The Economic Crisis – What Labour Should Do
Written: July 1966
Source: Militant pamphlet, July 1966
Transcription: Francesco 2013
Proofread: Francesco 2013
Markup: Francesco 2013
The Tories and the capitalist press have demanded even severer measures than those announced by the Wilson government. The CBI are demanding further cuts in the social services. The measures announced, together with the previous cuts carried out by the Labour government amount to the severest attack on the standard of living of the working class since the war. There is not only a wage freeze, but the cost of living is rising through the government’s own measures – hire purchase down payments on cars, motorcycles, payments on domestic appliances being raised to 33.3 percent. The price of beer is increased and there is a surcharge on petrol. Postal charges will be increased which in turn will be passed on to the consumers.
Meanwhile young couples getting married will find it difficult to get the things that under modern conditions have become necessities. At the same time, as a gesture to the working class, no new cuts in the social services, schools and hospitals have been announced. But progress in these fields is already well behind the promises originally made at the general election.
The Times organ of big business cynically analyses Wilson’s former criticisms of Tory measures which were not as severe as now. These Tory measures, as Wilson, Brown, Barbara Castle and other members of the cabinet pointed out, did not solve any of the problems facing British capitalism during the last 20 years.
On January 25, 1964 Wilson made a biting and bitter attack on the very policies he is now carrying out. Said Mr Wilson, “There are two built-in weaknesses in every Tory period of expansion. The first is the effect of the boom on our balance of payments, i.e. on both exports and imports. The second is the problem of incomes and inflation.”
Said the Mr Wilson of 1964 in criticising the Mr Wilson of 1966, “Why do we give such a high priority to expanding production? The answer is that all else in our programmes and our vision for the new Britain depend on what we turn out from our factories, mines, and farms; our laboratories and our drawing offices… Our plans for raising our national production provide the basis for achieving and maintaining full employment, for raising living standards in our own country, ending the shameful pockets of poverty which disfigure our society, the basis of our plans to fight ill health, and disease, to transform our education system from its present two-nation orientation to a system sparkling with opportunity… Everything depends on a firm base of economic power.” Then attacking the Conservatives Wilson said, “In the past 12 years (of Tory rule – EG) the Conservatives have repeatedly sought to impose a pay freeze because of a stagnant economy – indeed an economy forcibly prevented from expanding – could not pay higher wages without inflation.”
What has changed in the situation to cause Wilson and the other Labour leaders to adopt capitalist policies which have proved to be disastrous to the working class in the last twenty years, and have not even solved the problem from a capitalist point of view?
Wilson and the other leaders of the Labour Party, have forgotten the elementary principles of socialism. They had the illusion that they could run the capitalist economy better than the representatives of capitalism. “But there is an economic crisis” declare the Labour leaders. Of course! The course pursued by British capitalism in the last twenty years has been one in the interests of the monopolies, the banks and big business generally. The balance of payments crisis has been caused by the colossal investment of capital abroad, now amounting to £11,000 million and the expenditure of £500 to £600 million on military expenditure to guard the interests of these same monopolies and the City of London.
The capitalist class itself is becoming divided about the uselessness of this expenditure, particularly “East of Suez” of which Wilson boasted that “Britain’s” role would be continued under a Labour government. Such Labour Tories as Woodrow Wyatt and such Tory spokesman as Enoch Powell have come out against this squandering of the resources of British capitalism. Before the war Britain spent £16 million on military expenditure abroad (64 million in today’s inflationary money). Now she spends ten times as much. This plus the drain of £200 million to £300 million in foreign investments by the big companies is the immediate cause of the constant balance of payments crisis which has chronically beset British capitalism since the war. It is also the cause of the chronic inflation and the fall in the purchasing power of the wages received by the workers.
Now the measures announced by Wilson, as Trotsky predicted would be the fate of measures taken by a Labour government under conditions of economic crisis, have irritated the capitalists and angered the workers. The Transport and General Workers’ Union, the National Union of Mineworkers, along with other unions representing in all 6 million workers are affected by the freeze on wages. But the profits of the capitalists, except for the increase of 10 percent on surtax payers, will not be affected. Even this increase does not restore the position to that which existed before the previous Tory governments cut the amount paid in surtax.
In a certain sense the Financial Times, organ of big business, is correct when they say that this farce of equality of incomes will actually slow the recovery of business, by decreasing the “incentive” for the capitalists and managing directors. The “tops” of British industry will in any case devise ingenious methods, worked out by special accountants, to dodge payment of taxes.
Meanwhile all that a freeze on dividends not profits means is a piling up of the surplus labour extracted from the workers, the exploitation of the workers at an enhanced rate. Yet this will not solve the problems of British capitalism. Wilson is like the man in the humorous novel who drove his horse madly in all directions. After ridiculing the Tories mercilessly for their crazy policies, he prescribed en even worse dose than that recommended by the economic witchdoctors at the Treasury, the Bank of England, and the other capitalist institutions.
British capitalism is sick. This crisis has been described as the worst economic crisis since 1931. If the witchdoctors, and the soothsayers whom Wilson is relying on prove to be correct, this will result in unemployment of 600,000 or more this winter – mainly within the marginal sections of workers, the service trades, cleaners, shop-assistants and so on.
The immediate effect of these measures will be a further cut in investment by the capitalists, which has already fallen by 7 percent in the first 6 months of this year, in comparison with last year. Capitalists do not invest for production or worse still for production capacity, but for profits. The production of steel which is a useful index has dropped 10 percent so far this year. All the serious capitalist journals are unanimous that this will be the worst year of austerity since the war. The increase in production will be at best perhaps 1 percent higher than last year, some journals are speaking of an actual drop in production in comparison with last year.
What has happened to the grandiose “National Plan”? George Brown has had to admit in Parliament that it has been virtually scrapped. What has happened to the measures which were going to guarantee an increase in production of 4 percent a year; higher standards of living, schools, roads, hospitals etc.? The fatal flaw in the reasoning of Wilson, Brown and the other leaders of the labour movement was that they imagined they were more “practical” than the Tories. As if big business does not want maximum production if it can make maximum profits. As if it was a peccadillo of eccentricity which forced Selwyn Lloyd and Maudling to indulge in stop-go. Wilson has an ingenious way of imagining that by changing the name of a thing he changes its character. His policy is not stop-go, but stop, stop and go for the capitalists. Thus these “practical” men when in power have debased the ideas of socialism and advanced further attacks on the trade unions and the working class than even the Tories dared to do.
What then for the labour movement? With what malicious ploy the hirelings of capital hope to use this situation in order to vilify the ideas and methods of socialism. But already there is the beginning of a revolt in the labour movement against the traditional capitalist methods of solving the crisis. Cousins, Woodcock and a group of left-wing Labour MPs have announced opposition to the wage freeze and other drastic measures. The Labour “left” MPs are demanding withdrawal of troops from Germany and an abandonment of the disastrous imperialist “East of Suez” policy. Wilson’s cut of £150 million in military expenditure is a mere bagatelle. Already the “ceiling” of expenditure on arms of £2,000 million has been exceeded by nearly £200 million so that this cut is not a cut at all.
In addition, the acceptance of a wage freeze by British workers would merely be made the excuse for a similar attack by the German, American, Japanese and other capitalists on their own working class.
Even cuts in military expenditure would not restore production. Cousins, Foot and the other leaders of the movement are calling in effect, for a return to the general election programme of the Labour Party, and every militant worker will support their opposition, but it will not solve the problem.
The organised working class in the Labour parties, and trade unions will never accept tamely this attack on their standards. The seamen’s strike, formerly the least militant of unions is merely the first warning of the struggles to come. The engineers, miners railwaymen the civil servants will not accept meekly this assault on their standards. Cousins and the other leaders should be mobilising and explaining to the workers and first of all the members of the trade union and labour movement, the real seriousness of the situation. Very gingerly has the TUC called for more participation and consultation of the workers in both nationalised and private industry. But how is this to be organised?
The solution to the problem in reality is very simple. The measures suggested by the “left” of selective control of imports and control of capital exports are impractical under capitalism. There are too many loopholes and the inevitability of a black market.
There is no way round the solution of the crisis, in the interest of the working class, except by crisis and emergency measures. Clement Attlee in his book Labour in Perspective suggested that Labour should pass an enabling act giving them blanket powers to take action against big capital. They are responsible for the virtual decay and decline of British capitalism.
Now is the time not to promote further monopolies as the government is now deliberately doing by forcing amalgamations of business, but the taking over of the private banks, the less than 400 monopolies and the insurance companies that control the major part of the economy. If it is a question of maintaining the value of the pound as “a sacred symbol”, the taking over of the banks and the City corporations would soon solve that problem. A monopoly of foreign trade could decide which imports and which exports were essential. A democratic socialism drawing in the trade unions, the shop stewards, the Labour and Co-op workers, scientists, technicians, housewives, small shopkeepers and small businesses could discuss and plan the resources of the country. No man is an island. That is the lesson of organised Labour. No country is an island that is the lesson of Britain’s crisis for the past twenty years. References to gnomes of Wall St. and Zurich is merely to mystify the problem. It is a question of the international division of labour which complements the national division of labour, into docking, motor car manufacturing and so on.
Wilson savagely attacked the Tories on a nationalist basis for wanting to enter the Common Market. Now he is even somersaulting on this. Why? Because the means of production, that is to say the economic potential of the country (factory techniques, know-how and science) built by the labour of the workers, and of the surplus wealth extracted from them, has reached such heights that a market of even 50 million people is too small for the production runs of the biggest companies. Wilson’s “solution” has failed consistently for the last twenty years. While capitalism lasts there can be no solution for the working people. For the last 20 years there has been a vast increase in technique and invention. The productive power of the working class has increased enormously. Standards of sections of the working people through full employment and through the wives and entire families working have gone up but not in proportion to productivity.
A “nationalist” solution is no solution at all, as the bitter lessons of two world wars should have taught those who claim to lead the working class. The more far-sighted bankers are already dreading the deflationary measures. If the British rate of interest goes up so does that of other countries, if British industry becomes “competitive” that can only promote similar measures to that taken in Britain by other capitalist countries.
Only a democratic socialist Britain, offering the hand of friendship to the workers of Europe and the colonial countries can solve the problems of peace and socialism. The first step would be to demonstrate the advantage of a real plan of production with nationalised industry run through the trade unions and committees of workers, shop-stewards housewives, scientists and technicians locally. Then setting them up nationally. The trades councils could be broadened to include other sections and organised to supervise and run the industrial, service, transport and municipal areas, drawing in technicians and scientists to work out the resources of the country and their use for the benefit of all. That is a plan of production. Britain is still one of the wealthiest countries in the world. Let us use that wealth for the benefit of the people.