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Symposium: The New Europe

New International, July 1949


R. Harper

England: Grim Island Kingdom

What Is Behind the Sterling Crisis?


From The New International, Vol. XV No. 5, July 1949, pp. 140–144.
Transcribed by Ted Crawford.
Marked up by Einde O’Callaghan for ETOL.


This article on England Today has appeared in No. 2 of Confrontation Internationale, a new publication in France which concerns itself with international Socialist problems. – Editor

Conditions of class strife and recurring social crises, are the daily experiences of continental western Europe. By comparison, the island kingdom of Great Britain appears at first glance as a country of grim and austere stability.

This social stability is expressed in virtual full employment, in a minimum of industrial disputes, and in the lack of any “extremist” challenge to the authority of the ruling government.

The climate of “social peace” which characterises the relations between the opposing classes, and which is in turn transferred to the relations between the classes and the state, stems from two social forces which today shape British society.

Great Britain was on the verge of bankruptcy after the Second World War. But blood was transfused into the British economy and society by the American and Canadian loans and Marshall Plan Aid. Britain is the recipient of the biggest outlay of Marshall Aid funds.

Yet the Labor Government bought the social stability assured by Marshall aid funds at a very great, and in the long run catastrophic cost – the integration of British resources and manpower into the American war bloc and political support for its world struggle against Russian totalitarianism.

For a near-bankrupt country, Britain is in the paradoxical position of being able to spend over $3 billion a year on armaments. This year, sheltering under the peaceful umbrella of the Atlantic pact, she may be spending the fantastic sum of $4 billion! These expenditures are also made possible by Marshall Plan aid.

In common with both totalitarian Russia and capitalist America, Labor Britain is engaged in the same crippling militarization of its society. It has been drawn into the main drift of our epoch – towards the garrison state.

The second force primarily responsible for assuring that social stability which is of such grave importance for the Atlantic pact powers is the Labor Government itself.

Against this backdrop of economic bankruptcy, and propelled by its inescapable and urgent pressure, the Labor Government has carried out its complete program, as announced in its 1945 election manifesto. Labor leaders cite this as one of the virtues of labor rule. This by itself is claimed as a great achievement; to have carried out a program solemnly promised to the electorate. What a sad and illuminating commentary on capitalist politics this is!

Still, this fact is one manifestation of the novelty and difference between the Labor Government and its predecessors. It is the first political party in Britain to carry out, with a certain amount of vigour and determination, its full, declared program of reform. To a greater degree than most other European countries, the government has used Marshall aid funds for rehabilitating and strengthening the structure of British society. Complementary to the outside aid received, Labor has also put into effect its own response to the crisis. It has enforced the most stringent austerity, spent capital reserves and launched a successful drive for higher production and exports, thereby staving off the collapse of British society.

The Other 80 Per Cent

Twenty per cent of the economy has been nationalized. The other 80 per cent under private enterprise has been placed under rigid governmental control. Working parties, Development Councils, composed of employees, employers and independent members supplying research, statistics, advice on accounting and design, and on wages, have helped in reorganizing backward industries. Export targets have been set for all those industries engaged in the export drive. In addition the government collects over 40 per cent of the national income in the form of taxation.

This colossal financial power placed in the hands of the state bureaucracy is used both to modernize the obsolete and worn out industries, to retool, to carry out a state determined investment program and to introduce an extensive social security system.

It is these modifications in the traditional structure of British capitalism which confuses those who know nothing about the underlying Marxian fundamentals of socialism, or who have forgotten everything they may have known about these fundamentals, into believing that a genuine socialist program is being carried out, and which blurs the real purposes for which it is being done.

For this program of state intervention and “state planning” has enabled the Labor Government to carry out unabashed, its imperialist policy in Germany, its war against the Jews in Palestine, its colonial war in Malaya, etc. It is a way of holding back the swiftly encroaching twilight of the remnants of the British Empire overseas. In Africa, e.g., Labor seeks to entrench British overlordship with the help of state financed corporations.

And this social security program at home, is chiefly responsible for assuring that solid adherence to the Labor Government, which, without any room for doubt, exists among the mass of the working class. The social security program has contributed increased old age pensions, subsidized food, subsidized housing projects, social insurance and national assistance, family allowances, grants for education, free legal aid and a free medical health service for the British people. All in all, these multiform benefits total up to what has been called the “Welfare State.”

This is one tendency in British Labor which, in spite of all its shortcomings (particularly its bureaucratic management and distribution from the top), is certainly progressive, compared to the past. It has helped to lighten the agonizing load of insecurity and terror of pauperization under which millions of workers existed before.

But these benefits, handed out as they are by the bureaucratic state, which is the impersonal and uncontrolled repository of concentrated national power, can in no way be equated with a genuine socialist democracy. It must be emphasized that the social security program introduced by the Labor Government takes place within this framework, and is directed towards supporting and strengthening it.

In order to save what it considers to be “the national interest” – i.e., the preservation of that part of the British empire which can still be saved; the conservation of “the national interest” in terms of capitalist economic and political interests, whose survival Labor sustains, the Labor regime has been forced to cut into the overall profits, taking away the prerogative from the separate and differentiated capitalist segments which make up the conglomerate national capitalist class.

A Nation in Two Camps

This government – involving the redistribution of the national income, and the redistribution of relations between the classes and the state, – is resulting in a political split of the nation into two camps.

The Conservative Party, which is the traditional party of British imperialism, has become the refuge of all the separate ruling class groups and of all those who live within its orbit and who are being victimized by the disintegration of British capitalism. Today it flounders in political and ideological ineptitude, unable to resist or oppose the eruption of the state into the economy and society in general. Because it is the party of the monopolists, the small bourgeoisie, the rentiers, the decrepit aristocracy and the upper sections of the middle class, it continues to exist as a mass force, not really in its own right, but by default of the government’s policies.

The Labor Party is still the mass party of the working class, of the trade unions and sections of the lower middle class. But the momentum which carries it along, and which increasingly makes it a force alien to its supporters, grows from the fact that it has become the agency for the bureaucratization of capitalist society. The Labor Government is the trustee of capitalist society in its death agony.

Unless fissures develop within these two blocs of voting power, there is no opportunity for a major third party to develop. The rivalry between these two blocs is not a contest over radical fundamentals. It is a rivalry between parties which accept and have in common (in the main) the defense of the same basic institutions; property relations and political ambitions.

Even Vital Differences

There are differences, even vital differences. But these are not differences relating to ends or goals. They are confined to means, to day to day nuances in the major task of repairing the groaning machine of British capitalism, although these tactical differences do assume a considerable importance in the normal political rivalry for state power between the two parties.

This is how things appear at first glance. But if one looks deeper into the economic, political and social layers which combine and form the pattern of British society, one detects the outline of processes which will, to a greater or lesser degree, crack this facade.

First, there is the problem of the gap in the balance of payments. The problem of the gap is not only a question of dollars. It expresses in the sharpest form the irretrievable unbalance of world capitalist relations.

British capitalism established its supremacy in the past by exchanging its manufactured commodities in the world markets against the raw materials, the foodstuffs produced in its colonial hinterland and other spheres of influence. From this flowed its traditional stability. Today this pattern of economic relations has been blown to pieces by two world wars and the intervening political and economic dislocations. In the former colonial or dependent territories, industrialization has taken leaps forward. Britain has lost her primary control of her former markets. What is even more important, she will never be able to recapture them again, in her former dominant role.

Her former sources of supply were disrupted in the course of the Second World War. The terms of trade are no longer in her favor (that is, expensive exports against cheap imports) and they will never again become favorable. For in the rest of the world too, there is the same process of government intervention. Everywhere the state is forced to assure stable prices by subsidies, guaranteed prices to its primary producers.

The dollar shortage must remain permanent, and the attempt of British economic strategy to reach economic solvency and independence is doomed to failure.

Britain is the one country in the world which inherently cannot exist in economic autarchy. It must become either a satellite, a dependency of one or another more powerful economic and political entity (which is already happening in its relations with America) or else try to initiate or fuse itself into some kind of independent and more encompassing economic and political area.

The Labor Government should have, from the first, taken the lead and worked for the formation of an independent democratic Western European Union, as a first step on the road to a socialist Europe. The most irrefutable and crushing condemnation of Labor policy is that it has not taken this lead, or shown any interest in this movement. The contrary is true. The Labor Government has set its course in an undeviating subservience to the American war bloc.

It has become chief representative of Marshallism in Western Europe and it is now facing all the difficulties, all the insoluble problems of capitalist world economics.

Its export drive is now coming into brutal contact with the boundaries of the capitalist world market. The sellers market is waning and the buyers market swells with increasing competition. The current recession in America, by intensifying the hunger of American business for markets, complicates an already delicately poised situation. Derationing of clothing, relaxation of controls in the home market, are the first open signs of increasing competition outside. Another example of this incurable malady is the great and growing divergence between the level of costs and prices in the sterling and dollar area.

Sir Stafford Cripps

It is a situation full of the most serious pitfalls for a country whose whole future is staked on its ability to export. To get around this barrier, the government will either be forced to devaluate sterling (which Sir Stafford Cripps has vehemently denied) or else to implement other measures of lowering production costs. Whatever method is attempted in the future, the already austere standards of living of the worker must come under further attack. Alternatively, the present standard of living will be stabilized by one or another form of dollar assistance when Marshall aid ends.

But in that case the nation will fall deeper and deeper under the shadow of American imperialism. No matter what concrete details of development will emerge, British economy and society face difficult and stormy years. The Economist has summed up the precarious nature of Britain’s recovery and the many dangers which face it in this apt way, “like some of the hastily built merchant ships of war-time, all the stresses and strains have been welded into the frame. In a smooth sea, the ship is impressive, but it will break up in the first storm.”

It is within this context that one must analyze the latest budget. It too, points unmistakably to support of the present analysis. The budget statement establishes with relentless clarity the fact that no more reforms are possible, that the present benefits must be halted and rigidified, that no cuts in taxation are possible either for the bourgeoisie, or for the proletariat and that the bourgeoisie is to be left alone in its control of its greatly reduced but still substantial wealth and power.

The reform era introduced by the Labor Government is now coming into conflict with the narrow limitations of the Labor program and with the ever growing defense responsibilities which they have assumed.

The main change introduced – a cut in the food subsidies, amounts to a slice taken out of the standard of living of the workers. Sir Stafford Cripps went so far as to threaten to introduce a special new health tax if the heavy run on the health services was to continue. In his own words, “There is not much further immediate possibility of the redistribution of the national income by way of taxation in this country: for the future we must rely upon the creation of more distributable wealth than upon the redistribution of the income that exists.”

This is true only when one accepts the permanent existence of the capitalist class, of private property, of the incentives of the profit system. It is also true only when one accepts the tremendous burden of armaments, the defense of the Empire and embroilment in world imperialist contests.

The whole dilemma on which the Labor Government rests is a very simple one. Either they conscientiously accelerate the breakdown of capitalism by introducing an increasingly radical socialist transformation or they become entangled in the coils of capitalist breakdown and assist actively in the collapse of our world. The Labor leadership has, without any qualms, chosen the second alternative.

Having accepted this course, their commitment is paying off, in the form of electoral reverses. Recent county and municipal elections have registered large victories for Conservative and Conservative supported Independents. Although these results are only of local significance, and do not show any conclusive national trend, they do express the exasperation and hostility of the middle class in all its layers and of the most backward workers, to the Labor regime. They also show the apathy which exists in the broad working class mass. The Labor Government behaves in a similar manner and repeats the familiar disastrous policies of Social Democratic rule.

The County council elections results were also influenced by a wave of dissatisfaction with the budget announcements. But the election results revealed an even more disquieting feature. In London, which Labor has held for more than twenty years, the election results were a tie for Tory and Labor. Instead oft appealing again to the electorate, especially to those 60 per cent who had not voted, the Labor leadership of County Hall, usurped the control over the council by using the votes of Aldermen who had been appointed by a previous Labor majority. By this action the local Labor leadership (supported by Head Office) treated the electorate with contempt, seeing in them mere voting cattle who, once they have been driven to the polls, can then be sent back into political inactivity until the next election call is trumpeted forth.

Tory Hue-and-Cry

In London, the Conservatives raised a hue and cry against the anti-democratic Laborites. To prove their absolute devotion to democracy, they then adopted a similar method in Glasgow. There the Labor Party had a majority of one. But the Tories, relying on two non-elected, co-opted members, turned their own minority into a majority. Thus we have the spectacle of the two major, responsible, democratic parties violating the democratic will of the electorate in their own power interests and both utilizing for their own purposes, the relics of medieval anti-democratic ritualism.

The statement on policy issued by the Labor Party executive for discussion at the recent party conference is another document which can help us to understand the trends in Britain’s social development. This statement of policy underlines and re-inforces the outline we have given.

Apart from proposals for the nationalization of cement, industrial insurance, the sugar industry, meat wholesaleing, and the threat to establish state-owned concerns “to compete fairly and squarely in the public interest with private firms,” the program proposes to consolidate and to conserve the existing reforms.

The Labor leadership has now decided to maintain a mixed economy, wherein the private property section, will predominate. This program was endorsed by the party conference last month.

It is difficult to foresee any major struggle developing between the loyal, but unenthusiastic rank-and-file and the leadership. Faced with the ever-increasing Tory challenge, the labor masses will continue to support the government.

But this support is not a cast-iron one. Today the working class is held back from open opposition by the existence of full employment and the relief of social security. Tomorrow (that is, at least after the next elections) and if the Labor Party is returned to power, confronted with the accumulating stresses and strains of British economy, and the tensions resulting from the growing development of the garrison state, the split now latent in the Labor Party, might reveal itself.

If, on the other hand, the Tories are returned, then the precarious stability established by the Labor Government will fall apart. The Labor Party has purchased the loyalty of the working class by reforms. Thereby it has also succeeded in stifling and damning up their class combativeness. If the Tories come, to power, this damn will collapse.

Although it is impossible to predict which political combination will emerge victorious at the next election, it can be stated with certainty, that all attempts at patching up bankrupt capitalism can only produce either the small-scale havoc of economic crisis, or the fury of atomic destruction.


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