The Floating Pound (1972)

From the August 1972 issue of the Socialist Standard

The Government's decision to float the pound is yet another confirmation of the Marxian theory of inflation. Floating the pound means that the government is not using its gold and foreign currency reserves to maintain a fixed exchange rate between the pound and the dollar £1=($2.60 till 23 June). As a result the exchange rate of the £ (which is but its price on the foreign exchange market) can, depending on demand, float up or down — but in practice under present circumstances definitely down. The “Times" estimates that when, after a few months, a fixed exchange rate is restored it will be around £1=$2.40 (or its equivalent), an effective devaluation of between five and ten per cent.

Devaluation, according to the Marxian analysis, is an official recognition that due to the over-issue of a paper currency the amount of gold represented by a pound-note has been reduced. Acting on false Keynesian doctrines, successive British governments, Labour and Conservative, have denied that, given a certain level of production and trade, only a definite supply of inconvertible paper money (i.e. paper money not convertible into gold on demand) should be issued if prices were to be kept reasonably stable. And that, if more money than this amount was issued, the inevitable result would be a depreciation of the currency or, what is the same thing from another aspect, inflation (rising prices). Instead they have followed the advice of Keynes to “let the money supply look after itself* and via the Bank of England have provided government departments with the money needed to maintain their expenditure and to subsidize private capitalist industry.

In the last quarter of 1971, for instance, Britain’s money supply was expanded at an annual rate of 25 per cent! (The Times, 9 March, 1972). Only recently have a few academics come to realise what Marx, and indeed many of the bourgeois economists of his day, knew: that the inevitable result of oversupplying an inconvertible paper currency is depreciation and inflation.

For a trading State like Britain this can cause difficulties. For inflation (at least if it proceeds at a faster rate than in other exporting countries) raises the price of exports and makes them uncompetitive on the world market. At the same time imports increase because of the lower prices of foreign goods. The result is a balance of trade deficit, leading to a balance of payments crisis. Also, and this is partly what seems to have happened to Britain this time, export prices can be uncompetitive because of a lower-than-average productivity. The international bankers obviously know all this and have decided to express their lack of confidence in the official gold content of the £ by selling their holdings.

When this happened in 1967 the Labour government gave in (as it had to), devalued the £ and, at the insistence of the international bankers, abandoned their programme of social reforms and imposed a wage freeze. This time a Conservative government has given in, but in a roundabout way: floating the £ for a few months so that it can find its own exchange rate is in effect only a slow-motion devaluation.

What devaluation is supposed to do (as long as other countries don’t devalue as well, of course) is to bring the devaluing State’s internal price level in line with the world price level; its export prices fall and imports from abroad become more expensive; the deficit on the balance of trade disappears and the crisis is solved — until the next time.

For the capitalists devaluation is a policy aimed at restoring the profits they lost through their goods at home and abroad being uncompetitive. But what about the workers? In Britain, which imports much of the food consumed by the working class, it means a rise in the cost of living which can only be recouped by determined action to raise money-wages too. This will inevitably bring the workers into conflict with the government made even more determined to resist wage demands by a desire to regain the confidence of the international bankers. Could there be any more obvious proof that capitalism cannot work in the interest of the vast majority the class of wage and salary earners?

On the beach (1979)

From the June 1979 issue of the Socialist Standard

Everyone — that is, every City Editor, every investment analyst — loves a growth industry. It usually doesn’t matter what the growth is about; the firms which supplied the ovens and the gas to the Nazi concentration camps must have been a growth industry. What matters is growth — the vision of an ever-developing, ever-expanding and therefore, it is assumed, an ever more profitable business.

One of the great growth industries of recent times is the tourist trade; sometimes, as if it were a political theory, called tourism. Six per cent of total international trade is attributable to tourism — more than iron and steel and surpassed only by motor vehicles, chemicals and fuel oil. The World Tourism Organisation, who may be supposed to be not entirely impartial in the matter, claims, “Tourism is no longer a cottage industry . . . today [it] has developed into a major industry".

Britain, advertised as a place where the scenery varies from the simply pretty to the dramatic and where there are buildings dating back to the Roman occupation, is one of the world’s big tourist attractions. Last year 11.72 million tourists came here, to stare at the scenery, photograph the buildings and dazedly shell out their cash to the riotously charging barrow boys of London. During that same year, 12.86 million people travelled abroad from Britain. Those who came in here spent £857 million more than those who went out spent abroad a bias on the balance of payments such as to please any City Editor.

For a favourable balance of payments, like a growth industry, is everyone’s favourite. This (although there are arguments that even by the standards of capitalist accounting the advantages are often more apparent than real) is one of the inducements for the ‘developing’countries to build up a tourist trade. In these cases, the state takes a close interest in the trade; there is usually a Ministry of Tourism and some impressive government subsidies and investment as well as other help. Sometimes the capital for the development has other sources. One American travel firm planned to take over an entire African country, with “no economy, no nothing” and to “merchandise it . . .  so the entire country is run as a beautiful place’’. (The money was to come from Rothschilds.)

Lego
This drive to ravage some defenceless part of the world into a paradise for the tourist trade gives tourism a bad image. The industry has its apologists, whose efforts sometimes have a note of desperation:

  Anyone concerned with the motivation of travel has to realise first that he is reaching deep into one of the major conflicts of the human mind; a desire for sameness, the return to the womb, if you wish; conflicting with the motivation to reach out and discover the world. In a sublimated fashion, a trip is therefore a form of birth or rebirth. (Dr. Ernst Dichter, Address to the Department of Travel, Kashmir, October 1967.)

Rather closer to the reality of the balance sheet the trade says it aims to supply hopeful people, on their annual release from the job with a little money to spend, with the Four Esses — Sun, Sea, Sand. Sex. And in pursuit of the profits to be made from that, the tourist trade has invested millions into ships, aircraft, motor coaches, airports, roads, beaches. It has raised hotels which all appear as if they have been built from the same Lego set, where among the palms and the sunbrellas workers can lie roasting like fowls on the spit, hoping to take a sun tan back to the office.

Behind the illusions, tourism has had a dramatic, even drastic, effect on the social fabric of the places it has invaded. In 1955 Torremolinos was a tiny, poverty-stricken village on the south-east coast of Spain. Then the developers’ eye fell upon it and now the Lego is everywhere, the Thomas Cook brochure describes it as ". . . exuberant [with] all the essentials of a modern resort: bars, boutiques, restaurants, beer cellars, clubs, golf courses, yacht marinas . . . One observer has summed up this trend:

  Tourism . . . is no less an industry than steel manufacture and its introduction into Alpine valleys has been no less destructive of total population patterns and traditional culture than if each hotel had been a blast furnace. (The Geography of Recreation and Leisure, Cosgrove and Jackson.)

Pollution
This aspect is beginning to worry the tourist trade, and much of the writing on it is now concerned with a call for something called a Tourism Policy, by which is meant a controlled development of tourism. It also worries the ecology lobby. The summit of Mount Snowdon is literally being worn away by the millions of feet which trample over it. In the season, a city like London suffers exhaust fumes made even denser by the fleets of taxis, cars, buses, coaches needed to move the tourists from one box office to the next. Outside the city the big jets scream to and from the airport on their carpet of noise, a 707 at take-off generates the same sound level as all the world’s population shouting in unison — and this can happen every few minutes, nearly every hour of every day.

But for the present the pollution which it causes is a lesser worry for the tourist industry. Of more immediate concern, because it offers an imminent threat to profits, is the bogey of saturation. If too many people visit the same place and overwhelm the available facilities, they may have the kind of experience to persuade them not to buy that holiday again. London, which lies fourth in the league table of saturation, measured by tourist nights spent per 100 residents, is getting near that point. Moving around the city in the summer is difficult, almost impossible, as the visitors from abroad add their weight to the rush-hour miseries of the travelling workers. In Westminster Abbey the crush is so great that an admission charge has been imposed, and after paying to go in the visitors are channelled along roped-off routes with no waiting allowed to look at anything.

This illustrates a contradiction of tourism which (although it may not occur to the Ford worker inflicting his Spanish on some hapless English-speaking bartender on the Costa Brava) is typical of capitalist society. Tourism has grown from the pressures of industrial capitalism. It was the concentrations of urban life — factories, close-piled slums, relentless exploitation — which spawned the need to get away from it all as well as the faster and more efficient means of doing so.

It took some time for the workers to establish that a holiday is an essential part of the recreation of their labour power. As this need is now accepted, and as many workers now get three or even four weeks break each year, the tourist industry has grown to market that recreation. This can assume some startling forms but who cares, as long as it sells? So holiday camps marshall their millions into obedient queues and into nerve-wracking competitions to find the funniest face in the place. Package tours take care of everything except stomachs abruptly overfull of unusual food and booze. Jet planes pack in their economy passengers as tight as a bus, easing the discomforts with the plastic smile of a leg-weary hostess. Somewhere among all this gusty enjoyment, say the industry’s salesmen, batteries are recharged; the line at Ford’s flows freer for it.

So big business is interested in an efficient holiday industry and the tourist trade has answered this by itself becoming big business. It is becoming increasingly harder for the small firm to survive. The British hotel industry is dominated by companies like Trust House Forte (who try to promote a cosier image by advertising that all their employees wear unctuous smiles) and Grand Metropolitan (who also own Express Dairies, Watneys and the Express Newspapers). Behind them is some of the latest, most expensive technology, Holiday Inns has a central computer link-up which is said to be the world’s largest private communications network.

In package holidays, three firms — Clarksons (the largest in the world), Thomsons and Horizon account for over half the business originating in Britain, leaving the rest to seventy-odd smaller operators. Governments offer a wide range of subsidies (in Britain a grant of £1,000 was available for every hotel bedroom completed before 1973), tax allowances, low interest loans and so on. They also invest a lot of money directly in the trade; two-thirds of the airlines in the IATA are wholly or partly state owned. At the same time, governments impose laws on safety and consumer standards, many of which can be met only by the bigger operators. The 1971 Fire Precautions Act, which laid down regulations about fire safety in hotels, caused thousands of small hotels and guest houses to close or to change their use.

Jaws
These laws are designed to prevent the profit motive running riot to the point of being counter-productive and to encourage a more orderly investment of capital in the industry. A bad experience, caused by a rush to get a quick profit, can damage the industry overall; and that is the sort of thing governments are supposed to prevent. The film Jaws showed how tills operates, and there are many examples of it in real life. In 1962 the Swiss ski resort of Zermatt suffered an epidemic of typhoid caused by its neglect of the water supply in favour of building hotels, ski lifts and the like. In 1973 the typhoid bacteria was found in the water in Miami. The authorities could not ignore the problem, as had happened at Zermatt; they advised everyone to boil all their water but refused to use words like ‘contamination’ which, although accurate, might have damaged their holiday bookings.

Workers who spend their lives on the treadmill of exploitation need to buy a holiday once in a while, to restore themselves. The industry which sells these holidays is now big business and operates under all the contradictions of any capitalist enterprise. The rush to invest in tourism has proved environmentally damaging — although the ‘environment’ is usually an essential part of the commodity which the industry sells. In some ‘developing’ countries the tourist trade has been built up at the expense of other industries which, by the standards by which capitalism judges profits —might well prove to be more worthwhile. A mess which is typical in a society where wealth is turned out to make profits and not to satisfy human needs.

There is a final irony. Holidays are about illusions, about forgetting reality for a while. But the trade which markets those illusions is itself being forced up against its own reality. And it is not always having a lovely time.

Ivan

What Plan? (1968)

From the January 1968 issue of the Socialist Standard

The National Plan was dreamed up by the Department of Economic Affairs back in the palmy days of 1965. At the time Harold Wilson described it as a “national crusade for higher productivity” and George Brown wrote that its embodied “all our hopes for maintaining full employment and raising our standards of living.” Not surprisingly the Labour Party has since then done its best to give the Plan a quiet burial.

In its aims the National Plan was beautifully simple. The overall objective was to increase national production by 25 per cent (i.e. £8,210 million) by 1970. It pointed out that the balance of payments had been in the red by £750 million in 1964 and that this had resulted in heavy loans from the International Monetary Fund. As a solution, the Plan envisaged a steady improvement in these figures: “we shall need to get back into balance during 1966 and then into surplus; by 1970 we shall need a surplus of about £250 million.” This was to be achieved largely by boosting exports which, during I he barren years of Conservative rule, had been expanding at an average rate of only 3 per cent a year. Now they were to be stepped up by “over 5 per cent a year up to 1970. No one can say that this target is crying for the moon(!)” On the other hand, imports were to be effectively controlled and, “taking everything into consideration”, these would grow by no more than 4 per cent a year. The trade deficit was in this way destined to be cut dramatically, from £534 million in 1964 to about £50 million in 1970.

The Plan also gave prominence to its schemes for expanding the labour force. “On industry's present plans 800,000 more workers will be needed if the 25 per cent increase in output is to be achieved”. The hundreds of thousands of new jobs in the manufacturing and construction industries were to more than compensate for any shake-out in mining, the railways and other declining areas of employment. Prices were going to be magically frozen and, since wages would be creeping up steadily by 3-3½ per cent a year on average, “our personal consumption . . . should rise by one-fifth by 1970.” “This is not a policy of restriction. It is intended to increase the value of what our pay packets will actually buy and get away from purely paper increases cancelled out by higher prices.”

The future was going to be rosy in other ways as well. Expenditure on health and welfare services was to rise from £1,238 million in 1964/65 to £1,529 million in 1969/70. To meet the housing shortage, half a million new homes were to be built each year by 1970 (as compared to 383,000 in 1964). But these were only details when compared to the underlying ambition. Once and for all the crises and upsets of capitalism were to be abolished—by the stroke of a bureaucrat’s pen! “We have had too many crises in the last ten years . . .  Sometimes the only quick way of dealing with these crises was by cuts and squeezes at home . . . The whole point of the Plan is to break out of this vicious circle once and for all." (their emphasis)

Although the working class in general greeted the plan with a healthy indifference, it fired the imagination of many economists. By the end of 1965, after the Plan had been in force for a grand total of four months, some of them were becoming quite enthusiastic.

   The Chancellor has every reason to feel encouraged by this ending to a year in which exports rose by 7 per cent and the average monthly trade deficit was halved. Even if he did not quite hit his target of halving the total balance of payments deficit during 1965, it is now clear that he cannot have fallen far short of it . . .  Mr. Callaghan is running to time towards his objective of eliminating the payments deficit by the end of 1966.  (Financial Times, 13/1 /66)

But 1966 was a great year for wrecking illusions. The pundits had a variety of hypotheses to account for the sorry state of the economy but they were united on one issue—all was not going according to plan. Perhaps Victor Morgan, Professor of Economics at Manchester University, spoke for them all when he said:

   The year 1966 should stand as an awful warning to those of us, both in official circles and outside, who indulge in the black arts of economic forecasting. At the end of 1965, the government was confidently looking forward, on the basis of existing policies, to a rapid improvement in the balance of payments, and this view was generally shared by academic and business economists. In fact, we have been subjected to another massive dose of deflation, and the current account deficit for the first three quarters, at £234 m., was £87 m. more than in the corresponding period of 1965.
   . . . the rate of growth of national output [is down] to an average of a little more than 1 per cent a year.

(Financial Times, 31/12/66)

Callaghan, however, remained optimistic. Nothing had gone fundamentally wrong, he argued. There had been setbacks, for a time economic recovery had even been halted, but dramatic improvements were just round the corner. A sign of this, he claimed, was that the government had “made a good start in repaying (the) debt to the Central Banks. Our reserves have been rising and we have resumed repayment of capital and interest on our North American loans.”

Contrast this to what has actually taken place. The final figures for 1967 will not be available for some weeks yet but even so we can see that the Plan is completely on the rocks. Far from being able to repay their debts to the International Monetary Fund and Central Banks, the British capitalist class have applied for further loans of $300 million. Despite the confident prediction that first 1966, and then 1967, would produce a positive balance of payments Callaghan has ruefully admitted that the capitalists still “need an improvement in our balance of payments of at least £500 million a year . . .” 

The Plan emphasised the importance of boosting exports by means of rebates to exporters and the need for heavy investment in the nationalised industries to provide the basic growth in fuel, transport and communications which would allow industrial production as a whole to increase. Yet now the government finds itself sabotaging its own plan. Among the economic reforms which followed the devaluation of the pound, two of the most important measures were to abolish refunds to exporters to the tune of £100 million and to reduce public spending (which includes capital investment in nationalised industries) by another £100 million. Apart from all this over half a million unemployed workers know that Labour’s brash predictions about creating more jobs have not worked out. And of those workers with jobs, how many now feel confident that their ‘‘personal consumption . . .  should rise by one-fifth by 1970”?

The failure to date of the National Plan is a blow to the efforts of the ruling class to strengthen the world standing of British capital. But, in the end, they can afford to take a philosophical view of it all. After all they are still the bosses and, however persistent the difficulties that face them, they can rely on the working class to keep on churning out the profits.—Or can they?

John Crump