven to reiterate once again, Comrade Germain, that pontifical declarations do not suffice.

The lack of gold and hard foreign currency also is not, as Germain thinks, proof that there is not a boom in England. We need only mention the boom in Germany in the years 1924-29 in which equilibrium could not have been achieved in her balance of payments if not for the American loans.

The difficulties Britain is experiencing in attaining her balance of payments are neither proof nor refutation of a boom. Let us recollect that at the beginning of the crisis of 1929-33 Britain’s balance of payments turned against her, being a reflection of the tremendous rise in imports due to the readiness of the foreign producers to flood the British market with goods at the cheapest prices. After a while, however, and especially after leaving the gold standard, the conditions of slump reflected themselves in a change in the terms of trade to Britain’s benefit and a greater ease in gaining equilibrium in her balance of payments. From Britain’s difficulties in attaining equilibrium today, therefore, nobody with any knowledge of economics would assert that this is proof that there is not a boom.

One could go on pulling the weeds out of Germain’s garden. But I am afraid that were this to be done, nothing would remain at all.
 

Germain’s analysis of the cycle of production under conditions of decadent capitalism

After showing such a lamentable lack of understanding of the theory of cycles, Germain tries to apply it to the conditions of declining capitalism. He gives four characteristics. The first is almost entirely a quotation from Trotsky, and is, therefore, correct. All the rest are based on a mechanical interpretation of the ABC of Marxism, and on a complete misunderstanding of the realities of capitalism in decline.

He writes:

The world market ceases to expand globally. There is no more boom on a world scale. The splitting up of the world market or the violent destruction of a competitor alone allows for the development of feverish booms in certain capitalist countries. (Germain’s emphasis.)

It is difficult to imagine the concentration of more mistakes in so few words. Instead of explaining that the decline of capitalism means that historically the productive forces expand more rapidly than the market, that, while not standing still, they lag far behind the potential productive possibilities, that more and more productive capacity is left unused, that production is ever further diverted from the production of means of production and means of consumption to the production of means of destruction – instead Germain puts forward the above-quoted vulgarisation of Marxism. A few simple facts will prove how careless he was in writing.

Let us begin by comparing industrial production on a world scale from the peak of one cycle to the peak of the next.

World Industrial Production
(1913: 100)

1891

  33

1900

  51

1906

  73

1913

100

1920

102

1928

148

(Weltproduktion und Welthandel in den letzten 100 Jahren
by Jurgen Kuczynski, Libau 1935, pp.20-21).

While immediately after the First World War and certainly after the Second World War European production was lower than before the war, there is no question but that on a world scale production today, as against the situation after the First World War, is considerably higher than before the war. In 1929 all the countries of Europe except Britain overreached the level of production of the peak year, 1913. It would be wrong even to say that the world market shrinks absolutely during the whole period of the decline of capitalism. As the accumulation of capital determines the market, builds it, limits it, and undermines it, to speak about an absolute decline of the world market as a permanent phenomenon, and not as a stage in a cycle, is tantamount to declaring that the accumulation of capital ceases to take place in the period of the decline of capitalism. Such a theory can take its place not among revolutionary Marxists, but among IKDers, with their “theory of retrogression”.

Let us bring a few facts about the development of world trade from the time of the transition of rising industrial capitalism to decadent monopoly capitalism until today.

Volume of World Trade
(in milliard Swiss francs, 1913 prices)

1870

  45.5

1880

  68.8

1890

  94.2

1900

118.7

1913

197.8

1920

193.3

1929

261.7

(Ibid.)

During the cycle of 1929-37 world trade declined tremendously at the beginning but then rose, not however, reaching the 1929 volume even at its peak; it was 4 per cent lower. There are no statistics as regards world trade today.

Germain writes:

There is no more all-round development of productive forces on a national scale. Even during the period of “prosperity” certain branches develop only at the expense of other branches. Advances in technology are no longer or are only very partially incorporated in production.

If we understand this to be relative, and not as Germain considers it, to be absolute, it is correct. It simply repeats in other words what Lenin wrote in Imperialism: “It would be a mistake to believe that this tendency to decay precludes the possibility of the rapid growth of capitalism. It does not. In the epoch of imperialism, certain branches of industry, certain strata of the bourgeoisie and certain countries betray, to a more or less degree, one or another of these tendencies. On the whole, capitalism is growing far more rapidly than before. But this growth is not only becoming more and more uneven in general; its unevenness also manifests itself, in particular, in the decay of the countries which are richest in capital (such as England).” (Little Lenin Library, p.109).

From this no one, except perhaps Germain, would conclude that technological developments are only partially, or not at all, incorporated in industry today. That this is not so, will be clear from a comparison of the changes in the productivity of labour in England in the fifty years before the Second World War, when this country showed traits of decadence to a much greater extent than any other capitalist country. These are the facts.

Productivity per Worker per Hour
(1913: 100)

Trade Cycle

Productivity per
Worker per Hour

1880-86

  71

1887-95

  75

1895-1903

  80

1904-08

  87

1909-14

  93

1924-32

105

1933-39

119

(Jurgen Kuczynski, A Short History of Labour Conditions in Great Britain
and the Empire to the Present Day
, London 1942, p.96.)

A summing up of Germain’s conception of the rise and decline of capitalism, can best be illustrated by drawing the following graphs:

Volume of Production

Diagram 2

Productivity of Labour

Diagram 3

In reality the graphs should look something like this:

Volume of Production

Diagram 4

Productivity of Labour

Diagram 5

The standard of living of the masses in the period of the decline of capitalism

Germain writes:

There is no more all-round amelioration of the standard of living of the industrial workers from one revival to another.

Ascendant capitalism did not yield a general improvement in the living standards of the workers from one boom to another. Proof of this is to be found in the pages of the first volume of Capital, which describes the labour conditions in this period and points not only to the relative impoverishment of the working class, but also to its absolute impoverishment, not only to the decline of the workers’ portion of the total product, but also to the absolute decline of real wages. Excellent proof of this is also to be found in Engels’ The Condition of the Working Class in 1844, written in a year of boom. The connection between the general economic situation and the standards of living of the working class is determined by many different factors: by the tempo of accumulation of capital; by the relationship between the increase of production and the rise of the productivity of labour which influences employment; by the extent of the proletarisation of petty bourgeois strata (peasants, artisans and others) following upon industrialisation, which influences the supply of labour; by the general price structure influenced by national and international factors, etc., etc.; and, most important of all, the relation of class forces.

Whereas until about the 60s and 70s of the nineteenth century the living standards of the working class declined, there is no doubt that in all the developed countries during the last few decades of the nineteenth century the absolute standards of living of the workers rose. Now, with capitalism in decline, the general and continuous rise that took place for these few decades not only stopped but was even reversed for a certain period in some countries. To proceed from this to the oversimplified conclusion of Germ am would be no less mistaken than to infer that throughout the rise of capitalism there was a general and continuous improvement in the living standards of the workers. It is most important to guard against underestimating the influence of the class relationship of forces in determining the value and price of labour power. To demonstrate that the decline of British capitalism has not yet been accompanied by a decline in the standard of living of the workers between the peaks of the cycles, let us look at some figures given by A.L. Bowley in Wages and Income in the United Kingdom since 1860, (London, 1937):

Real Wages in Britain
(1914: 100)

1880

  69

1890

  93

1900

103

1914

100

1924

111

1929

118

(ibid., p.30)

This rise in real wages, of course, does not preclude a decline in wages relative to total production, i.e. an increase in the rate of exploitation. Thus relative wages in Britain were:

Cycle Relative Wages
(1900: 100)

1859-68

124

1869-79

111

1880-86

  96

1887-95

  95

1895-1903

  94

1904-08

  91

1909-14

  88

1924-32

  76

(Kuczynski, ibid., pp.64, 301)

Germain writes that although “There is no more all-round amelioration of the standard of living of the industrial workers from one revival to another”, this “does not exclude either a relative ‘amelioration’ between the crisis and the revival, or a relative amelioration of the position of unemployed or peasants, etc., transformed during the ‘revival’ into industrial workers.”

We have already explained that an amelioration of the standard of living of the workers between two revivals even in the period of the decline of capitalism, is not excluded. It is even not excluded that the position of the unemployed during the depression will not be worse than the position of the unemployed in a previous depression, or indeed even than the position of the employed workers in a previous boom.

Colin Clark, who made excellent statistical investigations into the British national income and its distribution, points out: “During recent years of low food prices, it has been about true to say that an unemployed man with a wife and two children drawing benefits has been better off than an unskilled labourer in full work in 1913.” (National Income and Outlay, London 1937, p.270.) [5]

These few facts are a warning to us not to interpret mechanically and in the spirit of the “Third Period” the words of Trotsky when he said that in the “... epoch of decaying capitalism ... in general, there can be no discussion of systematic social reforms and the raising of the masses’ living standards ... every serious demand of the proletariat and even every serious demand of the petty bourgeoisie inevitably reaches beyond the limits of capitalist property relations and of the bourgeois state.” (Transitional Programme)

Although the nineteenth century was the century of reforms, this did not prevent the short-lived Paris Commune from coming into existence. In the same way, the fact that the twentieth century is the century of socialist revolution, does not exclude the possibility of certain reforms or semi-reforms being introduced. But these reforms cannot be of a general and lasting nature; necessarily, they must be very meagre as against the vast potentialities of production. [6]
 

A few remarks in conclusion

It is outside the scope of this article to make an exhaustive analysis and elaboration of the Marxist theory of crises. Nor does it attempt to show how the theory of crises applies to world capitalism in general, and Britain in particular; or to attempt to analyse the influence of the war on the economic cycle. Nevertheless, if it succeeds in throwing some light on these questions it will have accomplished what it set out to do.

In view of the fact that Comrade Germain writes extensively and prolifically on many theoretical and political subjects requiring considerable study, it is very necessary for the well-being of the Fourth International, that he prepares his writings with scientific conscientiousness. The analysis of his article under review proves that sweeping confidence and pontifical declarations regarding facts and theoretical generalisations are no substitute for really scientific work. And this holds good not only for current reading, but also for the ABC.
 

Notes

1. Capital, I, Trans. Samuel Moore & Edward Aveling, Modern Library, p.495.
Capital, I, Trans. Samuel Moore & Edward Aveling, Swan Sonnenschein & Co. Ltd, p.455.
Capital, I, Trans. Eden and Cedar Paul, Everyman’s Library, p.486.

2. Germain’s juggling with words makes up such an important part of his article that, although we do not intend to weed out every error he makes, this particular one deserves mention, even if only in the form of a note.

He says that there are “two terms by which Marx characterises the period that we call ‘boom’: the term ‘upswing’ (essor) and the term ‘production at high pressure’.” He arrives at this conclusion after citing two quotations from Marx describing the cycle. Even if the passage from Man was not wrongly quoted, the way Germain derives his definitions from them is absolutely arbitrary.

In the first passage (wrongly quoted) the cycle is divided into six sub-sections: moderate activity, prosperity, upswing, over-production, crisis and stagnation. In the second, it is divided into four sub-sections: moderate activity, production at high pressure, crisis and stagnation.

Now, by eliminating the common terms in these two formulations, we would be left in the first formulation with: prosperity, upswing and over-production. In the second we are left with production at high pressure. If production at high pressure is, for Germain, identical with boom, why does he exclude Man’s terms of prosperity and over-production from being part of the boom?

3. The implication that the comrades of the RCP Majority consider the coal shortage to be “a result of the boom” is readily shattered by an analysis of their resolutions for several years and especially by the article to which Germain pens his reply.

4. It would be possible to establish the same facts as regards other industrial countries also, but let this one example suffice.

5. In the light of the above-quoted figures of real wages, and of a comparison of the existing conditions in Britain today, with those described by people living before the First World War, it is clear that the writers of the editorial in the Fourth International of March 1947, were not very well informed when they wrote: “The prospects in England are dimmer and dimmer for a return to the living levels of 1939, let alone the levels achieved before 1914.” According to this the standard of the British worker today is lower than in 1939, and in 1939 it was lower than in 1913!

6. In order to prevent any misunderstanding, it is necessary to point out: while Germain is wrong when he speaks of the inevitability of the standard of life decreasing from one peak of a cycle to another in the period of decadent capitalism, it does not follow that every boom must bring a standard of life to the masses higher than in the preceding boom. No, definitely not. Marxist economic laws are not of this schematical character. If the RCP majority perspectives speak about reforms and semi-reforms at the present time, they could not derive this prognosis from the fact that Britain is in a period of economic boom alone. There were many booms not accompanied by a rise in the standard of life of the masses. The RCP perspectives were conditioned, and must be conditioned by three factors: one, the existence of a boom; two, the prevailing relation of forces in Britain; three, an American Loan which will bridge the big deficit in the balance of foreign trade. As Trotsky formulated it: “Every historical prognosis is always conditional, and the more concrete the prognosis, the more conditional it is.”


Last updated on 14.5.2011