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International Socialism, July/August 1975


Notes of the Month

The Crunch is Now


From International Socialism, No.80, July/August 1975, pp.3-5.
Transcribed & marked up by by Einde O’Callaghan for ETOL.


‘STERLING plunges – devaluation level widens to 26.5 per cent’; ‘Bank of England backs statutory control of wages’; ‘June jobs worst since war’. Three headlines from the serious bourgeois press on 20 June, the day these Notes were written, three markers along the road to the most massive economic crisis anyone under fifty years of age can remember. A week earlier the Economist, in one of its more analytical articles as opposed to the now frequent hysterical ones, made this assessment:

‘In a continuing inflation wages must keep going up ahead of prices in a spiral turning ever faster, despite the braking effect of rising unemployment and falling output. The moment that impetus is lost, the gap will rapidly close. Prices will continue to accelerate to reach the peak rate of inflation after wage increases have started to fall. Workers’ real incomes will then be viciously squeezed. The fall will become precipitate. Higher prices will not shift resources back to companies but, by cutting real incomes, send demand tumbling. As output collapses and unemployment rises, the pursued will become the pursuer – prices may start chasing wages back down the inflationary spiral.

‘This is not simply theorising. For anyone who looks beyond post war British experience the evidence is compelling ... Japanese industrial output has fallen by a fifth over the past twelve months. Last year’s wage round notched up 32 per cent increases; this year’s under 20 per cent. Producer prices of industrial goods have not risen for four months and are now 3% per cent up on a year ago (March). Consumer price inflation is down to 14 per cent from nearly 25 per cent. Japan has had a sharp sudden slump ... American industrial production has fallen by over 10 per cent in the last twelve months. The wholesale prices of American industrial goods, which are still up 18% per cent on a year ago, have risen less than 2 per cent in the last four months. Unemployment is eight million and rising. America has followed the same road as Japan.

‘... This means that Britain should probably expect something over Japan’s 20 per cent fall in industrial production, and something over America’s unemployment rate, in late 1976.’

Right or wrong in detail – and no prediction for as far ahead as late 1976 is more than guesswork – this correctly judges the immediate outlook, the beginnings of a fall in real wages, falling demand and an accelerating slump.

The current figures show wage rates up 32.5 per cent over twelve months and earnings (always ahead of rates in boom conditions) by only 30.6 per cent. Real earnings are static at best. Unemployment stands at 870,000; still only 3.7 per cent but the highest June figure since 1939.

And at this very moment the government, in spite of a willingness to buy off the threatened rail strike with trivial concessions, is about to throw its whole weight behind the attempt (by statutory policy or otherwise) to drive pay rises below the level of price rises. It is about to strain every nerve to precipitate the situation in which ‘workers’ real incomes will then be viciously squeezed’ and thus to trigger off ‘a sharp, sudden slump’.

This course is being urged by all ‘responsible opinion’, by the City and the CBI, the ‘experts’, the press, the Tory and Liberal parties, Labour’s own right wing (now grown to swallow the Wilson ‘centre’) and, not least, by the foreign bankers. From a capitalist point of view it is a necessary, if risky and unpleasant, remedy to overcome the relative economic strength of the British working class. It marks the end of any attempt at a distinctively ‘Labour reformist’ solution to capitalism’s ills. The International Socialists’ national conference, meeting at the end of last month, noted in its resolution on political perspectives:

‘Politically, the unofficial “coalition” of the Tories and right-wing Labour (including the Wilson-Callaghan leadership) on the Common Market issue represents the abandonment of a distinctive “Labour” solution to the problems of Britain on a capitalist basis. The Wilson government has now moved to a position to the right of its stance from 1966-1970. Not merely the unemployment arising from “rationalisation” but the deliberate creation of unemployment as a weapon of the employing class in the class struggle, especially in the “public sector”, is now an integral part of government policy.’

The TUC, enmeshed in talks with CBI and government, is clearly going to go along with this. It will go reluctantly, haggling over terms (the Jones plan, pay rises down to 20 per cent rather than the 10 per cent the government aims for and so on) but it will go nonetheless. In spite of the AUEW conference’s rejection of the Social Contract and the Scottish Miners’ call for £100 for a four day week, the predominant majority, marshalled by yesterday’s ‘left-winger’ Jack Jones, is prepared to lead its membership to the slaughter. How far they can actually deliver the members bound hand and foot is, of course, another question and one that divides ruling class opinion between the advocates of Social Contract Mark II and the growing number of supporters of yet another statutory Incomes Policy.

Either way, the TUC chiefs will cooperate in practice, although they may well baulk at actually endorsing a statutory policy.

The Resistance

THE trade union leaderships move swiftly to the right. The Communist Party’s various ‘broad lefts’ have been following, maintaining verbal opposition to government policy in most cases, but opposing and sometimes sabotaging effective resistance. The attitude of the local Communist Party union officials to the use of troops against the Glasgow dustcart drivers is typical of what can be expected.

A very great responsibility thus falls on the Rank and File Movement. The fight against redundancies and public sector cuts is going to depend heavily on solidarity actions of various kinds, on linking together groups of affected workers, manual and white-collar, and generating a big groundswell of opposition to the effects of government policy, even amongst workers who do not see the solution in terms of overthrowing the system.

The ‘broad lefts’ will not do any of these things, as a rule. But, of course, their verbal opposition to cuts and redundancies can and must be utilised to the full in attempts to draw the workers they influence into activity. The Rank and File Movement must develop firm but flexible responses to reach out to the quite wide sections of workers, including traditionally non-militant ones, who can be mobilised on the cuts issue in particular.

The job is going to be marginally harder because of the ignominious collapse of the Labour ‘lefts’ in the aftermath of the right-wing victory in the Common Market referendum. By accepting demoted posts in the post-referendum government reshuffle, Benn and Co have ruled out, for the time being at any rate, any real challenge to the government’s stampede to the right at the level of ‘official’ politics. And in doing so they have rendered the ruling class a useful service.

The IS conference resolution previously quoted assessed ‘Bennery’ as follows:

‘Benn and his associates do have a distinctive “solution” (to the problems of British capitalism). It is the combination of increased state intervention and state control together with “workers’ participation” schemes which aim to incorporate layers of convenors and senior stewards in the management structure along the lines of the German Mitbestimmung (co-partnership). However, under conditions of sharpening crisis, the Benn solution (which is acceptable in principle to intelligent conservatives) is seen in ruling class circles as a real danger precisely because it encourages groups of organised workers to resist closures and mass redundancies and to demand state intervention to save jobs. This danger lies at the root of the mass media vilification of Benn. The Benn “solution”, however much it is in the long term interests of British capitalism, is not now acceptable to the ruling class in the actual circumstances of today ...

‘It is possible, though far from certain, that Benn outside the government could become the leader of a substantial “leftist” movement, based primarily on the established “rank and file” (i.e., shop stewards’ committees etc.) and would adapt his politics to this layer. Such a movement would be left-reformist at first, but could become centrist (i.e., revolutionary in words, reformist in deeds) if the crisis deepens quickly.’

Benn’s surrender to Wilson rules this out as an immediate prospect. The consequences are mixed. In the short run the absence of a ‘Bennite’ opposition undoubtedly helps the right in the Labour movement. But it also leaves the field clearer for the revolutionary left. Benn may have lost nis best chance to channel the inevitable growth of working class hostility to the government into left-reformist channels. It is up to us to profit from this fact.

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