Ted Grant

U.S. loan and British workers—No solution to crisis of capitalism

Source: Socialist Appeal, January 1946
Transcription: Francesco 2008
Markup: Manuel 2008

The announcement of the terms of the loan of 3,750,000,000 dollars from America, of which 650,000,000 dollars will be full and final settlement of lend-lease, has been met with dismay by the ruling class. And the Labour leaders, who have accepted the measure and pushed it through parliament, have swallowed it as a disagreeable and bitter pill.

The most important provisions tie British currency, in effect, to the dollar thus confirming the dominant financial role of Wall Street. By preventing Britain, through the Bretton Woods agreement, from devaluating her currency beyond certain specified limits, America hopes to curtail Britain’s competitive powers in the export trade. Britain will be prevented from under-cutting by selling her goods cheaper through this device.

It is noteworthy, however, that all the negotiations for the loan were carried through by the direct representatives of the capitalists, Lord Halifax, Lord Keynes, the permanent officials at the Treasury, etc. Thus the policy adopted was the policy suggested by the servants of Big Business.

However, the agreement has gone through with groans and gnashing of teeth, and the ostentatious “abstention” of one section of the Tories, while another has voted against. By this means they wish to unload the responsibility for the agreement onto the shoulders of the Labour Government, though when challenged they could not offer any alternative policy. Churchill admitted that not to have accepted the terms would have meant an instant fight to the finish, a trade war which British capitalism was not in a position to wage, and in which she would inevitably be worsted.

The American Imperialists have made a hard bargain. All the appeals and supplications of British Imperialism to their “Allies in the common fight” have had the same effect as the appeals to British Imperialism in the days of her might. America has emerged victorious from the war as the greatest Power on earth and is dealing with British capitalism, in the words of one Tory M.P., as “a defeated nation”. The real aims of the war are revealed in the post-war struggle between the Powers. Having used British capitalism to help defeat her most powerful and greatest rival, Germany, America wishes to drive British Imperialism to its knees, to become a satellite of the U.S., living on the rations doled out by America and completely dependent upon her.

During the course of the war, the American Imperialists have taken advantage to strip Britain of the accumulated loot and plunder of the exploitation of the world, which has been piled up for generations. Before Lend-lease was introduced, the reserves in dollars and gold of British imperialism dropped in 1941 to only £3,000,000. Lend-lease was not an Act of generosity as Churchill pretended, but the fruits of cold calculation. The American Imperialists saw that it was to their advantage to subsidise Britain in the struggle, just as Britain, when she was the world’s banker, financed other countries to fight wars in her interest in the past.

And during the course of the war America has become economically stronger; Britain economically weaker. While America’s wealth increased tremendously, Britain’s wealth has decreased by the staggering figure of 25 percent. Britain has in the past had to import more than she exported, but the adverse balance was made up out of the income from investments abroad, shipping, insurance and banking. Now these sources of income, whereby British capitalism extorted tribute, especially from the colonial peoples have in great measure been lost. As the Economist expresses the position:

“All of these credit items have been affected during the war. The export trade was deliberately abandoned so that manpower, production and materials could be mobilised to the fullest extent, with the result that it shrank to less than one-third of its pre-war volume, and is expected in 1946 to cover not more than half the country’s essential expenditure on a minimum volume of imports and on other necessary payments overseas…

“As a result of losses, shipping tonnage, after allowance has been made for new building in the war, is less than three-quarters of the pre-war figure.

“Owing to the extensive liquidation of foreign securities, the repatriation of loans by overseas debtors and the increased interest payments to holders of sterling debts caused by the United Kingdom’s heavy war expenditure overseas, the net income from overseas investments in 1945 will be less than half the 1938 figure.”

Thus on the basis of capitalism, Britain found herself in a desperate position. She lacks necessary food and raw materials, her industry requires modernising and re-equipping to stand even a chance of competing in the markets of the world. She could not possibly make up her deficit of imports over exports without a loan from America unless the standard of living was reduced immediately to coolie level. But this would have provoked immediately a fight to the finish battle for export markets with America, which Britain is not in a position to wage successfully at this stage, and the danger of social crisis and revolution in Britain. Clearly the masses would not tolerate such an outcome of the sacrifices of the war. It is their hopeless position, their helplessness, which has forced British Imperialism to go cap in hand, humbly to the Wall St. Bankers.

The Economist estimates optimistically:

“It is hoped that work on export orders will have attained the pre-war level by the second half of 1946, but the period of production and the time lag in payment mean that cash receipts will not correspond until after the end of the year. Moreover, reconversion so rapid as this must be regarded as optimistic.

“Any estimate of the 1946 balance of payments would be so precarious in view of the large uncertainties affecting many of the factors involved that detailed estimates are not provided. But, on the assumption that the price level of exports and imports will be about double the pre-war level in terms of sterling, the deficit is estimated at something like £750 million. A further deficit of £500 million is likely for 1947 and 1948 taken together, and there is likely to be a small deficit in 1949 and 1950 before stable equilibrium is achieved.

“The cumulative deficit is thus likely to be £1,250 million or more—though it should be emphasised again that these estimates are precarious—and to meet it, and to release some part of the sterling balances, the United Kingdom will have to rely on its own reserves and, in the main, further external credits.”

In reality, even these figures are unlikely to be reached and the deficit is likely to be even greater. The British capitalists will probably find that the credit they have obtained from America will melt away in vitally necessary purchases, even in a couple of years, leaving Britain in as difficult a position as that which drove her to seek succour from the United States capitalists.

Because of her loss of investments, etc., even to maintain her pre-war position would mean Herculean efforts beyond the power of British capitalism. The Economist explains:

“It has long been a commonplace that British exports will have to be increased by 50 percent above their 1938 volume; the financial burdens now assumed raise the figure to 75 percent. In 1938 the exports of the United Kingdom were just over 10 percent of the world total, so that if they are to rise by three-quarters an extra volume of trade must be won equal to 7.5 percent of the world total, either by taking it away from others or by securing the lion’s share of any likely increase in the total. This by itself would be a gigantic task. But it understates the real problem. The whole of the increase will necessarily be concentrated on manufactures, and if the total is to rise by 75 percent the volume of manufactured exports, which were 72 percent of the total before the war, will have to rise by just over 100 per cent. But British manufactured exports in 1937 amounted to 19 percent of the world total in this category. In short, in this decisive field, the British task is to secure additional markets equal to one-fifth of the whole international trade of the world.”

This is clearly impossible. Ostensibly the loan agreement is intended to tide Britain over a period when she cannot compete, till her economy becomes “normal” through the switchover from war to peace production. But the irony of it lies in the fact that in return for this assistance America is utilising the position to gain admission to markets where Britain was formerly dominant. The sterling bloc by means of which Britain preserved large markets in the Dominions, Colonies, and certain other countries which were compelled by this means to buy goods in Britain in return for British purchases of food and raw materials, has been broken. By forcing Britain to make dollars available to them, America makes it possible in the immediate future to penetrate the markets of the Colonies and Dominions.

Britain’s greatest weapon in the trade struggle of being the greatest market in the world is rendered futile because she cannot directly bargain on the basis of an immediate exchange of goods which would come under the heading of discrimination. She cannot increase her purchases of any raw materials or goods from the Colonies or Dominions while decreasing the purchase of the same goods from America as this would come under the same heading. America is in a position to supply goods and machinery immediately or almost immediately and in many cases cheaper than Britain which could only supply the goods urgently required only after a long delay, consequently her former markets will be under constant American pressure. This with no real corresponding concessions on the part of Yankee Imperialism. The Economist cries out:

“In short, those devices (of trade) which could be used by Britain to its advantage are banned with the greater degree of explicitness; those that assist American exports with the greater degrees of vagueness.”

Thus British capitalism is in the position of a starving athlete preparing for a race, who accepts food from a competitor in return for allowing his arms and legs to be hobbled together when he runs. Not for nothing has America announced a programme of trebling her exports! But even if the world market increases somewhat it will not be big enough to satisfy the Imperialisms of Britain and America, let alone the lesser struggling Powers. The trade war is on, only the British capitalists have begun on such a weakened position that they have been compelled to surrender without a battle for the time being.

However, it can be predicted in advance that the Agreement will break down. It is impossible for bankrupt British capitalism to fulfil it. The Economist openly declares:

“It is very difficult to understand how any man in his senses can think that the obligations now to be assumed can possibly be fulfilled. It is not the annuity of £35 million to America that is so frightening, but the chronic deficit of at least ten times that amount that would seem to be the all but inevitable consequence of the subsidiary conditions.”

The spokesmen of American capitalism know very well that Britain will never be in a position to pay back the loan. But they have a double objective in making it. By allowing a certain amount of consumers and other goods into Britain and thus finding markets which their enormous surplus production urgently needs they stave off an immediate social crisis of British capitalism. Such a crisis would lead to revolutionary struggles throughout Europe, and would have immediate repercussions in Asia and the colonial world thus leading to the danger of the complete overthrow of world capitalism. At the same time American Imperialism needs Britain as a counter-balance to Russia in Europe. Simultaneously they drive into Britain’s most sacred preserve and her last line of defence against the American trading offensive: her Empire Markets.

The whole of the capitalist press unanimously shrieks “Woe, woe”; both the Labour leaders and the Conservatives, those for the agreement and those against agree on its disastrous effects in the long run for Britain. But even those who protest have no real alternative to offer. On the basis of capitalism there is no other alternative but to accept the domination of American imperialism. The Economist grimly but sadly sums it up in a very apt way: “All this, no doubt, is unavoidable. Beggars can’t be choosers. But they can, by long tradition, put a curse on the ambitions of the rich!”

The capitalists prefer that it should be the Labour leaders who incur the odium of doing the dirty work and bowing the knee to American Imperialism. The consequences for the masses will be hard in the next few years. As Mr. Eccles the Tory M.P. for Chippenham remarked with evident satisfaction:

“From these unsatisfactory documents we secure one great advantage. From now onwards there cannot be a man or woman in the country who does not see that the export trade is the nation’s first priority, and that all the other sound objectives of policy that were listed at the General Election, housing, nationalization, social reform and the rest, must now step down to make way for exports.”

The capitalists wish to place the full burdens of the crisis onto the shoulders of the working class. And the Labour Government by pursuing a capitalist way out of the crisis make it inevitable that the real standard of living must fall. That is why the building workers and the Dockers have received such grudging increases! But the intensification of labour which the capitalists, the Union and Labour leaders and the Stalinists are all simultaneously demanding, speed-up and rationalisation, will not solve any of the problems of British capitalism. With or without the agreement with America such a policy would and can only prepare the way for a new and more terrifying slump than in 1929-1934 which led to intense misery for the masses and the fall of the Labour Government. No one in the Parliamentary debate could deny the fact that a terrible slump would follow the present boom in America and that it would spread to Britain. A point that was made by many speakers in the debate. Such an economic crisis with a weakened economy would mean mass unemployment, even further lowered standards, and general misery for the masses. These will be the fruits of the policy now being pursued by the Labour Government.

But what is the alternative many sincere Labour workers will ask? There is only one way out. If instead of pursuing this shameful policy of capitulation to the City of London and Wall Street the Labour leaders pursued a real revolutionary Socialist policy, a Leninist policy, the situation would be entirely changed. The first step would be to take over the banks and all industry without compensation to the capitalists and run them under workers’ control. Then on the basis of having instituted as in Russia a State monopoly of foreign trade, the industry and trade both at home and abroad could be organised and planned. Even if the American capitalists attempted economic reprisals the workers would gladly accept sacrifices temporarily (as they did when they believed they were fighting against fascism), when they realised it would mean a world of undreamed of plenty and peace, of rising standards for them and their children. A Socialist Britain could appeal to the Russian, American, European and Asian workers to come to their assistance.

This is the only realistic policy for the British working class. The other way leads to the collapse of decrepit British capitalism, to untold sufferings and hardship, to slump and finally fascism and war. The capitalists will utilise the services of the Labour leaders and then cast them aside. A new crisis and a new 1931 debacle is inevitable if the present policy of the Government is persisted in.

Labour workers, Communist workers, this economic agreement is an ominous warning! Prepare now for the battles that lie ahead. Compromise with capitalism at home or abroad can only lead to disaster. Only in the overthrow of capitalism can the working class find a way out of the anarchy, chaos and nightmare of capitalism. Only the Revolutionary Communist Party tells you the truth and warns of the debacle that lies ahead for the Labour Government. Remember in the future and support the Party that forewarned and forearmed you for the battles that lie ahead.