ISJ Index | Main Newspaper Index

Encyclopedia of Trotskyism | Marxists’ Internet Archive

International Socialism, Spring 1965


Editorial 2

Knuckling Under


From International Socialism (1st series), No.20, Spring 1965, pp.3-4.
Thanks to Ted Crawford & the late Will Fancy.
Transcribed & marked up by Einde O’Callaghan for ETOL.


Since its inception, this journal has consistently drawn attention to the basic contradiction between Labour’s promise to the working class to implement a programme of vitally necessary, albeit modest, reforms and Labour’s determination to modernise and streamline an ailing British capitalist economy. The truth of this assertion has – all too depressingly – been borne out by the events of the first months of the Labour Government. What was less easy to forecast, however, was the fact that the contradiction would take such a sharp form and appear so early in the life of the Government. An analysis of the present dilemma of the Labour Government – particularly in relation to the consequences that flow from a policy involving deflation and high interest rates – indicates that it is unlikely that the present form of the contradiction will remain characteristic of the full life of the Government assuming, of course, that it can survive any future Leytons. It has to be remembered that to the underlying growth-crisis of the economy – which stems from years of inadequate investment in an increasingly competitive world situation, and which is manifested in a sluggish rate of expansion and a critical foreign trade imbalance – has been added a financial crisis. This crisis is the direct product of the anomaly of British capitalism’s being saddled with an ‘open’ currency system, which developed from the needs of the 19th century expansion in world trade but now places Britain’s modest gold and dollar reserves in jeopardy every time there is a ‘fall in confidence’ in the outlook for British capitalism among both domestic and international financial circles.

The massive export of capital that was carried through last autumn and winter, culminating in the 3,000 million dollar bankers’ loan, had many sources. The declining profitability of investment in Britain, the better interest rates obtainable in some other banking centres, fears that the Government (at the behest of industrial interests anxious to cheapen exports, and in the face of opposition from banking interests) might devalue the pound, and – marginally – fears that a Labour Government might hamper the profitability and free movement of capital, all played their part. From 16 October 1964 Labour was faced with a fundamental choice. Was it going to impose controls over the free movement of capital, necessary in order to avoid high interest rates and their backlash on Labour’s election promises, or was it going to knuckle under and hope that the consequences would not be too dire? Labour knuckled under. It justified so doing with talk of foreign retaliation and domestic ‘non-cooperation’ in ‘rebuilding Britain’ if controls were imposed. What Labour did not point out was that it had laid itself open to such blackmail by its refusal to adopt a policy of comprehensive nationalisation. What the Government also kept remarkably quiet was that Britain’s entire foreign trade deficit could be almost entirely paid for out of the foreign exchange savings that could be made by scrapping the overseas military bases. But, especially after Labour’s agreement to undertake an ‘East of Suez role’ in policing imperialism’s interests in Asia, such a saving became more and more illusory.

The paradox of the present situation is that Labour is finding that its longer-term plans to modernise British industry – in particular its centre-piece plans for a wage freeze/incomes policy and proposals to attack workers’ job-defence practices – are being threatened by the consequences of its own actions in tackling the financial crisis. Fewer workers than ever will be inclined to accept long-term contracts that tie their wages to a rigid limit, now that the value of those wages has been eaten into by higher prices (sparked off in the main by higher interest rates). Similarly with Labour’s plans for dramatic increases in social welfare spending: they have been deferred to placate the ‘inflation’ fears of the bankers who put up the 3,000 million dollars. So too with the ‘cheap-money’ council-housing proposals. The truth is that the sweetener, so essential if the working class was to swallow Labour’s rationalisation pill, has worn so thin as to be imperceptible. Inevitably the workers have given their answer, through mass abstention in the recent disastrous series of bye-elections. If objective circumstances have made the job of the trade union bureaucrat – selling wage-freeze to the shop-floor worker – more difficult, then the job of socialists right now is to make that job well nigh impossible. There has rarely been a period in recent years when the relevance of class analysis and class propaganda was greater. Discontent and unrest there certainly is among workers, and it will grow. What is essential is that it doesn’t take a merely negative form, as in bye-election abstention, but becomes focussed around a positive programme of working-class demands. These demands must be organically linked to a programme calling on Labour to confront capital and implement its policy to the working class by the only means possible, nationalisation under workers’ control. How are these demands to be linked? The demand for lower interest rates must be tied to a call for state control of the ‘City’ finance institutions; a campaign against higher prices must be linked to the fight against the armaments burden which induces the price inflation in the British economy; the struggle of shop-floor workers against wage-freeze must be bound up with demands for nationalisation and workers’ control. These and other campaigns should be continually directed at the Labour Government, exposing both the possibilities for action by Labour and the class reasons for its inaction.

Of course Wilson is praying for time – time to surmount the Government’s short-term crisis, time in which to implement his short-term reforms, and time in which to begin his long-term streamlining policies. The trouble is that having accepted the rules of the game he is no longer in a position to dictate the speed at which the immediate financial difficulties will be resolved. And with every month world conditions (especially in Europe) are becoming less favourable to the dramatic recovery in British export performances which must precede international confidence in the pound. There is a grave danger that in the end Labour will please neither capital nor the working class. A few more Leytons and the path will be well and truly prepared for the return of reaction and the Tories. These are the political realities which must be brought home to every Labour Party and trade union activist in the next few months. With the clarification of the class issues involved in the struggles pending as a result of Labour’s actions must go more intensive propaganda work to bring the alternatives before the working class. There is no other way.

Top of page

ISJ Index | Main Newspaper Index

Encyclopedia of Trotskyism | Marxists’ Internet Archive

Last updated on 14 April 2010