Finance and Industry: Partners in Progress (1968)

The Finance and Industry column from the January 1968 issue of the Socialist Standard

Partners in Progress

The fiftieth anniversary of the Bolshevik seizure of power in Russia was a boon to the Morning Star. Its special enlarged issue of 7 November had articles on the coup and on the changes that have taken place in Russia since. The advertising department had cause to be proud as a large part of the extra space was taken up with adverts from Russian and British industrial organisations. There was a full page effort by Courtaulds telling of their trade with Russia. But pride of place must go to a quarter-page taken by ICI headed “Partners in Progress”. It stated:

  ICI-Western Europe's largest chemical company-enjoys a thriving business relationship with the Soviet Union.

And went on to list some of its products exported to Russia and of plants being set up there under license from ICI. It ended on technical co-operation:

   Just over a year ago this form of co-operation reached a new stage when a five-year agreement was signed by ICI and the State Committee of the Council of Ministers of the USSR for Science and Technology. This agreement—providing for technical co-operation and the exchange of information in certain fields—was the first of its kind to be concluded between the Soviet Union and a British company.

For ICI progress means a thriving business relationship and technical co-operation. Socialists know that scientific development and increased trade do not necessarily constitute progress. In the context of capitalism, in both the ICI and Russian state versions, science is used to increase productivity with a view to extracting more surplus value from the working class. It is only in Socialism where the means and techniques of production belong to and are under the democratic control of the whole of society that the results of scientific research will be used for the benefit of all.

We know that the so-called Communist Party and their unofficial organ, the Morning Star, are confused as to the nature of society in Russia. Now it seems their attitude to ICI has changed. This is what John Gollan had to say at their 29th Congress in November 1965:

  Labour's Britain of the 1970's will still be the Britain of the ICI, the Prudential, Vickers, the Stock Exchange, Eton and Harrow, the House of Lords and Buckingham Palace. We Communists refuse to accept this future (Turn Left for Progress).

There is no doubt about their attitude in that statement. They say they refuse to accept a future Britain of the ICI and so on. Yet in 1967 they accept an advert from their old enemy which points out its close ties with the Russian state. One useful aspect, however, is that the faithful followers of the Communist Party who will only accept information coming from the Morning Star have it straight from the horse's mouth: the Russian state and ICI have enough in common to be considered partners. We have one small suggestion. The caption should have read Co-operators in Capitalism.

Big Deal

The recent take-over battle in which the General Electric Company (GEC) gained control of Associated Electrical Industries (AEI) publicised the main features of capitalism which the journalistic trivia over personalities could not disguise. The first point to note is that the issue was not decided by the 150,000 or so people employed by the two companies even though it is they who carry out all the varied tasks involved in running both set-ups. Nor was the population of Britain consulted in spite of all the talk of how Britain’s interest would be served by the deal. The AEI shareholders were the important people and each side addressed their arguments to them. It was for them to decide and the point at issue was profits.

The argument raged over which management would deliver the greater profit. GEC had its record of growth in profit during the past five years as a recommendation. While AEI, in view of the stagnation of profits in the same period, could only claim that recent reorganisation would bear fruit in increased profits in the next few years.

It was clear that improvements in profits were expected to come as a result of a ruthless cutting back in the workforce. GECs record has shown what can be done for their shareholders through more intensive working of their staff; Moves included shutting down 35 regional offices and reducing head office staff from 2,000 io 200. AEI had been going in for the same sort of thing. The Financial Times of 6 November reported:

  Manpower has been reduced by nearly 9.000 and 12 major establishments closed with no reduction in manufacturing capacity . . .  but these actions alone reduce annual costs by about £7m.

Since the take-over the process continues. Cuts have been announced in AEI head office staff and more may follow elsewhere. The point to note here is that the drive to economise is inherent in the system and does not just occur when there is a merger or take-over.

Another feature of modern capitalism that the take-over publicised was the amount of common interest the parties involved had. Large shareholders were held in both firms by major institutional investors such as the Church Commissioners, the Prudential, the Co-operative Insurance. Not only did AEI and GEC have shareholders in common but they also shared investments such as the 18 per cent each had in C.A. Parsons, the leading supplier of generating equipment to the CEGB. Their interests involved agreements with firms in such fields as domestic appliances, lighting, telephone equipment, radio and television, electronic components and nuclear power stations. The take-over demonstrated how that holy cow competition works nowadays. The pressures generated by free, unbridled competition lead to its opposite where marketing and licensing agreements are entered into to try and bring some order into the anarchy of producing for sale with a view to profit. But capitalism does pave the way for Socialism in that even it needs large-scale co-operation. Its great stumbling block is of course that it is based on private property so that production solely for use, the logical outcome of socialised production, cannot be achieved.

Another publicised factor, the size of the resulting unit, is also important but it must be emphasised that the whole exercise was not concerned with increasing size for its own sake. The advantage of large groups is in the economies in design, research and marketing which large-scale production allows. In fields where AEI and GEC were competitors, duplication of design and research are cut out. The same goes for overseas sales. It is estimated that GEC-AEI will have annual sales of approximately £450m, which will make them seventh in the world league for the electrical industry. Even then they will be small in comparison with their American rivals of the same name. General Electric, whose annual sales are in the region of £7,000m. So that, in world terms, the going will be tough. In fact this was one of the pressures that led to the takeover. It is a case of running faster in order to stay in the same place. This is why mere size or the GEC Board's record are no guarantee of future success in profit making. ICI, whose management used to be the idol of the supporters of capitalism, has stagnated. BMH, in spite of mergers and rationalisation, has still found the going tough. Quality of management and size are only subsidiary factors to the main regulator—the condition of the market.

Mergers concern the owners or shareholders involved in that they hope to safeguard their investments through larger industrial units. The workers' role lies in producing the wealth from which the profit is made. Mergers take place due to the increasing competition within capitalism, but they do not guarantee any better profits as in general they are only keeping up with industry as a whole. For workers the lesson of mergers is an exercise in how the capitalist class protect their interest. They should take a hint from their masters and organise the biggest take-over of all—the take-over of the world's means of production for the benefit of everyone.

Joe Carter