Ted Grant

Wall Street slump

Source: Socialist Fight, vol. 4 no. 6 (July 1962)
Transcription: Francesco 2009
Proofread: Fred 2009
Markup: Niklas 2009

There was the spectacular fall in the price of shares on Wall Street, followed by a corresponding panic on the European stock markets, ended by a rise in share values. Since then there has been a gradual fall in the value of shares on the New York stock exchange to an even lower level than the previous catastrophic drop. Up to June 15th there has been a drop of 20 percent in stock market prices quoted on the New York stock exchange compared to prices at the beginning of this year.

The brunt of the losses of this fall has been borne by the small investors, middle class, small business people, the professional classes and some of the better off sections of the American working class. As the Daily Herald City column of May 30th commented, “It is possible that big business stung by President Kennedy’s sharp victory over the steel companies is fighting back… In other words the tycoons are telling the Americans ‘stop this man Kennedy or lose your money’.”

Thus the “people’s capitalism” of Kennedy is shown to be as much a racket as the much-vaunted “American” answer to Marx in the prosperity boom before the slump of 1929. It was these same classes of people who were then affected by the Wall Street slump. This must be a warning to the British labour movement because Gaitskell at the last party conference referred to the American administration as a “model” for a future Labour government.

Big business decides policy

Big business in America is cracking the whip and demonstrating who decides policy in America. The Times of June 19th puts the issue thus “the fact of the matter is that the hostility comes from the business side. Their critics of the executive want to be masters of the nation’s economic fate as well as their own. For them the function of Government is to reduce taxation and stay out of business. This is the fundamental dispute…”

In fact there is more to it than that. However, under pressure, President Kennedy is demonstrating in whose interests the measures of the government are intended. He has taken drastic action against workers who have gone on strike for higher wages and better conditions. Against the workers who have been on strike for 11 weeks at the Republic Aviation Co. he has served an injunction under the Taft-Hartley anti-Labour law ordering the workers back to work for 80 days. He has warned the flight engineers’ union in a dispute with the principal airways companies that he would serve an injunction against them if they went out on strike. Thus he demonstrates his “impartiality” as between the workers and big business.

Greater than the President

However, the causes of the crisis go deeper than mere personal whims and grudges of the “business community” against the President. The power of the great monopolies and combines which rules the United States in reality is a thousand times greater than that of the President himself. But they in turn are dominated by the uncontrolled forces of the capitalist market. Their sole criterion is how much profit can be made. The wealth producing factories, machinery, transport network, created by the labour of the workers, which has the potential of a flood of goods which could on its own supply the needs of the peoples of the entire world, is in their eyes their “own” personal property, to be used in their interests. They can play with the livelihoods of the tens of millions of American workers, like a child with a toy town. They open and shut factories according to what they can make out of them. They are the “national interest.”

Decline of profits

The cause of this flurry on Wall Street is in the fact that the American economy with swings up and down for the last five years has been virtually stagnant. The fall in prices of stocks has been in reality caused by the fact that retail trade in May dropped 1 percent over April for the first time for five months. This, coupled with the fact that pre-tax corporate profits in the first quarter of this year declined slightly from the record rate of the previous quarter, explains the hostility of Big Business. They can tolerate reforms or concessions to the workers while their profits are getting bigger and bigger. The moment these begin to decline they show their teeth and demonstrate who is master.

America, formerly overwhelmingly dominant economically in the capitalist world, has seen a change in its position during the last five years. Fantastic military expenditure and foreign aid hand-outs to keep the capitalist-landlord system intact, especially in the “undeveloped” major part of the world, has undermined the favourable American balance of trade and turned it into a deficit. This is beginning to have its effect on the standing of the dollar. The gold supply in America is now $16,500 million (about £5,900 million). The gold backing of the dollar in accordance with American law takes up $5,000 million, but there are foreign claims on the dollar amounting to $20,000 million, half in the hands of private business. With the business uncertainty reflected in the falls on the stock exchange “foreign confidence” in the dollar could be undermined.

Burdens on workers

Naturally the big business tycoons want the burdens and difficulties of their system to be pushed on to the backs of the working people and the small business people. Despite an unmatched productive machine, the American economy has for the last 15 years failed to work to capacity. It is useless for president Kennedy piously to declaim in a speech at Harvard University “The national interest lies in high employment, steady expansion of output, stable prices, and a strong dollar…”

These words ring hollow indeed on the background of unemployment of 4 millions, with 2 millions on short time, with rising prices and the instability of the dollar referred to above. It rings out mockingly against a background where the steel industry, one of the major indexes of the economy, is only working at 55 percent of capacity and threatens to drop even further.

Balancing the budget

Despite the hostility of big business, while President Kennedy was making empty threats, Douglas Dillon, his secretary of the Treasury was explaining that the tax proposals of the government in effect offer a considerable reduction to big business. Big business is also demanding a balancing of the budget as a means of preventing inflation, a cutting down of social services and other “luxury expenditure” to achieve this end and Dillon has faithfully responded. “As I have often stated, we intend to work vigorously until the deficit is wholly eliminated—a result we hope to achieve by the end of next year.”

In reply to criticisms of government “interference, and parasitism in mopping up a great part of the national income”, President Kennedy has quoted figures to show that president Eisenhower outspent President Truman by £64,286 million, thus showing that there was no difference between Republicans and Democrats in this regard. However, in relative terms, apart from the increase in expenditure on “defence and space,” while the amount had increased, government expenditure had in reality grown less rapidly than the economy.

Warning for Labour

This is an object lesson for the “revisionists” in the labour movement. It is noteworthy that Douglas Jay, Roy Jenkins and Gaitskell himself have been silent on these events in America. Coming at a time of “prosperity” in the capitalist world, where the difficulties of the system in Britain have resulted in the pay pause, stagnation of production and the measures of the Tories against the workers and middle class, it should serve as a warning to the advanced elements in the labour movement. If in America the stronghold of the system, at a time of prosperity, the “democratic” politicians cannot “organise” the system for the benefit of the people, how much less can it be expected of a much weaker capitalist economy, more dependent on the world market like Britain? If the American capitalists are hostile even to the liberalism of Kennedy why should the British monopolists like ICI be favourable to the liberalism or radicalism of Gaitskell, under similar circumstances? The shadow of 1931 and the disastrous sell-out of MacDonald, hangs over the labour movement.

Myth of boom

Even in prosperity capitalism cannot solve its problems. The myth of an uninterrupted boom has been rudely shaken by the falls on the stock markets. It is true these will not immediately be followed by the same consequences as in 1929. But over a period not only small slumps but steep falls in production and employment are inevitable. Consequently the only practical policy for the labour movement lies in putting forward a socialist policy to use all the resources of the nation to guarantee maximum production for the benefit of all. This can only be done by nationalising with minimum compensation all big business and operating it under a democratic plan of production, with workers’ control and management.