Michael Kidron

Socialist Answer to Tory Economics

(February 1956)

From Socialist Review, Vol. 5 No. 6, February 1956, pp. 4–5.
Transcribed by Ian Birchall, Nina Kidron & Richard Kuper.
Marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

It is time we held an inquest into the late Tory Prosperity. That it existed for a few years is true; that its existence was a matter of luck is also true. Just how much luck went into it can be seen to-day.

Since the Tories came back to Parliamentary power in 1951 the prices of our imports have been falling steadily in relation to our export prices or, to put it differently, our terms of trade have been improving at the expense of the countries that supply us with food and raw materials. By 1954 this meant a saving of £400 million a year in imports (at 1948 prices).

Tories Gain

Since 1951 too, output of manufactures has increased by nearly £1,000 million (at 1948 prices) while other output has grown as well. At the same time, the Tories have spent less on armaments than Gaitskell planned in his 1951 Budget. Altogether, greater production, more exports at higher prices, cheaper imports and less unproductive expenditure on war preparations gave the Tories something like £1,000 million extra income in 1954 (at 1948 prices) compared with what the Labour Government had in 1951.

Tory Wizard

With an extra £1,000 million in the kitty anyone, even a Butler, could be a “wizard” Chancellor, abolishing rationing and controls and reducing taxation on high incomes (and even on working-class incomes, slightly). Under this “wizard”, consumption increased at a tremendous rate and was £600 million (at constant 1948 prices) more in 1954 than in Labour’s last year. Even the working class got some of the extra money rolling about and so, despite rising prices, the Tories were allowed in again.

But the Tory Prosperity was a short-term affair. The more they gave their Capitalist friends in tax concessions, increased rents, higher interest rates and the like, the more did these same Capitalists ‘enjoy’ their added incomes and the less did they invest. Thus, although profits in industry were 20% higher in 1954 than in 1951, investment was lower by £20 million. While the American, German and French Capitalists were investing over 20% of their national incomes the British bosses refused to put in more than two-thirds of that amount with the result that Britain soon lagged in the race for exports. While Germany’s export rose by 440 per cent between 1949 and 1954 and U.S. exports by 38 per cent, the volume of British goods sold overseas rose by only 19 per cent in the same period.

That is not the end of the Tories’ troubles. While they have encouraged spending and not bothered to see that it was productive spending, they have allowed inflation to spread for the less investments there are to-day the less goods there are to-morrow and the higher the prices.

Inflation means higher export prices which means a further loss of markets and greater difficulty in finding the money for imports of food and raw materials. Inflation also means that whatever the organized working class forces out of the capitalists in higher wages is soon swallowed up in higher prices. Thus while real wages in Britain had increased by only 19% between 1949 and 1954, they had gone up by 39% in Germany during the same period.

The Tories have only one remedy for their problems – make the workers pay. If there is to be less inflation – cut the worker’s spending; more investment – take it out of the pay packet.

That is why they retrieved half of the £150 million they gave away to the Capitalists in the Spring (1955) Budget from the workers that same Autumn. That is why they have slashed into council house building, raised rents, cum hire-purchase, raised teachers’ contributions to their pensions funds hardened against wage claims. That is why the organs of Big Business – the Economist, the Times, the Financial Times and the Banker started the year with the demand to create a pool of unemployed. The Economist and the Banker even gave a figure of 700,000 unemployment as the immediate target. Finally that is why they all welcomed the redundancy that has appeared in the motor-car industry.

Hornets’ Nest

It is not surprising then that the Tories have stirred a hornets’ nest. While last year started with 5 million wage-claims outstanding, this year started with 8 million. Last year started with Capitalists and trade union bosses clapping one another on the back; this year even this Transport and General Workers Union was forced to renounce the wage-freeze, its traditional hallmark. That the workers are slowly mobilizing for industrial struggles is becoming clear to the Tories. But there is little that they can do about it.

Wage Cuts

If they don’t cut costs by cutting wages British Capitalists will be priced out of export markets. But if they do, they will be faced by a workers’ movement which, as it grows more militant every day. can threaten their very existence, if they ‘appease’ the workers by keeping full employment and ‘allowing’ wages claims, costs will continue to rise and exports to dwindle until the import bill cannot be paid for any less we have another balance of payments crisis. Whichever way they turn the Tories see an insoluble problem. So far they have managed because the terms of trade have been in their favour. But how long can this last?

Socialist Weapon

We know that it cannot last. We also know that the Tories cannot exist one day longer than their luck in terms of trade. But that isn’t enough. We must know the answer to the basic economic problems. Won’t a Socialist Britain, committed to constantly raising the standard of living of her workers, also have to import food and raw materials? Won’t she have to keep her costs low in order to sell her exports? Won’t she be as dependent on the terms of trade as a Capitalist Britain is?

Yes, it will be. But a Socialist Britain will have one weapon which the Tories could never use – the complete nationalization of heavy industry, the Banks, insurance and the land and their inclusion in an overall economic plan.


When a private capitalist cannot compete in world markets, he has to stop production and sack his workers. This decreases the size of the internal market in Britain, because the discharged workers have less to spend, and so other workers producing for home consumption are also thrown out of work. These workers are also forced to reduce their consumption and the process is repeated with ever-increasing unemployment.

Public Ownership

Even in a partially nationalized economy such as we have to-day a slump in exports would have the same effects. If, for example, the British car manufacturers lose some of their export markets to foreign competitors, their demand for steel would fall and, with steel production less, the demand for coal would drop and the miners, even though they work in a nationalized industry, would soon find themselves in the dole queue.

Only full nationalization can off-set the stops and starts in demand for our exports. By full nationalization and planning we can adjust our production to changing conditions in world markets. We can control and plan investments in such a manner as to prevent all the economic eggs being placed in one basket which might be profitable now but unprofitable later on (for example, the car industry.)

Spreading Profits

By full nationalization and planning we can share the high profits made in some industries (not nationalized) and so prevent the cumulation of unemployment which is part of the Capitalists slump.

Even if the international market slumps completely, we would not have to import its horrible consequences into Britain without mitigating them. Full nationalisation and planning in Britain could go a long way towards spreading these effects over the whole economy instead of, as in a private Capitalist or even in a partially-nationalized economy, letting the working class carry the can of unemployment.

First Principle

Complete nationalization and planning is the first principle in warding off the Tory attack. It is the first principle in solving the economic problems created by the Capitalist class. It should be the core of the Labour Party’s program. And yet the right-wing leadership of the Labour Party has said nothing about it. What is their policy?

So far we have been told to wait for three years while the Labour Party leadership goes into the classroom to find a policy. But what about the time until then? Very little has been said about this. True, the trade-union leadership has been stung by their rank-and-file into putting forward wage-claims, but an overall policy has still not been formulated.

The Labour Party leadership has also kept silent. The only hint dropped has been an article by Gaitskell, published shortly after he was elected leader of the Parliamentary Labour Party, in Socialist International Information (December 24th, 1955).

Thoughts for Future

Gaitskell didn’t even pretend to give a policy statement. He was writing about The Ideological Development of Democratic Socialism in Great Britain. But he showed what he had in mind for the future.

Writing about nationalization in the past, Gaitskell shows that it was undertaken (with the partial approval of the Tories) in order to increase efficiency where the private Capitalist refused to do the job and not because of the “egalitarian arguments originally associated with nationalization” which “fell into the background”. But there are very few loss-making industries left for a Labour Government to nationalise in this way.

Aid for Capitalists

So, for Gaitskell, if nationalization is to take place in the future at all, it must adopt the form of “state ownership without necessarily having control too”. In other words Gaitskell recommends that the State provide the Capitalists with the money taken from the whole population while it keeps silent about the way this money is to be used by them.

No Alternative

The Tories gamble on history. Gaitskell, with his “state ownership without necessarily having control too”, wants to join in at the roulette wheel. This is no alternative. The only way to fight the Tories and solve Britain’s economic problems until such time as we have international Socialism it is by the complete nationalization of heavy industry, the banks, insurance and the land and their inclusion in an overall economic plan.

Last updated on 16 February 2017