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International Socialism, Winter 1966/7


Paul Derrick

Letter on Incomes Policy


From International Socialism, No.27, Winter 1966/67, p.9.
Transcribed & marked up by by Einde O’Callaghan for ETOL.


In his interesting article in your autumn issue Ken Coates says that I ‘insist that workers should demand that controls should apply to all incomes.’

But I do not insist on anything of the kind. I do insist that workers should demand that the present ‘ban’ on dividend increases should be made both statutory and permanent, but in numerous articles in sixty journals over the last twenty years I have never suggested that wages should be controlled in any way at all. I am quite happy that wage rates should be determined by free collective bargaining.

Where I do agree with the Government is this. I think that it is right when it says that higher wages tend to lead to higher prices when the increase in wages is not accompanied by an increase in productivity. I think this is self evident. I think it is also self evident that any restraint in wage claims by trade unionists is bound, in a capitalist society, to lead to gains for private shareholders and proprietors however heavily profits may be taxed and however strictly prices may be controlled. Although wage increases must tend to lead to higher costs and prices it is ridiculous to expect trade unionists to exercise restraint in wage claims in an expanding economy in a capitalist society. On the contrary wage claims should be pressed with all possible vigour as this power is one of the most effective instruments for turning a capitalist society into a socialist one. From a balance-of-payments point of view the problem is to create a situation in which wage claims will not be pressed in an expanding economy. But this can only be done by replacing production for profit by production for use, by eliminating property incomes so that natural pressures develop against unilateral wage increases which disturb the pattern of relative earnings. This situation can only arise in a socialist society where there is no battle between capital and labour over the industrial cake. One way of tackling the problem is first to limit dividends right through industry: then to tax property incomes as such as heavily as may be. Stock passes into the hands of the State, the State assumes the responsibility for meeting the capital needs of industry and personal property incomes are eliminated except insofar as the State chooses to leave widows and orphans with sufficient property incomes from State bonds to meet their needs.

In such a situation workers by hand and brain would go some way towards securing the full fruits of their industry upon a basis of Common Ownership.

There would be much argument, as there is in Yugoslaia, China, Czechoslovakia, the Soviet Union and elsewhere, about ‘the most equitable distribution that may be possible’ of the earnings of industry. Insofar as the best obtainable system of popular administration and control was achieved the workers themselves would determine just what was the most equitable distribution that may be possible.

In such a situation wage negotiation would become a matter of bargaining between different kinds of workers and unions would tend to become Guilds, concerning themselves with problems of production and standards of workmanship as well as with incomes.

But there would be no battle between capital and labour for the product of industry, no wage price spiral, no appeals for restraint and no inflation. In fact prices would tend to fall with technical development and all would share in lower prices in the fruits of such development.

Chris Davison


Chris Davison comments: Of all the myths that have confounded the socialist movement, the current favourites, ‘inflation’ and ‘productivity,’ must be among the most pervasive. And as with all the good old ones from Grandma’s patent elixir onwards they rest on a morsel of truth. ‘No one likes to see his hard won wage increase swallowed up by increases in prices.’ We all agree. But the crucial question is, what alternative are we offered? Is it increased wages while prices stand still, so that the massive inequalities in the distribution of wealth between labour and capital can be diminished? On the contrary, our present experience shows that the exact opposite is to be. And how can it be otherwise when the Government’s stated aim is to improve the competitive position of British goods in world markets through reduced labour costs? The employer who told his workers that he could pay them more at a future date if they were willing to accept less right now would get short shrift from any competent trade unionist. Yet socialists are willing to swallow the same hook when it is dangled by the Government. There can be nothing but loss to the working class if it accepts this idea, that it must make sacrifices in order that British capitalism may be more competitive. Already we see the likely response of British competitors. Those who have conducted an incomes policy of their own now call for a further turn of the screw. Unless workers in each of these countries continue to resist and fight for higher wages the outcome must be an international depression of wage rates. Capitalism itself has serious objections to continuous economic inflation. Full employment gives the worker a security upon which confidence can be built. It allows him to push for higher wages with much less danger of victimisation. So capitalism is devising ways of solving this ‘problem’ by creating a small but adequate ‘army of unemployed’ (see Callaghan’s and Gunter’s recent statements about a permanent level of half a million). But for socialists the task is not to solve the problem but to prevent it being ‘solved’ at their expense. While we suffer capitalism it is certain that inflation offers no greater disadvantages than the alternative. We have no desire to return to the last period of stable or falling prices – the 20’s and 30’s.

The image most favoured when the question of productivity is raised is that of a man digging a hole with his bare hands who is offered a spade. Only a fool can refuse. Why then does such conflict surround it? To the worker improved productivity offers a higher standard of living, more leisure and lighter work. To the employer it offers higher output, lower costs and greater profits. For the worker higher productivity is best achieved through technical innovation while the employer, on the contrary, will prefer to see his workers work harder and faster than to spend money on new machines. For the employer higher productivity means fewer workers producing the same goods while the worker is as concerned about those outside the factory in the dole queues as he is about those inside. The crucial question is, ‘who gets the benefit?’ This is the reason why socialists cannot accept ‘productivity’ as the great cure-all. We do not accept that ‘increases in wages must be accompanied by a corresponding increase in production,’ as Government speakers are fond of putting it. To do so is to accept for good the present distribution of wealth and power in society. If you do that then we must necessarily count you among our opponents.

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