Notes of the Month


Majority Labour Government

(October 1974)

From International Socialism (1st series), No.72, October 1974, pp.3-5.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

THE RETURN of the majority Labour Government has not fundamentally altered any of the problems facing British capitalism. Investment is continuing to lag. Price rises are still heading towards the 20 per cent figure. A number of large companies are continuing to drift towards bankruptcy. The stagnation of the the world economy continues to make a quick escape from this situation impossible.

All this means that the Labour Government is going to face the same dilemma in the months ahead as in the period since the spring election. It cannot deal with the problem of inflation without holding back government expenditure, and restraining the money supply. But such a policy will necessarily lead to further bankruptcies and still higher levels of unemployment. Its attempts to deal with any one of its problems are going to make worse the others.

The only option for it is to make a forceful attempt to continue cutting back on workers’ living standards. Real wages have already fallen by four per cent this year. All the pressures will be on the government to prevent workers regaining these losses, and, if possible, to impose still further cuts.

Wilson implicitly admitted that this was what he was at in the last days of the election campaign, when he condemned the BBC for granting a wage rise without consulting the government and when he made it clear that a majority Labour government would make more strenuous efforts to collaborate with the Confederation of British Industry.

The form wage restraint will take initially, will still be that of ‘voluntary’ restraint through the social contract. In the election both major parties accepted that there will little alternative given the memory of how the miners smashed through the last attempt at statutory wage control. Instead of confronting large groups of organised workers directly, Labour will try to continue using its policy of the last six months of persuading union leaders to control the actions of their members.

The union bureaucracy is only too willing to carry out such a task. Both its right wing and its ‘left’ wing components accept that their job is to slowly build up the strength of their organisations within the confines of capitalism. They see the approach of crisis as upsetting the stable environment in which they are accustomed to operate, and will do almost anything if they think it can restore that stability. The more the system moves into crisis, the more they align themselves with attempts to find capitalist solutions to the crisis – even if it means sacrificing the living standards of their own union members.

The vote at the TUC on the social contract underlined the point. Even those leaders who are in the Communist Party, such as Eddie Marsden and Ken Gill, preferred to abstain on the question of wage restraint rather than upset the government’s plans. After years of pursuing a policy of making friends within the bureaucracy, the CP’s leading trade unionists no longer feel able to follow an independent line of their own.

The problem for the union bureaucracy, however, is that already it is finding it very difficult indeed to sell a policy of continued wage restraint on the shop floor. The last three months have seen a growing number of local, unofficial strikes in defiance of the social contract code – in particular, rejecting the stipulation that wage claims can only be pushed every 12. months. The Ford struggle has only been the most prominent example of a growing trend.

The strain on the union bureaucracy in such a situation has important consequences both for the ruling class and for the working class. Within the ruling class – and no doubt within the Labour cabinet-there are a growing number of voices suggesting the necessity of an alternative option to the social contract – whether another spell of statutory wage freeze, a deliberate pushing up of unemployment or an increased use of the forces of the state for strike breaking.

Yet, even for a Tory government it would be difficult to adopt any of these strategies, given their unpopularity with trade unionists and the strength shown by the most powerful sections of workers over the past couple of years. Interestingly, the Tory election manifesto, no doubt with Heath’s defeat at the hands of the miners in mind, retreated from most of the union bashing proposals of the February election campaign.

For the Labour government, implementation of any of these policies will be more difficult still. Yet the economic pressures to do something will be irresistable. In all likelihood, what we will see is an attempt by the Labour cabinet to introduce very harsh policies and, then vacillate about implementing them under pressure, as with In Place of Strife in 1969. The only asset for the Labour leaders in such circumstances will be their own paper thin majority. They will claim all the time that the parliamentary balance of forces does not allow them to behave as they would like.

The Prospect for Militants

THE CLASH between the determination of the government and the union bureaucracy to hold back wages, and ‘the spontaneous spread of local, fragmented economic struggles, provides revolutionaries with considerable scope for intervention.

In practice, the key issues that arise are likely to be of two sorts. Firstly, there is the question of the fight against the social contract. There is today a fighting spirit among many groups of workers that did not exist 18 months or two years ago. Given the right leadership from militants, workers are prepared to fight for wage increases of up to 30 per cent and to ignore the 12 month time limit for new agreements.

However, these struggles cannot ignore political questions. The government and the union bureaucracy make sure of that. Revolutionaries have to intervene with all the arguments against the incomes policy under capitalism and have to draw from them conclusions about the necessity of a complete transformation of society.

The second set of struggles that are going to develop will be against redundancy. Again, the question of militant leadership will be very important. If management can for instance get away with actually distributing redundancy notices, then inevitably, workers will be divided one against another, between those who know their position is secure and those who want to be first in the queue for whatever vacancies are available at the labour exchange. Only a strong shop floor organisation, building links on a combine basis, can successfully defeat such management tactics. Again, what is necessary is a preparedness to go from particular tactics of struggle – from the overtime ban and the blacking of work to the all-out occupation – to the political demand for nationalisation without compensation under workers’ control.

In the past in this country we have a great deal of experience of localised, fragmented unofficial strikes over economic issues. We have also, in more recent years, known a number of large, national, official strikes which have raised very sharp political questions. What we are going to be faced with in the months ahead is with a continuing wave of fragmented, unofficial, localised struggles – but ones which raise general political questions within the class. That is why the International Socialists have been able to develop a general programme of demands which make sense in each and every one of the localised struggles:

The point about such a list of demands is not that they can somehow be self-subsistent. What they do is provide a thread running through the different struggles of the next few months, raising precisely those issues that the government and the trade union bureaucracy will be most resistant to. They generalise the struggle and begin to politicise it.

The National Rank and File Movement

THE FACT that so many different struggles are linked by a common thread of demands provides the rationale for attempting to build a rank and file organisation. The militants leading these struggles may not yet be revolutionaries. But they are clashing, in practice, with the policies of the Labour Party leadership and the reformist trade union bureaucracy.

The point of any rank and file organisation is to draw such militants together, so as to provide them with a means of co-ordinating and developing their struggles independently of the bureaucracy. A fully fledged rank and file movement would, like the National Minority Movement of the 1920s, be constituted by militant groupings in each industry and union, linked together to form a network of activists cutting across established demarcation lines. In this way it could provide the .beginnings of an alternative focus of national leadership for the class as a whole to the bureaucracy.

We have, of course, a very long way to go to achieve this goal. But revolutionary militants can begin the task by trying to build forms of organisation that group around them many of those involved in the current struggles who are not yet revolutionaries, but see the need for fighting a programme of demands unacceptable to the trade union leaderships.

That is why the initiative of the Rank and File Organising Committee in calling for a second conference on the fight against wage restraint and unemployment is to be welcomed. Such a conference could provide a real pole of attraction for many of those groups of workers who have been moving spontaneously into opposition to the government’s plans. It should aim to develop real organisational links between militants in different industries and localities. Such links will be very important in the period ahead, and the government, the press and the trade union leaderships are likely to join forces in attempts to stifle independent : shop floor struggle.

By the very nature of such a rank and file organisation, it cannot just be proclaimed. It has to be built, gradually gaining credibility and strength from its ability to provide assistance and leadership to particular struggles. The first moves in this direction have been made by the rank and file organising committee in the months since the first conference in the spring. The key question for it now is to prove that it can play a role in the struggle against wage restraint and unemployment in the next year.

The Spread of the Crisis Internationally

WHILE THE British ruling class has been trying to muddle through, the crisis internationally has worsened appreciably. The US has nowhad six months without any economic growth at all, unemployment is growing and has now reached nearly six per cent, and inflation is accelerating rapidly, with wholesale prices up by 3.7 per cent in the single month of July. In Japan the recession has developed much more quickly than the experts were predicting at the beginning of the year: an economy that has usually grown by about 10 per cent a year is expected riot to grow at all this year and only by five or six per cent next year. Germany has a growth rate this year of between one and three per cent, less than half the average for the last 10 years, while the Italian economy is having to borrow internationally to keep afloat and unemployment and short term working are likely to rise rapidly in the next few months.

Everywhere, the dilemmas facing the British government are repeated. The Keynesian escape from rising unemployment via increased government spending is blocked by fear of further inflation. And the ‘monetarist’ escape from inflation by cutting back on the supply of money, is blocked by fear of depriving businesses of the day-to-day funds they need to operate. As it is some very large and very powerful companies are complaining of ‘cash flow’ problems (difficulties in borrowing the money they need to balance their books until profits flow in).

As we have argued in the pages of this journal before, the problems which world capitalism is facing cannot be avoided by either one of its rival economic schools. They are much more deep rooted than that. After 30 years of more or less uninterrupted expansion based upon massive arms expenditure, the system is beginning once again to encounter the sorts of crisis that punctuated its history before 1940.

Because arms spending still continues on a substantial scale, the crisis this time round will not be as deep in the 1930s. Today the pessimists speak of nil growth of production and of a growth of world trade of two or three per cent: in the early 1930s production world wide fell 30 per cent and world trade by a third. Nevertheless, for those running the system, it is the worst shock they have had to face since the war. And what is worse, precisely because they do not face a massive slump, there is no obvious way out – even in the long term.

The slump of the pre-war period had advantages for capitalism – or at least for those larger and stronger sections of capitalism which survived it. Inflation was brought to a halt as bankrupt capitalists were forced to sell their goods on the cheap and unemployed workers clamoured for the jobs of the employed. The biggest firms were able to restore their profit rates by buying up on the cheap the machines and factories of those of their competitors who went under. The crisis bled the system and it caused much pain – but the end result was a new vigour and a new burst of growth.

The problem the system faces today is that it cannot see a way through to renewed vigour, even in the long term. If arms spending still continues to rule out an all-out slump (and, interestingly enough, in the US industrial investment remains steady despite the stagnation of the economy), then there is no automatic mechanism for enabling some sections to benefit at the expense of others and for wages to be cut. Indeed, those who try to run the system find it increasingly difficult to impose the most minimal discipline on its component firms through the threat of bankruptcy. The important firms are so large now, that for any of them to go out of business would have a catastrophic effect on the rest. If any of the really big boys really went to the wall, with their workers thrown on the dole queue and their plants shut, the effects on their respective national capitalism would be fairly catastrophic. Long before that happened, the capitalist state would be forced to step in to protect the national capitalist class. But by that very action, it would be stopping capitalism taking the classic cure for its long term problems.

But without reorganisation of the system through some of its members going under, there seems no way for it to break away from the trend towards economic stagnation and rising inflatioa Two of three years of stagnation will not bring prices down appreciably, so when the system enters the next boom inflation will accelerate much more quickly than it did in the last boom (over the last two years), leading it much more rapidly to grind to a halt.

Stagflation is the prospect for the short, middle and long term – with the stagnation getting ever more persistent and the rate of inflation ever higher.

It is this prospect that makes the outlook for British capitalism gloomier than ever. Even if by borrowing massive sums it is able to survive the next two years, that will leave it in a weaker position than ever at a later stage. There may well be a short world boom in 1976-7. But with none of the problems solved that gave rise to the recent wave of inflation, it will be cut short as prices internationally really shoot through the roof. British capitalism meanwhile is likely by overseas borrowing to have already disposed of its one real positive asset – the wealth available from North Sea oil. It will be in no better a position to take advantage of the next world boom than it was of the last – when investment in Britain barely rose at all. By the time the symptoms of crisis are resumed, its competitive situation could be really desperate.

In other words, neither for world capitalism nor for its British component is the present crisis some freak event. It is an expression of the fact that the long period of capitalist expansion of the last 25 years is coming to an end as the system loses the ability to restructure itself for new bursts of expansion. It is the ending of that expansion which is putting into question established political structures throughout the world. That is why such respectable organs of ruling class opinion as The Times and The Economist are beginning to question whether much vaunted parliamentary institutions are going to be the best way of preserving the rule of their class. It is also why the next three or four years can present the left in Britain with its biggest challenge ever.

Last updated on 18 November 2009