From the January 1931 issue of the Socialist Standard
A most deadly weapon in the armoury of the politicians who defend the interests of the employing class is the assertion that wages must come down because the present rates of pay are “more than industry will bear.” It is put forward by Liberals and Tories, and has been supported by the expert advisers called in to help the Labour Government. It is accepted by large numbers of workers, and is more than half-believed by the Labour leaders themselves. It is not true.
The Capitalist class are not poor, nor are they becoming poor. The powers of wealth production are not declining, but increasing. The Seventy-second Report of Inland-Revenue (Table 47) tells us that the gross income assessed to income tax (excluding weekly wage-earners) amounted, in the year ended March, 1929, to an estimated total of £2,765,000,000. That figure is the largest amount in any year since the War. It is £41 million more than the highest preceding year, and is £650 million more than the first complete year after the War (1919-1920). Sir Herbert Samuel, in a letter to The Times, published on December 1st, stated, on the authority of Professor A. L. Bowley, that in spite of the so-called depression the total national income in 1930 would probably be £100 millions more than the national income in 1924, the year when the last comprehensive calculation was made by Professor Bowley and Sir Josiah Stamp. This will put 1930 only slightly below 1928 and about on a level with 1927.
The vast surplus wealth of the rich minority, at a time when about two and a quarter million workers are jobless and dependent on unemployment pay or relief, is well illustrated by the huge sums of money seeking investment. The Daily Express on December 11th drew attention to the fact that “bank deposits are very considerably higher than they were this time a year ago. People are hoarding instead of investing. Money is so cheap as to be almost unlendable.” The Financial Times on November 10th gave details of one recent loan after another which had been heavily over-subscribed. A typical example is the London Electric Railway issue. The company wanted to raise about £3,500,000. They received offers totalling nearly £140 millions, or forty times as much as they wanted. It is true that some applicants would apply for more than they expected to receive, but they would do this only because they were aware of the superabundance of money seeking investment. This is nowhere denied. Mr. Snowden, in the House of Commons on October 30th, stated categorically, in reply to a question, “There is no shortage of credit.” The Evening Standard's City Editor (November 25th) estimated that about £1,000 millions had been offered for investment in response to invitations to invest less than a quarter of that amount. This had all happened in the first ten months of 1930, the year of “depression.” In Australia, another “depressed” country, a £28 million Government loan in December was promptly over-subscribed.
What, then, is this “ trade depression ”?
It is a condition which arises normally and inevitably out of Capitalism. It is a crisis of over-production. Millions of the world’s workers are suffering want because the world is glutted with goods which no one will buy. In spite of what was described by the Observer on June 22nd as ”frantic efforts to limit production,” the competing combines which struggle for control of production are faced with bursting grain elevators, overflowing oil tanks, over-stocked warehouses, and shops filled with unsaleable goods. Ships lie idle, farmers are burning wheat in Manitoba, and South America is convulsed with political upheavals owing to the suffering caused by vast quantities of unsaleable coffee, grain, nitrates, etc.
The owners of industry have allowed the workers they employ to produce more food, more fuel, more ships, more raw material, more machinery and more of everything than they can sell. Not that there are no people in need—far from it. Three-quarters of the population have never known the pleasure of satisfying their modest desires to the full. It has been estimated by American Trade Unions that this winter will see one-sixth of the men, women and children of the U.S.A. on the verge of starvation. Contrast that with the American Standard Oil Companies’ estimated record profit in 1930 of £57 millions.
Those who are in need lack money to buy. Those who have surplus money have no more needs left unsatisfied. That is the key to the depression. That is why prices are forced down and workers are thrown out of work by the hundred thousand. There they will stay until the accumulations of goods are slowly disposed of. Then the anarchic system of producing faster than the market can absorb will begin again.
Lower wages will not remedy this evil. Lower wages aggravate it. With less money to spend, the working class buy less than before of the goods offered for sale. The employers increase their incomes as a result of the reduced wages bill, but much of the increase merely goes to swell the fund of money which is surplus to their requirements. They seek to invest it, but find fields for investment limited. Nobody will extend plant and factories at a time when the existing ones are shut down because the owners cannot find buyers for their goods.
Since 1921 the total annual wages of the workers have been reduced by over £550 million. That has not solved the unemployment problem. It has merely served to make the rich richer than before.
There is, then, no economic necessity for lower wages, but is it possible in the existing situation for the workers to resist demands made by the employers for wage reductions?
Let us first make clear what wages are. The owners of the means of production (the land, factories, and so on) are the owners of all the wealth which the workers produce. They give to the workers wages which cover their cost of living. Nevertheless, there is, for most workers, a margin between the standard of living and the cost of providing the bare physical necessities of life. The employers seek constantly to reduce the level of wages in keeping with any fall in the cost of living, and to press wages down still further towards the bare physical minimum. If there were no resistance, they would do this. The workers’ economic organisations, their Unions, can be centres of resistance. They may, as happened in Germany only a month or two ago, play the humiliating role of inviting wage reductions. On the other hand, they may put up a stiff resistance. If they do this, the employers will pause and count the cost before embarking on an attempt to force acceptance of their terms. It is true that the employers have behind them their wealth and the forces of the State to starve the workers into submission, but it is also true under certain conditions that they will hesitate to launch out on this costly and provocative course. It is admitted that increases of wages give the employers added inducement to employ more labour-saving machinery. But here, again, it is worth noticing that the vast accumulations of capital which to-day are sunk in plant and machinery make a factory re-organisation scheme more expensive than it was when the amounts of capital so invested were less.
The first essential is that the workers should clear their minds of the employers’ propaganda which harps continually on the so-called depression. The Capitalist class as a whole are not depressed. They are richer than they have ever been.
Ever since 1920 we have had it drummed into our ears that industry is depressed. But the Economist newspaper’s index of the rate of dividend on ordinary shares shows a remarkable stability at about 10 per cent. The average rate in 1919 was 10.7 per cent. Since then it has never risen above 11.1 per cent, or fallen below 8.4 per cent. In 1929 it was 10.5 per cent., in spite of falling prices. We have been solemnly warned that the unfortunate Capitalists were living on their capital. But Sir Josiah Stamp (Times, November 20th, 1930) estimates the total national wealth in 1928 as being over £18,000 millions, as compared with only £14,310 millions in 1914. He has deducted from his 1928 figure the National Debt of £6,400 millions,: the gross total being £24,445 millions.
Again, the workers must not be deceived by the specious argument that if they refuse to accept lower wages they will lose their employment altogether. If the Capitalist class have need to preserve any industry or branch of industry which is in financial difficulties, they will themselves find excuses for protecting it with tariffs or for giving it subsidies. They will keep it on its feet, whatever the level of wages. Thus we see the Capitalist class prepared to give State grants to air service companies and (in Australia) to gold-mining companies. In 1926 we saw the Conservative Government heavily subsidise the mines. And we have seen the inland telegraphs maintained permanently at a big annual loss because the Capitalist class have need of that service. Millions of pounds were paid as subsidies to overseas cable companies.
On the other hand, if the Capitalist class have no need to maintain a particular branch of industry, they will let it close down in spite of lower wages. Where combination is far advanced, it is now quite common for the federated employers to buy out particular units simply in order to close them down. “National Shipbuilders’ Security, Ltd.,” is a company formed for the express purpose of buying and dismantling redundant shipyards on behalf of the shipbuilders in general.
The arguments referred to. above are used by the employers to make their wage reduction policy easier of attainment. The arguments need only to be examined for their purpose to be understood.
But something more is required of the workers. Even the most effective action on the economic field, i.e., that action which is based on an appreciation of the common interests of the workers as a class, cannot solve the fundamental problem. Only Socialism can do that.
And if the workers would turn their attention to Socialism, the whole form of the struggle with the employing class would change. So far, despite heroic fights by Trade Unionists against wage reductions, the employing class have never had reason to fear that the working class were turning away from their belief in the Capitalist system. But when a considerable body of workers learn the lesson that no reformist policy or party is of any use, and begin to understand and support the demand for Socialism, we can confidently anticipate a less aggressive and less cheese-paring attitude on the part of employers. They will, when that time comes, be anxious to surrender part of their wealth in the hope that by so doing they may stave off the day when they must yield it all. We shall then be well on the way to the acquisition by society of the means of wealth production now privately owned by a privileged class.