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Andrew Glyn

Labour’s Alternative Budget

Socialist Measures Needed

(March 1982)

From Militant, No. 594, 26 March 1982, p. 11.
Transcribed by Iain Dalton.
Marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Workers in their millions, including many who were ‘conned’ into voting Tory in 1979, have been made bitterly angry by Thatcher’s policies.

Cuts in living standards generally, in health, in education, but above all the monstrous rise in unemployment have all added greatly to the unpopularity of the government.

But to win mass support at the next election, the Labour Party itself must have a convincing programme to deal with the economy and especially with unemployment.

The focus on economic policy after the Budget provides an excellent opportunity to explain Labour’s alternative. And compared to Sir Geoffrey Howe’s studied complacency in the face of havoc his policies are causing, the proposals put forward by Labour last week at least have an encouraging optimism about them.

The policy gives priority to overcoming unemployment and creating new growth in the economy, things that all workers would welcome after years of Tory-induced recession. But in relation to the drastic situation in the economy, the objectives of creating only 500,000 jobs a year and a 5 per cent growth rate are wholly inadequate, and, given the whole logic of the policy, confining the strategy within a capitalist framework, they are utopian in any case.

Labour’s modest target to reduce dole queues to 1 million in the five years looks hopelessly inadequate when the hidden unemployed and the increase in the workforce are taken into account.

Unemployment was only 235,000 in 1955 and only 70,000 in 1944. Labour should set itself the goal of reducing unemployment to at least these sort of levels. Between 1945 and 1948 three million new jobs were created. The same rate of job expansion – a million a year for five years – has to be the basis of Labour’s policy; and bold socialist policies have to be adopted to make sure it is possible.

But far from securing the required 5 million extra jobs, it is highly unlikely that the plans recently detailed by Peter Shore would yield the 2½ million he hopes for.

Indeed in broad outline the plans bear an uncanny resemblance to the last great Keynesian package, launched by Tory Chancellor Tony Barber just 10 years ago in April 1972

After Barber’s package, production did actually grow at 6 per cent a year, faster than Shore’s 5 per cent target. But the pace of expansion could not be maintained despite a massive increase in the budget deficit. Inflation rose in two years ’72 to ’74 from 6% to 24%.

Furthermore, instead of ploughing back their increased profits into investment in manufacturing industry, which would maintain or improve competitiveness on world markets, cash poured into office blocks, stocks of commodities, indeed anything which promised a faster return than producing real wealth. Little more than a year after the ‘give-away’ budget the growth in production had ground to a halt.

In the present situation, it is doubtful if the same pace of expansion could be maintained even for as long as under Barber. The first, and most crucial, point, is that the capitalist class were wholly behind Barber’s policies but they are implacably opposed to Labour’s.

Early in 1972 they had just received their first drubbing at the hands of the miners. The attempt to hold down wages by means of mass unemployment (at that time one million unemployed was regarded as mass unemployment) had collapsed and capitalism sought salvation in a reflationary boom.

The collapse of the boom, with the crisis in secondary banking, caused a torrent of recrimination to be heaped on the head of the luckless Barber.

It was precisely the experience of those years that explained the wholesale conversion of the City and much of industry to hardline monetarism. The City would now totally reject Labour’s plan.

Far from pursuing the Tory strategy of pulling public sector borrowing down Peter Shore would push it up by £5½ billion in one year, with presumably more to come the year after and the year after that. But the strategy has not a word to say about how the big City institutions will be persuaded to lend all this money to the government.

No one can have faith in the ‘negotiations’ mentioned in this connection by the NEC’s statement The Socialist Alternative, because it is not only the total size of Shore’s package, but its shape which will antagonise the finances.

Peter Shore has correctly called for exchange controls “to keep capital at home.” But keeping “capital at home” does not mean that it will be lent to the government.

He also proposes to raise an extra £1 billion in taxation of top incomes. But doctoring a growing PSBR in this way will only enrage the City all the more and speed up the financial sabotage of government plans.

Peter Shore’s plan includes chunks of the CBI’s programme; he calls for the abolition of the National Insurance Surcharge, an increase of government capital spending, as well as a lower interest rate. But the CBI sees these as part of an overall package of reduced government intervention.

Shore’s plan to offset some of the Tories’ cuts with £2½ billion extra current spending on restoring the social services and the value of welfare benefits, is anathema to the CBI just as much as to the City. The CBI in fact wants cuts in this area to the tune of £1½ billion. With their rate of profit at only 2 per cent – a quarter of the level at the time of Barber’s boom – the chances of business being launch onto a substantial boom are negligible. They will not invest in any case where so much capacity is unused – about 20% in industry overall.

There is nothing in the reported statements of Peter Shore to indicate what measures he would propose as Chancellor to force employers to comply with Labour’s priorities.

Militant has consistently argued that Labour conference policies themselves are not sufficiently strong in this respect and that substantially further nationalisation is required. But there is no mention of these policies at all in Labour’s strategy. The logic of the policy is yet another attempt to push the socialist content of Labour’s programme to one side, on the pretext that it is necessary first to get the economy right.

Most alarming of all is what has now become a clear statement that Shore and the other Labour leaders foresee involving the trade unions once again in a new “Social Contract.” Despite all the experiences of 1974–79 the Labour leaders are canvassing again for an incomes policy.

The hope that economic expansion would not increase inflation by any more than 2½%, is also distinctly optimistic if a major fall in the exchange rate is contemplated. Peter Shore indicated his “continuing strategy for cost restraint in the second and subsequent years ... necessarily included a national economic assessment, in which the trade union movement is closely involved with government, on the use of resources and the share of the nation’s income ... which would go to profits, earnings and other forms of income.”

The pressure to restore profits from the CBI will be enormous. To meet the CBI’s target of 10% for the rate of profit, the first 20% increase of production would have to go to profits.

There is no way that a “national economic assessment” can reconcile the demands of workers, enthused by Labour’s victory, to restore their living standards and the welfare state, with the dictates of capital for vastly higher profits.

Enormous pressure – in reality economic blackmail – would be used by big business and the finance houses to push a Labour government into seeing the ‘right priorities’ in their economic assessment. Otherwise, they would sabotage the government through a strike of investment, massive factory closures and capital movements.

If the basis of Labour’s appeal to workers in the next election is the conquest of unemployment and other social ills – and that without doubt is the feeling of Labour Party members – then bold socialist policies would have to be adopted in the economic sphere.

Labour should explain that a Labour government would have to take over the commanding heights of the economy – the 200 or so industrial companies, banks, insurance and finance companies that dominate the wealth of the country. A genuine National Plan for economic recovery can only be based on genuine control of the wealth and resources of the economy and their democratic management and running in the interests of all.

Labour must fight for a clear alternative to the misery and chaos of capitalism. But workers will not be inspired by the call for more sacrifice – even if it is dressed up as a new Social Contract. The call must go out for a fundamental change in society, as the only way to give workers a future.

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