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Tom Kemp

The Politics of Prosperity and Depression

(February-March 1960)

From Labour Review, Volume 5, No. 1, February–March 1960, pp The Politics of Prosperity and Depression.
Transcribed & marked up by Ted Crawford & D. Walters for the Encyclopaedia of Trotskyism On-Line (ETOL) in 2009.

The decade of the ’50s will stand out as one of paradox and contradiction in the history of British capitalism. Like the other advanced countries, it experienced an upsurge of unprecedented prosperity after something like a quarter of a century of relative stagnation, depression and total war. Apparently, therefore, it has shown great resilience in the face of these trials, and a superficial glance might lead one to conclude that it is now stronger than before. In fact, however, not only has the prosperity of world capitalism been built upon a combination of specially favourable factors, some of which have worked themselves out and been replaced by others—a happy situation which the upholders of the system would do well not to count upon indefinitely—but part of that prosperity has depended upon the serious world crisis arising from the confrontation of two incompatible world systems. The British economy is now tied more closely than ever before to the world market; it can no longer count upon massive investment income from overseas, it has, more than before the war, to export or die. The rapid recovery of the capitalist world market from the dislocation of depression and war has been a major factor in sustaining prosperity in Britain. If that market ceases to expand, and even more if it should contract, intensified international competition would thrust a considerable strain on British capitalism because of the comparative rigidity of some of the structures which it has inherited from the past. At the same time, there stands the crucial sustaining role in the capitalist economies today of armaments expenditure and the continual outflow of dollars from the United States which is directly dependent upon the Cold War.

To conclude that capitalism, either in Britain or on a world scale, is stronger now than before the war simply because the level of unemployment is now much smaller or because there is general prosperity would be seriously to misread the picture. In particular it leaves out the impact of what has been happening to capitalism—and what can be expected to happen in the coming period—upon the working class and, for that matter, important segments of the middle class. The dynamics of social change and political action are not geared precisely to the ups and downs of the business cycle as is sometimes thought. We do not have to wait for a slump before we move into action. Rather there is a complex interaction of forces, not least among which are those which intersect in the consciousness of the human participants, and which, in turn, lead to certain courses of action being taken which react upon the material situation. For example, unemployment or a threatening slump can dull consciousness, disintegrate organisations and lead to a relative weakening of the working class. Such a situation, typical of the 1930s, provided a breeding ground for fascism and prepared setbacks for the working class.

It should be pointed out here that non-Marxist economists tend to conceive of society as a mass of consumers, differentiated only by their purchasing power. If the general level of purchasing power has been going up they assume that the system is in good health and see the future in terms of onward and upward. For Marxists, however, society is made up of classes standing in specific relationship to the means of production and to each other. Where one class owns the means of production and concentrates immense social power in its hands, so, all the more, does it stand over those who have nothing to sell but their labour power as an antagonistic, alien force utilising them as objects in the interests of a small clique. Nothing which has happened in the field of consumption, employment, social services and the like can cancel out this over-riding fact. At the point of production interests clash and the class struggle provides a continuous front which runs throughout the economic apparatus. At any particular time that front may, for most of its tortuous length, appear quiet; but the transformation of human energy, sweat and muscle into the means for the wealth and social power of the ruling class in capitalistic society goes on without respite. In fact workers know that this tussle for dignity as well as a share in the results of production goes on uninterruptedly, even when they do not reason it out and consciously take their stand on socialist policies. They may, for example, quite happily repeat the shibboleths of the daily press and vote Tory until the day when a tightening up in workshop procedures or a deliberately dragged-out wage negotiation sends them out to be ‘wildcats’ along with the others.

The class struggle is a vital factor in the assessment of the prospects for capitalism; it is integral to it and inseparable from it. The relative strength of the contending classes and the support in society which they win from other classes are decisive.

Of course, all sections of workers do not react in the same way and at the same time. Past experience, the nature and organisation of each industry, its rate of development, whether it is expanding or declining—all these play a part and result in great inequalities and unevenness between workers in different industries, and, because of geographical specialisation, in different parts of the country. Moreover, some industries have greater strategic significance than others in the economic life of the country—docks, transport, mines, for example—and what goes on in them is thus of more weight than the actual numbers involved would lead one to believe. In any case, Marxists do not base their prognosis upon the spontaneous reaction of the various sections of the class. Objective conditions prepare the ground; it is organisation which brings action, and which plays the linking role between one section and another. It is always necessary to be part of the movement of the class, not to sit back, observe and predict on the basis of some kind of ‘research’ undertaken from outside. Nor can tactics and policy be imposed from outside; they must take full account of the understanding and experience of the participants.


Instead of a post-war crisis and slump, repeating the ’30s on a more grandiose scale and marking the end of capitalism, there has been renewed prosperity and expansion. It was difficult for friend and foe alike to discern, in the ’30s, any new expansive force likely to lift the system into a renewed prosperity for more than a short period. On the other hand, once such a force, or a combination of forces, could be found, the historical experience of capitalism had been that for periods extending over several shorter trade cycles it had been able to move on an ascending curve. Such a period had, indeed, preceded the First World War and had only come to an end in 1920. From that time, at any rate in Britain, the general curve had been downwards, and the world depression which came at the end of a sharp American boom in 1929 was thus superimposed upon an already stagnant economy.

The depression of the 30s had a number of special features which made it unlike anything which we can expect to issue from the present situation of the British economy. The depth and duration of the depression were exceptional; they arose out of special circumstances which cannot be examined in detail here. It is generally recognised, however, that a slump of much smaller dimensions would have even more profound social consequences today, at the end of a period of considerable prosperity. Even the comparatively small recession of 1958 revealed signs of something like a crisis of confidence among the defenders of capitalism. In the summer of that year the business press gave expression to many forebodings and, surprisingly enough, after 20 years of Keynesianism, many economists seemed to be at a loss to know what could be done if the downward spiral should continue in the United States. The first point which can be made, therefore, is that there is no need for the next depression to be as severe as that of the ’30s to shake the system to its foundations.

The incidence of the depression of the ’30s was very uneven as between industries and regions. The main burden of excess capacity and unemployment fell upon the industries concerned with investment and the export trade. The situation in these fields reflected the adverse change in Britain’s world position which had come about after the First World War and which marked an inability of the industrial structure to adapt itself to the new conditions. On the other hand, technological change did not come to a standstill, and re-adjustment was taking place. Notable signs of this could be seen in the continued expansion of such industries as motors, radio and electricity, some branches of engineering and, in general, those which were directed to the internal consumer market. For large numbers of workers, therefore, the ’30s were not necessarily years of slump and unemployment. It is true that the insecurity was there, but an improvement did take place in the standard of living.

This relative immunity to slump of sections of British industry was closely tied to another factor --the fall in the prices of primary products and the favourable shift in Britain’s terms of trade. By cheapening commodities entering into capital outlays and wages this kept up the profit rate and, at the same time, enabled workers to maintain or improve their consumption levels, at the same time as the pattern of consumption was changing. The slowness of the adoption of new techniques and new industries in the earlier part of the, 20th century meant, in fact, that there was room for new investment and expansion in such fields in Britain during the ’30s. The growth of these modern sectors of industry was an important sustaining influence in British capitalism in the 1930s; it prevented a slump from being more devastating; it enabled a fairly rapid if partial recovery to be made; it tended to divide one section of workers from another.

Partly, of course, this favourable side was an aspect of Britain’s imperialist position: the ability to draw vast tribute from overseas debtors, to profit from the misfortunes of primary producers and even to draw on capital invested overseas. Here Britain is undoubtedly much weaker than before the war. On the other hand, the necessity now to sustain and expand exports gears up industry to a much higher level all round than was attainable then. The high level of exports makes a powerful contribution to the continued possibility of extracting and realising surplus value on an extended scale which is the key to post-war prosperity, though, of course, it is not the only factor. In this sense the changed relationship of the British economy to that of the rest of the capitalist world market—which means greater vulnerability to shocks transmitted to it from outside—has the short-term effect of contributing to a high level of activity at home. But the cushioning effect of overseas investment and a strong imperialist position has partly disappeared today: and in the long run that is perhaps of greater importance.

What did working-class action amount to against this background? Here again only a summary of the main points can be offered. But the answer surely was that this was a decade of betrayal, defeat and to some extent of demoralisation. The betrayals came industrially in 1926, politically in 1931. Both these dates marked setbacks to the working class associated with the ruling class’s problem of stabilising and shoring up the worm-eaten framework of British capitalism. It is true that there was a lot of activity of one kind and another, including a leftward flurry in university and intellectual circles: but in practical effect it amounted to very little. If the crisis had been as serious here as in Germany, given the state of leadership of the working-class organisations at that time, there seems little reason to doubt that they would have been broken just as easily.

Like any other capitalist crisis, that of the 1930s was historically unique. This brief recapitulation of some of its main features in Britain shows that the forthcoming economic problems—those likely to arise after a period of sustained prosperity in a changed world situation—will be different in essential particulars. It is important here to note that the Marxist analysis of crisis derives, as it were, from a ‘chemically pure’ capitalism. But the inner laws of development which drive the system from prosperity into its opposite have concrete historical results which help to determine the ways in which the laws will operate and the consequences which they will have. To think in terms of the 1930’s as a ‘classic slump’ is in a way misleading. Of course it did confirm the Marxist prognosis in a striking way, but the many Marxists who could discern no way out for capitalism and who concluded that breakdown was at hand certainly allowed themselves to be too strongly affected by the prevailing trends, to the exclusion of other possibilities. Likewise, in the post-war years, when Marxists were scanning the horizon for the ‘inevitable’ slump, the same error was made. Such subjectivism was, in essence, rooted in a mechanical adherence to certain aspects of Marxist analysis which seemed to fit the case so perfectly that others could be left out without loss.

As a matter of fact a number of Marxist writers who were prominent in the ’30s have subsequently defected and become adherents of some version of Keynesian orthodoxy. Their reasoning seems to have followed roughly the lines that if capitalism could find a way out through State-sponsored measures acting on investment and consumption, then the whole of Marxist economics was defective and capitalism could and would avert another depression. Under pressure from a new, more fashionable doctrine they were derailed, largely because their own erstwhile ‘Marxism’ was mechanical and incomplete; in the final analysis it left the overthrow of capitalism to irresistible and impersonal forces which were going to tie the economic system in insoluble contradictions. It left out the decisive factor—the need for a movement and a leadership anchored in. the class whose historical task it is to excise capitalism from history. In other words, in short, such ‘Marxists’ had no confidence in the working class: it was not surprising that some of them, as Parliamentarians, sought to substitute themselves for the class and steer the system painlessly into what they thought of as ‘socialism’. What in fact happened, in Britain, was that a synthesis of Fabianism and Keynesianism contrived to salvage the system and prepare it for the renewal of energy which it secured in the 50s.

Another variety of formalism; less dangerous, but nonetheless to be guarded against, is to begin reciting—at the first signs of recession—the whole supposedly Marxist litany through to deep slump and even complete breakdown. It is no good having rigorous respect for the book and trying to fit existing trends into the revealed word. That, indeed, is not Marxism, and discredits Marxism among all those who are ready to pounce at the first sign of dogmatism. However, it is sometimes difficult to avoid giving this impression, especially when trying to estimate the immediately forthcoming situation for the direction of political work. To exaggerate the prospects of a capitalist decline is a lesser error than to adopt reformist illusions which disarm the working class politically; but it is an error, and like all errors of this kind, can do harm.


There is every reason to believe that the phase of expansion through which capitalism has been passing has been storing up a number of problems familiar to Marxists. There is the question, for example, of finding continually expanding markets for the increased capacity which is being built up during the boom. There are the disproportions which appear between different sections of the economy. There are the problems of redundancy arising from automation and rationalisation, which have been concealed so far by the buoyant demand for labour in the economy as a whole. There is a string of international problems caused by the narrowed field for extensive capitalist development arising from the colonial revolution and the economic growth in the Russo-Chinese bloc. It is not difficult to add to this list of actual or potential strains which could give prosperity the death-blow at some time in the future. But there is no means of determining the time-span within which such crisis-points are likely to mature. Nor is it certain that even if they do they will not be counteracted by other forces within the system. Probably, in any case, the major condition for a large-scale slump is that there should be a recession in the United States reaching further into the basis of the economy—and especially into consumption levels—than the recession of 1958. From such a recession it is doubtful whether the other capitalist countries could insulate themselves; and the direct impact on some of the primary producing countries would be greater than on the advanced countries. Thus, although the stronghold of the world capitalist system might initiate a downward movement, the pressure would be strongest on the weakest links. This is one of the reasons why so many anxious eyes in the United States and Western Europe are turned towards the ‘underdeveloped countries’!

Although such world-sweeping perspectives should be in the framework of our thought about the economic future, our main immediate concern is with the most likely course of events in Britain itself. Even if these international factors do not bring crisis within the near future, the ’60s are unlikely to see a steady upward progress. The recession of 1958 already offered some pointers and some lessons. In the first place this recession established clearly that British capitalism was not immune from cyclical downturn.. Moreover, the measures to deal with it were late, slow in getting to the root of the trouble and would have been impotent but for the temporarily favourable international situation which emerged for Britain. The major weapon—which is still a main support of the prevailing prosperity—was the opening up of wider possibilities of realising surplus value through the expansion of credit (notably personal and hire-purchase credit) to sustain consumption. But this method has its limitations. In so far as it reaches back into the investment industries and initiates an autonomous expansion, or enables the old momentum to be resumed, it can exercise this effect for some time. Again, rising consumption, even on the never-never, may for a time add weight to the ‘you’ve never had it so good’ slogan and thus take the edge off the militancy of some workers, who, at the same time, are weighed down with heavy H.P. repayments. On the other hand, if other gashes appear in the fabric of prosperity, for example, owing to loss of overseas markets or an American recession, it is difficult to see how even easier credit can be resorted to. Indeed, under those circumstances the volume of hire-purchase and other debt would be a depressive factor, weakening the viability of the system.

Here again, a cumulative spiral into deep depression would not necessarily follow. The 1958 recession also shows—just as did the depression of the ’30s—that depressed sectors can co-exist with others which remain prosperous and continue to expand. Nor is this surprising if a few possibilities are considered. If armament spending remains at its present level, industries dependent upon it will remain prosperous. If there is intensified trade competition, there may be direct effects on some industries through a loss of orders, but the pressure on employers to modernise and mechanise to meet this competition will mean orders and employment in the firms producing capital goods. That means, essentially, the most advanced sections of industry in engineering, electronics and chemicals. On the other hand, while continued technological advance may favourably affect these groups, it would intensify the already obvious problems of the older industries such as coal and cotton.

Even in a review of this kind we might remember that the continued expansion of some of the growing-points in the economy, such as motor cars and consumer durables, cannot be taken for granted. A wave of optimism seems to have surged through these branches of industry, which are now counting more firmly than before on a number of years of expansion. But the fulfilment of these hopes depends upon the market at home and overseas into which many factors necessarily enter. At any rate, despite the important role which these industries have played in prosperity, the curve of growth may more or less rapidly flatten out once the effects of the credit expansion are exhausted. In that case the reaction upon other sectors may be quite severe.

In the meantime, then, we can anticipate that some industries will continue to expand under conditions of modernisation and prosperity. With full order books, optimistic prospects and booming profits employers may put up an ostensible front of reasonableness and willingness to make concessions. While they economise on labour power by increasing production with no addition to their labour force, and perhaps some reduction, they can pay more for each unit. In fact they could pay a good deal more than they will be willing to offer. The conflict of interest at the point of production is, as has been said, inherent in capitalist economy; exploitation at £30 a week can be as real as exploitation at £5. It is on this basis that workers in the prosperous industries find themselves in struggle on the same terms as their less fortunate brethren.


The general conclusion is that the Marxist does not wait for some inevitable day of reckoning when capitalism will topple through its own weaknesses. On the contrary, he recognises that the effect of slump can be to disarm and demoralise the working class, as happened to a considerable degree in the ’30s. The present mood of the working class is sometimes hastily described as one of apathy or complacency. Certainly this describes the attitude towards the traditional organisations, both the Trade Unions and the Labour Party, and it would be truly remarkable, after a long period of prosperity—with many young workers who have never known anything else—if there were not some complacency. This is not the place to analyse the relations between workers of the rank and file and their leaders, or indeed to examine the influences which flow around and into the working class from the capitalist environment. Marxists have never assumed that the workers were homogeneous as a class or would attain to a consciousness of their position in society and role in social change by a spontaneous process. Neither do they equate apathy towards the bureaucratic leadership of the mass organisations with indifference to the class struggle. That struggle, as has been seen, is for most of the time a silent and unspectacular process: but when it bursts out into open conflict there is certainly no lack of fighting spirit or solidarity. The relations of capitalism in which the worker is enmeshed, whatever the material level which his wages permit him to ‘enjoy’, are a standing invitation to resistance on his part, since they make him the object of another’s purpose and deprive him of any real say in how his working life should be spent. Employers know this well enough and the ‘enlightened’ ones spend quite lavish sums to try to ‘integrate’ the worker into the enterprise—which largely means to dull his consciousness of his own exploitation. In fact they have not succeeded in this task; even the apparently most docile sections can turn over suddenly to strike action. While the demand for labour power has been running high in the period of full employment, the working class as a whole has built up not only a higher material standard than before the war, but also a determination to preserve and improve upon that standard. Any attack by the employers or the State consequently invites resistance: a resistance which is all the more tenacious because even in prosperity workers have not become reconciled to capitalism, even if they do not express this clearly and directly.

Apathy towards leaders who are reconciled to the system can only be regarded as a healthy disrespect for humbug. Opposition to mechanisation and new processes is really a spontaneous defence of men against the demands of dehumanising Capital. Fundamentally the only difference between the present-day worker in production and the worker whose situation Marx delineated with such care and prescience is that the former carries home more spending power at the end of the week. He still knows, however, that it is a condition for existence that he stands ready to furnish his labour power to the employer when the next working week begins. No matter whether the social force, Capital, is personified by an individual capitalist, a limited company or a nationalised board, the worker is still exploited.

It is on this basis that Marxists devise their tactics and strategy in the present-day struggle for socialism. They set to work in the here and now, with things as they are, confident in the ability of the working class, when it rises to the level of consciousness which the situation demands, to take charge of its own destiny in society. In doing so they do not pin their faith on irresistible processes, nor do they assume that only slump and depression can move workers to take stock of their position in society and move to do something about it. When assessing the changes which capitalism constantly undergoes, they take care to distinguish the form from the essence; the changes which have been hailed to constitute a ‘mutation’, in fact alter the form in which capitalist relations express themselves while leaving the fundamentals unchanged. They take warning from history that periods of apparently unlimited upsurge have occurred before in the history of capitalism—bringing with them a train of ‘revisionist’ thinking in the socialist movement—and have ended in war and depression or stagnation. When defining capitalism as a regime of crisis they do no more than sum up in a phrase the undisputedly stormy history of capitalism in our epoch, with its record of wars, colonial oppression, insecurity and now the ever-present threat of complete destruction or a return to barbarism after a nuclear holocaust. A few years of increasing production of TV sets, washing machines and motor roads cannot cancel out this debit balance of inhumanity. Nor can we forget that this very prosperity has been accompanied by, in fact to no small extent has rested upon, an unprecedented peace-time expenditure on armaments and active preparations for a new war.

The very progress of prosperity, too, has seen the accumulation of a knot of economic problems which cannot be analysed here. It has been inseparably connected, for a large part of the time, with inflation and chronic international imbalance. It has fallen short in rate of growth of that attained in the Soviet Union and China. It has been unable to stem the growth of the colonial revolution or to grapple with the problem of the under-developed countries. Within the orbit of capitalism as a world system even the standard of living has probably declined in the past quarter of a century: to have our eyes fixed on the situation in a few privileged areas is to ignore what on the world historical scale can be condemning the system to destruction. All these and related questions need fundamental examination in the light of Marxism and it will be our task to undertake this in the coming year.

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