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International Socialism, February 1976


Notes of the Month

Two Years of Labour Government


From International Socialism, No.86 (wrongly numbered No.85), February 1976, pp.3-5.
Transcribed & marked up by Einde O’Callaghan for ETOL.


Just two years ago this month, the Labour Party was fighting an election around the central slogan ‘Put Britain Back to Work’. The Tories, fighting on Heath’s slogan ‘Who Governs Britain’ (the unions or the ‘elected majority’, i.e., the Tory Party), lost their majority. The miners’ strike had brought them down. The two-days a week lock-out of the whole working class, imposed by Heath to break the will of the NUM leadership, had boomeranged.

Half a year or so later, the minority Labour government precipitated another election in the hope, justified in the event, of gaining an overall parliamentary majority. One of the central themes of the Labour campaigns was the claim that, to quote the October 1974 Labour Manifesto, ‘we utterly reject the Tory policy of relying on mass unemployment as a means of combating inflation.’

On 20 January 1976 the unemployment statistics showed the total pushing one and a half million (1,430,369), a total – and a proportion of the workforce (6.1 per cent) – unprecedented since the 1930s.

That same week the government’s own figures showed a marked fall in the real earnings of the working class. Average money earnings rose by 21.2 per cent from November ‘74 to November ‘75. The Retail Price Index rose, over the same period, by 25.2 per cent.

‘This implies,’ wrote the Guardian‘s Business Editor, Victor Keegan, ‘a sharp drop in living standards, since it is normally reckoned that an average worker needs an increase in earnings of at least 20 per cent more than the rate at which prices have been rising just to offset the increased taxation and social insurance deductions he encounters when his income rises.’ (20.1.76. My emphasis – Ed.)

Thus, the Wilson government has managed to achieve, in two short years, a real and substantial redistribution of income away from the working class; an incomparably greater gain in this respect for the capitalist class than was achieved by the combined efforts of the Churchill, Eden, Macmillan and Heath Tory administrations between 1951 and 1974. Indeed, in one respect, it is a greater success in the class struggle (from a capitalist standpoint) than was achieved by the MacDonald, Baldwin and Chamberlain governments of the Thirties.

They presided over considerably higher levels of unemployment (especially in relative terms); but after 1931 retail prices were falling and then stable, so that the real earnings of employed workers actually rose. Moreover, these were the years in which one form of social expenditure – housing – showed a very marked increase. The Council estates built in the Thirties, primitive as they were in some respects, were a real gain for a sizeable section of the working class.

Today, massive and growing unemployment, with falling real earnings for the employed, are supplemented by cuts in every aspect of the social wage. The Glasgow City Council, to take a random example, is compelled to announce the abandonment of its housing renovation schemes and even the closure of public lavatories and the curtailing of refuse collection! The Health Service is withering, public housing schemes drying up and the Educational Service being squeezed. Only Concorde, the rich man’s toy, receives an increasing subsidy.

‘One man’s pay rise is not only another man’s price rise: it might also cost him his own job – or his neighbour’s job,’ said Harold Wilson, introducing the £6 pay limit last July. The £6 limit was successfully imposed. The rate of inflation has in fact moderated. And unemployment has risen, is rising and will continue to rise.

Inflation, said the government hand-out on its pay restraint policy (July ’75), is ‘holding back the expansion and improvement of our social services – health, education, public transport, etc.’ And as the ‘anti-inflation’ policy develops, so the attack on all these services is deepened and widened.

It is ironic to recall that Labour fought the February 1974 election on what was described as ‘the most left-wing manifesto ever put before the electorate’ and that Labour’s Programme 1973, on which the manifesto was based, was welcomed by assorted ‘left-wingers’ as opening up the prospect of a socialist Britain!

The hopes and illusions entertained by so many; that the Labour Party leopard could change its spots by conference resolution, that the ‘socialist policies’ adopted in opposition would be carried out in office, these are hardly worth discussing any more. Except for the wilfully blind, it must be abundantly clear to all on the left that the experience of 1974-76 confirms in even sharper form the experience of 1964-70. Labour in office is a party of capitalist ‘rationalisation’. It is no longer a party of social reform, let alone a party of socialism.

Of course, the wilfully blind are a not inconsiderable tribe. One of the most striking features of the last two years has been the impotence and disarray of the Tribunite MPs. Far from drawing the obvious conclusions from the government’s adoption of the economic policies favoured by the City of London and the International Monetary Fund, they continue to support it, whilst bleating piteously about Labour’s Manifesto. But a more important force than the ‘left MPs’ has moved in the same direction.

The unions

At the time of the February 1974 election the TUC was publicly committed to these demands: maintenance of full employment, abolition of statutory incomes policy, repeal of the Industrial Relations Act.

By June the General Council was able to announce to affiliated unions:

‘Before parliament goes into recess for the summer, the Industrial Relations Act will have been replaced. The NIRC and the CIR will have been abolished. The government should be in a position to announce simultaneously the abolition of the Pay Board and its associated powers ... The effect of these new arrangements will be to return to negotiators full responsibility for negotiating settlements ... The new approach to collective bargaining problems will be essentially different in purpose and structure from the statutory policy ... Among the positive gains for workpeople there should be provisions for improved job security.’

These claims were issued, of course, in support of the ‘social contract’ which was up for endorsement at the September Congress. But factually they were correct. The IRA, the NIRC and the CIR were swept away. The Tory incomes policy and its instruments were indeed abolished. The government, at this stage, made very great concessions to the trade union bureaucracy.

Naturally, these were concessions aimed at extricating British capitalism from the impasse produced by working class resistance to the Heath government’s legislation. The miners had shattered Heath’s Phase Three and Heath’s government along with it. The Industrial Relations Act had proved unenforceable and the provocative rulings of Donaldson’s NIRC had stoked the fires of resistance and forced the reluctant TUC chiefs into a posture of continuing opposition.

This unaccustomed and uncomfortable (for them) position was giving aid and comfort to the left in the unions. General Councillors and Ministers alike were desperately anxious to get off the hook that Heath had made for them.

Nonetheless, the effect of the repeal of the Tory laws was considerable. The ‘broad left’ supported union leaders were able to exploit it to swing behind the ‘social contract’ which was being sold as the only way to combine full employment with free collective bargaining.

The fact that the Communist Party ‘broad left’ policy is based essentially on electoralism and ‘winning friends’ in the bureaucracy ensured that its opposition was muted as Jones, Daly and, at one remove, Scanlon moved rightwards. The party’s opposition to genuine rank and file movements and its criminal pretence that the ‘left advance’ was somehow continuing, even after the imposition of the £6 limit and the rise in unemployment, helped considerably the general swing to the right. The Rank and File Movement was not yet strong enough to intervene decisively at this level.

How long can this continue? There are plenty of mutterings against government policy. Basnett speaks of an ‘unacceptable level’ of unemployment. The ISTC, one of the most conservative of all unions, formally rejected the BSC plan for 44,000 redundancies and opposed the Welsh steelworkers’ strike with very much less than its normal vigour. The Foundry Workers have asked for a re-called TUC to reconsider the ‘social contract’ in view of the rise in unemployment. The NUM threatens a national overtime ban to prevent a pit closure. Even Jack Jones is demanding ‘further action’ against unemployment.

The government will doubtless respond with some cosmetic action to help its friends in the TUC to keep the unions behind its job-destroying policies. For us, the significance of an effective Right to Work campaign at this time cannot be overestimated. The union bosses are vulnerable on this issue, more vulnerable than on any other.

Of course, the issue of wages too, is coming to the fore with Healey floating kites about still lower pay limits and the debate about differentials getting under way. The scope for the development of the Rank and File Movement is broadening. Yet, at this stage, the ideological importance of the unemployment issue is overwhelming. More than any other it serves to focus attention on the irrationality and waste of capitalism. The activities of the National Rank and File Organising Committee’s Right to Work Campaign must be utilised as a means of driving home the lesson in every workplace and union body that can be reached. This is the key to creating a real left-wing oppositional current in the unions.

Economic prospects

The government’s line is that, essentially, nothing can be done about unemployment until the world economy goes into the next boom. It has rejected even that degree of (capitalist) planning that it used to believe in and collapsed into laissez-faire, into a blind reliance on the ‘invisible hand’ of competition. Market forces are to determine the course of the British economy – except, of course, for wages; their planning, a ‘planned decline of incomes’, is the order of the day.

Electorally, and in relation to keeping the trade union bureaucracies in line, this is a gamble on a substantial world economic upturn in 1976 and 1977. Unmistakable signs of an economic revival, especially in the USA, were already apparent in the second half of last year. The question is how big and how sustained – and how inflationary – it will prove to be.

The OECD forecasts an average economic growth of about 4 per cent for its member states in 1976 (compared with an average fall in output of 2½ per cent in 1975). It also estimates that the average rate of inflation will slow down to around 8 per cent and then start to rise again. The predicted growth rates are too low, according to the OECD forecasters, to reduce unemployment except in the USA where about 6 per cent growth is predicted.

Specifically for the British economy, the OECD estimate is for 1½ million unemployed through 1976 together with a further fall in real incomes of 2½ per cent.

Most significant of all is the prophecy that the boom will fade away into renewed stagflation throughout the OECD countries (broadly, the developed ‘western’ capitalist countries) in the course of the year. But this is far from certain. It is based on the assumption that fear of a renewed acceleration of inflation will cause the major governments (USA, Japan, West Germany) to further cut state spending in order to reduce budget deficits and that investment will remain stagnant in spite of a certain rise in profit rates.

If this essentially political forecast turns out to be wrong, a bigger and much more inflationary boom is on the cards. But both variants could occur successively.

‘Tax cuts also helped all three boom leaders (America, Japan, Germany) in 1975,’ noted the Economist (3.1.76). ‘These give a temporary boost to demand, but the effects wear off and the growth rate falls back to its previous level unless the dose is repeated. Repeated doses produce larger and larger public-sector deficits ... It is probable that present high rates of personal saving will fall in 1976 but they cannot go on falling for ever. The world also cannot break out of slump with export-led growth, because one country’s exports are another’s imports. Only a rise in investment can sustain a lasting recovery. And nowhere has the present mini-recovery been due to such a rise.

‘The slump could therefore prove double-bottomed, with the present recovery fading over the early months of 1976. If this happens, the world boom may not take off until late 1976 or early 1977 – i.e. when all countries have brought their inflation rates lower ... But if countries then invest together and put pressure on resources together, inflation is likely to rise again.’

And after that, a much deeper slump.

The one clear fact that emerges from this fog of uncertainty is that the destabilisation of arms economy capitalism is irreversible. The economic basis of national reformist policies has disintegrated. This fact, and not the views or character of a particular group of leaders, is what makes the Labour government adopt policies to the right of those pursued by the Tories in the boom years of the permanent arms economy in the fifties and sixties. The objective conditions for the growth of revolutionary socialism are here and are going to remain here for the foreseeable future.

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