Gatt: Free Trade — or Protectionism? (1994)

From the March 1994 issue of the Socialist Standard

Last year we dealt with the various factors that were leading to a trade war (Socialist Standard, April 1993). The possibility of a return to the "beggar thy neighbour" policies of the 1930s was discussed in the light of NAFTA (North American Free Trade Area) and GATT (General Agreement on Tariffs and Trade).

Prior to the recent signing of these agreements the Establishment-controlled media argued that the alternative to signing these agreements was a gigantic world slump. Quoting the OECD, the Financial Times (9 November) stated:

   "a successful round would add about 200 billion dollars a year to world trade. . . the increased business would certainly help the international economy from its current recession. If the talks collapse, then these potential gains will be lost. But, worse, a tit for tat trade war would lead to higher tariffs, higher prices, reduced sales, lost export opportunities and lost jobs."

Before the recent signing of GATT, the world was already dividing into trade blocs such as NAFTA, comprising Canada, the United States and Mexico, the EEC (Europe), and the Far East under the domination of Japan.

A similar attempt has been made in Latin America to form a trading sphere made up of Brazil, Argentina and Uruguay (MEPOSIL). Currently Brazil and Argentina are in dispute over movement of capital goods between the two countries. Argentina accusing Brazil of dumping.

NAFTA, when signed, was considered a triumph for the diplomacy of President Clinton. It has not, however, resolved the trade rivalries between the member countries. Canada has raised tariffs on farm products since GATT was signed "to make up for the protection its farmers lost in the GATT agreement. Tariffs are expected to be as high as 350 percent on butter. 290 percent on cheese and 270 percent on eggs" (Daily Telegraph, 16 December). The United States is pressing Canada to phase out these tariffs in 10 years instead of 15 as required under GATT’s rules.

The revolt of the Zapatistas in Mexico had their leader denouncing NAFTA from a hotel balcony as "a death sentence for Mexican Indians" (Economist, 22 January). In short, the Indians see no hope for themselves under NAFTA. Unlike the European Community there is no offer of regional aid to the poorer members of this trade bloc.

Export subsidies
One of the claims made by the advocates of these multinational agreements is that freer movement of goods will result in a raising of living standards world wide. Because many of the goods exported by the major industrialized countries have export subsidies the opposite is the case as far as the "lesser developed countries" are concerned. The higher prices of these products, especially agricultural products, are often more than they can afford. With much of their revenue being consumed in paying crushing interest payments on outstanding loans, far from improving, their living standards are worsened.

Similar attempts have been made in the past to reach agreement on a world scale with the object of preventing trade disputes and the economic rivalries that result eventually in world wars and slumps with mass unemployment. The Bretton Woods Agreement was one such example when in 1944 it was proposed along with the IMF and the International Trade Organization. The latter, the ITO, was rejected on the ground that it would provoke hostility from some of the major trading powers. No such considerations apply today. There is now a World Trading Organization replacing GATT.

The problem that capitalist politicians have to solve is how to have world trade without the various powers falling out as they compete for a bigger share of the world market. Bretton Woods, out of which came the IMF, gave rise to a system of fixed exchange rates that could periodically be adjusted where trade imbalances occurred. It appeared to work initially but with the entry of countries such as Japan into the world market and the subsequent erection of trade barriers it finally ended when President Nixon ended the dollar’s convertability. Under this arrangement America provided enough currency to provide a gold exchange rate system.

The violent currency movements that have occurred in recent years is evidence of the developing trade imbalances instead of the convergence of currencies as the enthusiasts for the European Community promised. Currency adjustments cannot overcome the problems of trade rivalries. Tight control of the D-Mark by the Bundesbank has not prevented the deepening recession in Germany.

Erection of trade barriers does not in itself afford protection against rival economic competitors or prevent import penetration. American multinationals were not in fact kept out of Europe by the formation of the EEC for the simple reason they were already established in Europe; Kellogs Cornflakes, Budweiser Beer, Camel Cigarettes, Ford Motors and the inevitable McDonald’s to mention only a few.

The only time anything approaching free trade can occur is when one world power has acquired a dominant position in the world. This was the case in the middle half of the 19th century, when the British Empire was the dominant world power with unlimited access to a large Empire from which it could obtain raw materials at minimal cost. A similar situation existed after the Second World War when America was the predominant world economic power for about two decades. In this sense protectionism has dominated, apart from these two periods in the history of capitalism.

Whilst NAFTA was launched under the auspices of free trade it is in reality protectionist as is the EEC ("Fortress Europe”). The three trade blocs that have emerged have access to cheap labour and raw materials. In the case of NAFTA, America and Canada can increasingly use Mexico for production of labour-intensive goods. This will reduce their interest in the Newly Industrialized countries such as Singapore, South Korea, Taiwan and Malaysia which are all heavily export-dependent. The percentage of GDP that comprise exports are 30 percent for South Korea, 44 percent for Taiwan and well-over 90 percent in the case of Hong Kong and Singapore. The main markets for their exports are OECD countries such as the industrialized nations of North America, western Europe, Australasia and Japan. The OECD accounted for an average of 44 percent of the export of South Korea, Taiwan, Singapore and Hong Kong in 1992. Any failure of GATT will cause serious economic problems in these export-dependent economics.

China has officially admitted that it has over 130 million agricultural workers surplus to the requirements of its industry. Many of them have defied regulations and flocked to the cities in search of work. With surplus labour-power of this size, where wages can amount to less than a dollar an hour, it is not difficult to see what impact this will have on the world market if utilized.

Hardly had the ink dried on the new GATT agreements before the United States and Japan were involved in a dispute over computer copyrights and access for computer hardware, with America alleging that Japan was violating the agreement. On a recent visit to Japan, Jean Spero, US Under-secretary of State for Agricultural and Economic Affairs, accused Japan of foot-dragging. Speaking in Tokyo she said: "Quite frankly progress has been disappointing and when the leaders meet it will be against a backdrop of the largest trade deficit in the history of United States-Japanese relations” (Daily Telegraph, 13 January). Subsequently Lloyd Bentsen, US Treasury Secretary, warned that "his country would have to re-examine the basis of its bilateral trade agreement with Japan if negotiations fail to make sufficient progress by next month" (Daily Telegraph, 24 January). Lloyd Bentsen said "Japan is out of step. It has the lowest penetration of manufactured imports and it has the lowest foreign investment levels among major nations." At the same time the European Community is in trouble with GATT for operating a restrictive quota of bananas while Latin American countries claim discrimination against them" (Daily Telegraph, 24 January).

Last year it was discovered that Germany had signed a secret trading agreement with the United States unbeknown to its European partners leaving them out in the cold (Daily Telegraph, 21 June). With the majority of European countries in recession the likelihood of trade barriers and protectionism increases, particularly as the recession deepens.

There is absolutely no convincing evidence that GATT involving 105 countries can increase free trade when it retains many of the features of protectionism. Its history is one of endless disputes, complaints and alleged violations. Its ultimate effect is the opposite of what its advocates claim. The groupings of NAFTA, the EEC and the Far East are expressions of competing capitalist groupings struggling for access to the world’s markets.

Terry Lawlor

Priority Imports (1947)

From the February 1947 issue of the Socialist Standard

  “A cargo of uranium ore from the Belgian Congo which arrived in the Elder Dempster ship, Fulani, is being handled at Toxteth Dock, Liverpool. It is contained in nearly 1,300 drums, weighing altogether more than 860 tons”

(Daily Telegraph, 20/11/46).

Time's Little Joke ! (1947)

From the October 1947 issue of the Socialist Standard

  “First, the balance of payments. Here we have done very well so far, much better than most experts expected; and there is no prospect of any ‘crisis.’ As Hugh Dalton has said, controls would prevent this; and all that could happen at the worst would be a prolongation of austerity. If we do not export enough, we shall have less oranges, bananas, tobacco, sugar, limber, etc., to consume. That is all.

  “But the figures are encouraging. It was expected that in 1946 we should have a total deficit on the balance of our oversea payments (including Government expenditure abroad) of about £750,000,000. But in fact it has only turned out to be about £450,000,000.

  “Since only £300,000,000 of this was due to ordinary exporting and importing, our excess of imports over exports in 1916 (if we allow for the changed value of money) was scarcely greater than the average for the 1930’s. This is an incredible success, which has not been widely enough realized.

   “It is for this reason that the American Loan is being used up so slowly. Those who say that it is being used fast have evidently not examined the figures very carefully. Hugh Dalton told us recently in Parliament that in the last six months of 1946 some 600,000,000 dollars of the American loan had been spent. This is a rate of spending of £300,000,000 a year. Since the effective part of the loan amounts to £937,000,000, it would last at this rate for rather over three years, i.e. till the autumn of 1949.” 

 (Douglas Jay, Labour M.P., “Labour Press Service,” March 7th, 1947.)

Letter: International Exchange. (1923)

Letter to the Editors from the February 1923 issue of the Socialist Standard

Dear Comrades,

Re answer to Mr. Hart concerning rate of exchange in, I think, the November issue, would you be good enough to make it clear how the total figures are arrived at of the prices of goods exchanged between two countries; also to whom is the gold settlement made, to balance any difference there may be? The principal difficulty to me is the fact that it is individuals who trade and not countries. Also, would your explanation cover the fall of the mark in Germany?

Yours fraternally, 

Enquirer.

Answer to Enquirer.

When using the terms “two countries enter into commercial relations,” we were using the terms in common use. Actually, of course, it is the private merchants, or firms, who enter into these relations and carry through the exchange of goods.

The difference between what is bought and what is sold is shown by the demand for Bills of Exchange in the market of the country under consideration. If the demand in England for Bills on French mediants was greater than the demand in France for Bills on English merchants, this would show, under normal conditions, that more goods had been sold to English merchants, than had been bought from them. From this it is easy to see that the total figures are not of prime importance. It is the difference between the two sets of accounts that matters.

The gold balances are paid, usually, through the Banks holding the Bills mentioned. If the Bills have been bought by the Banks, the gold is placed to their own reserves. If the Bills are 'merely held for customers the amount of the gold is credited to those customers' accounts.

The goods passing into or out of two countries have to pass through the customs departments of those countries. The quantities, weights, and values, of the articles have to be declared on forms drawn up for that purpose. These “returns” give the total figures of the trade between those countries.

All these factors apply to trade under normal conditions. At present Germany is not under such conditions. The fall of the paper mark is due to loss of credit of Germany.

So long as people believe that the paper will be “honoured”—that is, exchanged for gold upon demand, or at a specific date —the paper will circulate at approximately its face value. If this belief begins to decline, the exchange value of the paper will begin to fall at a similar rate. This process may continue until, as in Austria, the paper falls to its value as actual paper, or waste paper. The German mark is nearing the same position, owing to the great uncertainty of the future.

It must, of course, be understood that we have only dealt with the main points of the question. To cover the details of the matter, particularly in the present exceedingly complicated circumstances, would take a huge volume. If, however, Enquirer wishes to raise any other detail question we shall be pleased to deal with it.

Editorial Committee

Unbalanced exports and experts (1964)

From the April 1964 issue of the Socialist Standard

One of the toughest problems which faced the Attlee government when it took over in 1945 was the deficit in Britain’s balance of trade. The six years of war had cost this country a great deal, apart from the bloodshed and the suffering which the working class had endured. Britain's capitalist class had lost a lot of their overseas investments, they had been forced out of several spheres of influence and had seen many of their traditional markets fall under the sway of their wartime allies. The Imperial Preference system, by which they had once set so much store, had lost a lot of its power as a tight trading club.

As the world turned from the production of munitions, attention was focused upon the markets offered by the rebuilding of the countries which had suffered in the war. There was a frantic rush to get into these markets; almost anything could be sold there, provided it got there quickly. The Labour government launched its famous export drive, sending its Ministers around the country to draw homely analogies between the world market and Mrs. Smith's housekeeping, and sticking up its “Work Or Want” posters. The more we exported, and the less we imported, went the story, the better off we would be.

Some of this propaganda went home. Many workers actually worried about the trade gap and as each set of figures came out, showing how large the gap was, they sank into gloom. It was useless to tell them that the trade gap was a problem for the people who owned the goods which were going in and out of the country and that workers should concern themselves only with their own economic interests. They were convinced that the bigger the gap the more everyone would suffer and perhaps, as well, they thought that the “lousy foreigners” were getting one over on poor, simple, honest John Bull. Amid the gloom, their blood boiled.

The Tories, of course, made a lot of hay while this particular sun shone. The trade gap, they said, was caused by the amateurish methods of the Labour government; there were too many controls, too much nationalisation, it was all something to do with Socialism. Just let a businessman’s government take over and in no time at all the trade gap would disappear.

Well that was a long time ago and it is time now to draw attention to one or two facts. First of all, the trade deficit has not disappeared under Conservative government; it has, in fact, remained as stubbornly as ever. Secondly, the fact that the Tories used to say in the days of Labour government that the gap inevitably meant poverty has not stopped them claiming that we are all having it good—although the gap is still there. And thirdly, the Tories have notched up the biggest trade deficit ever to be recorded for one month. All of which indicates that, however baffling the Labour government found the problems of running British capitalism, the Tories have not found the going much easier.

It was in last January that the trade gap reached its peak. Imports reached a new high of £457 million, while exports fell to £326 million which, taking into account £11 million worth of re-exports, left a “crude" trade gap of £120 million. This figure was especially impressive when compared to the monthly average gap of £45 million for 1962 and £49 million for last year.

By all the standards which the newspapers, the politicians and the city editors have used in the past, this was a crisis for British capitalism. But some of them, when the January figures were announced, revealed that they had adopted new standards, or had at any rate modified the old ones. The Daily Telegraph headlined a gap of only £72 million, without mentioning the fact that this lower figure was arrived at after using a method of calculation which had not been used before. In the Sunday Times, economic editor William Rees Mogg was saying “By this weekend . . . no one doubts that there is a serious balance of trade problem to be contended with," although The Guardian a couple of days later had it that “People can talk themselves into a financial crisis. But at the moment there is none in sight." Sir Alec Douglas-Home was keeping his eye firmly fixed on the next election: “Do not let us,” he said, “Talk ourselves into a crisis or write ourselves into one on the basis of one set of monthly figures.” And in this he was supported by Samuel Brittan in The Observer ". . . a crisis is a psychological phenomenon that exists when people think it does.’’

The obvious comment on this latter kind of optimism is that, if it is possible to talk ourselves into a crisis then all that is needed to remedy the situation is to talk ourselves out of it. (Sir Stafford Cripps, when he was Labour’s Chancellor, made a similar statement about a crisis in 1949 but the economic problems of British capitalism, beat him in the end—and no one could accuse Cripps of not being able to talk.) And if crises are only, after all these years, psychological phenomena, why, what the Treasury needs are not economists but psychiatrists, and Mr. Brittan's column should not be written by a financial wizard like himself but by an expert in mental disorders. What a pity nobody thought of it in the ’thirties! It would have saved the government such a lot of dole money.

This was not the end of the confusion. If the experts could not agree on whether there was a crisis, neither could they agree on what was needed to get rid of it. The National Institute of Economic and Social Research advised the government, in an article written a few days before the January trade figures were published, to increase personal taxation by about £200 million. Three days later the Federation of British Industries was recommending a decrease in income tax and an increase in indirect taxation. Mr. Rees Mogg declared himself ". . . opposed to import controls" — something which, said The Guardian, “. . . is beginning to be talked about again by economists in responsible places . . ." In the end, Mr. Maudling increased the Bank Rate, which some of the pundits had advised him to do but which the National Institute had described as “. . . not likely to be effective.’’

It is easy enough to pick out these contradictions. Whenever British capitalism finds itself in some sort of difficulty there is no lack of inconsistent advice from the experts. Whenever a Chancellor announces a measure which is supposed to relieve a crisis there are plenty of the same experts to crow that the measure is too little or too late, too large or too early, or that anyway they thought of it first. It does not seem to occur to them that, if they cannot agree upon the nature of a crisis, or upon the solution to it, or indeed upon whether there is a crisis at all, the chances of them ever being able to solve the economic maladies of capitalism are just about non-existent.

What the experts never tell us is that the trade gap is a problem which only capitalism can produce. Most of the world's developed countries are exporters—and even the undeveloped lands have some sort of export trade, if only in some primary crop like cocoa or sugar. But exports do not simply go off into the blue—every one of them is an import into some other country. The £457 million worth of goods which came into this country during January were worth about that much to the countries which sent them here. Sometimes a nation’s exports depend upon its imports; goods which are sent abroad are made by machinery which has been imported or include a vital component which, because it is made more cheaply in a foreign country, has been bought from there in preference to home produce. And with so many countries in this struggle, each of them fighting to get on top, it is impossible for them all exactly to balance their trade with each other. Even if they wanted to, that is; for if they were to try to keep their imports precisely level with their exports, capitalism's international trade would collapse and many of its industries with it.

This fact, naturally, is ignored by the government, who tell us what all good, docile patriots want to hear—that it is best for our country to be on top, for our country’s trade balance to be in credit and to hell with the rest. At the same time governments abroad, who are competing with British industry in the world’s markets, are telling their workers the same story and the workers are swallowing it and so the whole sorry mess goes on. While the people are busily swallowing the official propaganda, few of them are realising that the crises are interminable, that the experts and the Ministers are unable to deal with them and that in any case the state of their country's trading accounts has no appreciable effect upon their welfare.

Neither are they realising that it is capitalism itself which creates the balance of payments problem. Why, in the name of sanity, should one area of the world not import more than it exports? Why should the Americas not send out a lot of cereals? Or Africa a lot of raw minerals? Or Australasia a lot of dairy produce? Why should not the world’s wealth be produced in the areas where this can be done most efficiently and easily and sent to the areas where it is needed?

Why? Because at present the world is divided into opposing nations and groups of nations, who unite their interests, often temporarily, against the rest. Because the world is now split into rival trading groups who fight bitter economic wars against each other. Because the world produces its wealth to be sold so that the class which owns the machines and the materials which go into the wealth can make a profit on their investments.

We are now at the very root of the trouble. Until we deal with it the crises, of many kinds, will continue. But whoever may lose his job in a crisis, there is one type of person who will not be unemployed—the person who owes his position to his professed ability to do something about the uncontrollable ups and downs, stops and starts, which are an inevitable part of capitalism all over the world.

Ivan

Finance and Industry: Three cheers for enterprise (1964)

The Finance and Industry Column from the April 1964 issue of the Socialist Standard

Three cheers for enterprise
We are constantly being lectured on the virtues of private enterprise. Our capitalists, we are told, are justified in taking their profits because of the skill and foresight they put into their businesses and of the way they generally plan and run them. But just how enterprising are we supposed to get? At what point does the enterprising deteriorate into the shady?

Last month saw the end of the mail train trial. So enterprising are the chief robbers that they have apparently managed to get clear away with most of the loot—to the tune of a couple of million pounds. The operation was certainly well planned, the execution faultless, and both skill and foresight amply displayed. Such results in a company balance sheet would lead to the most fulsome tributes from the shareholders.

Again last month, we were regaled with all the details of the great air ticket swindle. Once more some enterprising characters have been at work, this time getting away with something like a million pounds by selling airline tickets at a discount and conveniently omitting to pay for them or paying for them with dud cheques. And the great joke is that there are apparently quite a lot of eminent and respectable businessmen prepared to “shop around" for this dubious merchandise. It has almost become a status symbol to get a "ticket at a rebate," said Coloney Ford of B.O.A.C. to the Observer. Carrying enterprise to the lengths of making robbery and fraud tempting to the respectable—what could be more enterprising than that?

And at just about the same time, to give us three examples in a week, H.M. Customs published their report on smuggling during 1963. They seized goods to the value of about £120,000, of which one-half was accounted for by watches. But it is apparently common knowledge in the trade that for every watch that is seized by the Customs, at least fifty others are successfully smuggled through; perhaps as many as two million smuggled watches circulate in this country each year compared with "legitimate” sales of about five millions. One smuggler was recently convicted for concealing 700 watches in his waistcoat, with the option of 12 months imprisonment or a fine of £6,500; the fine was paid the next day. You have to be a very enterprising operator to stand overheads like that!

Three fine illustrations, in short, of how to succeed in business. And just in case someone is all ready to protest about the difference between the straight and the crooked, let him pause a moment. Is there all that difference? The shoddy goods and poor workmanship, the slick advertising and the glib sales talk, the tax evasion and the expense accounts, the cut-throat competition and the take-over bids, the short weight and the wrong change, the cartel and the monopoly, the "loss leader" and the big, plain foot in the door—what is so respectable about all these?

And what is so respectable about the greatest fraud of all the exploitation of the many by the few?


Oil under the sea
The scramble for oil now goes on under the water as well as over the land. The big companies vie with each other to explore the sea bed in more than a dozen parts of the world and are actively prospecting for more.

As long ago as 1937 the Americans were drawing up oil from the Louisiana seaboard, though the amounts were small. But within the last few years, offshore output has gone up considerably and the search has spread to California and Alaska, Mexico and Venezuela, the Middle East and Egypt, West Africa, the Mediterranean, and now the North Sea. Spurred on by the recent huge natural gas find in Holland, British, Dutch and German interests are already struggling hard for concessions. The French and Belgians are showing similar concern for their own coastal areas.

Why such a sudden, spurt of interest in the oil under the sea? First, because the need for more and more oil is unceasing (reserves in 1939 were estimated at 40 years’ supply, today they are reckoned at' 30). Second, because even if this were not the case, no oil company can afford to let its rivals steal a march on it—this is a law of capitalism stark and simple.

The chances of finding oil under the sea are good, especially when the prospective deposits lie close to oil-bearing land areas. But the expense gives the oil companies the shivers—it is between three and nine times as costly as land prospecting and, of course, the question of coastal water limits immediately becomes an added problem. 21 countries have already signed the proposed Geneva convention on these and Germany, which has hitherto had nothing to do with it, has suddenly decided it might be a good idea to sign it after all. The convention proposes to calculate the national limit as far out as the 100 fathom line and this could cause enormous trouble since in some parts of the world the sea bottom is fairly shallow for many miles; the Straits of Dover, for example, are nowhere near this depth so that both France and Britain could technically lay claim to the entire width of the strait.

All in all, the proverb about pouring oil on troubled waters could hardly be less appropriate.


Exports—or dumping?
The recently published report by the Richardson Committee turned down the idea of introducing the turnover tax as a method of stimulating exports. The decision, was not unexpected, but one of the reasons for it certainly was.

This was that very few of the exporting firms consulted by the Committee thought they would benefit from the system because, they alleged, they generally made little or no profit from their exports anyway. Commented the Guardian, “Does the bulk of our export trade really depend on practices which verge on dumping, as this implies? ”

Perhaps it does, when you come to think of it. Competition in many industries is now fierce indeed, and exporting is made even more difficult when there are tariff barriers to be overcome. Britain is already meeting problems in getting goods into the Common Market because the tariff is getting progressively stiffer, and the Six are having similar troubles with exports to the EFTA bloc.

It is well known that many British cars are going to countries such as France at prices which can at the most cover cost and may be less; French manufacturers are using the same discount methods to send cars to Britain. There is lots of evidence to show that refrigerators, ships, steel products, chemicals of various kinds, agricultural produce, are being similarly marketed, often with government aid to cover the deficit.

It would be really interesting to know, in fact, just what proportion of international trade is taking the form of dumping, or something extremely close to it.


An excess of eggs
With the high point of the production year yet to come, there are all the signs of an egg glut extending not only to this country but over the whole of Europe. Germany has already tried to close the door to imports but has had to open it again following protests from her partners in the Six. In Britain, farmers have been warned of the approach of serious over-production, the intention being presumably to get them to cut down their laying flocks.

But such warnings are a waste of time. The small farmer cannot afford to do it anyway and the first reaction of the big producer is to step up the size of his flock so as to get more efficient output! The real irony, however, is that with a government subsidy of 5½d. a dozen, the big man cannot go wrong.

About £30 million of state aid has been paid to egg producers this year. Its intention was to help the small man to survive, but its main effect has been to make the big farmer bigger. This is the inexorable development of capitalism, we know, but it is ironic to see a capitalist government paying out such vast sums so gratuitously to assist the process.

Stan Hampson

The Labour Party and Unemployment. (1929)

Editorial from the April 1929 issue of the Socialist Standard

Writing in the Morning Post (February 18th), Mr. Tom Shaw, M.P., Minister of Labour in the Labour Government, gave a statement of his Party’s policy with regard to unemployment.

The first point to notice is that Mr. Shaw without hesitation accepts the view that unemployment in this country is a national problem to be solved on national lines. His criticism of the captains of industry here is that they have allowed their foreign competitors to out-distance them :—

 Rationalisation, standardisation, combination, and centralisation, have made relatively more progress in other countries than our own.

Mr. Shaw blandly assumes that more rationalisation will mean less unemployment, something the very reverse of the truth. These various processes are introduced with the set purpose of securing economy in production; a greater output with the employment of fewer workers; the continual addition of surplus workers to the army of the unemployed. If Mr. Shaw does not believe this, will he show us the capitalist countries where unemployment has been permanently lessened by any or all of the means he enumerates?

Then he goes on to say that it "makes his heartache" to go into country towns and villages and see the shops " full of Danish products.” He wants British tummies lined with British butter made by British hands from the milk of British cows, reared on British grass. He does not dislike the Danes. He has to be sure a profound admiration for their success as exporters of dairy produce. The whole secret of their success “is that Denmark's farmers have adopted co-operation and scientific methods." Mr. Shaw wants British farmers to adopt the same methods and secure the same success. Beautiful; but how will this solve the unemployment problem? Denmark suffers just as much from unemployment as any other capitalist country, and when the promised greater efficiency of British farmers threatens to ruin their Danish competitors, some Danish Mr. Shaw will be telling his compatriots to adopt still more efficient methods, with the object of still further under-cutting the prices of dairy products; and so on in the manner normal to the capitalist system.

Something rotten in the State of Denmark

Mr. Shaw is careful to say that he does not hate the Danes. It is then difficult to see why he discriminates between them and other peoples also unfortunate enough not to have been born British. For although the sight of Danish eggs makes his heart ache, he goes on in the next column to say that "every effort ought to be made to develop trade to a much larger degree" with "China, India, and Russia." Does Mr. Shaw really believe that trade with China, Russia and India, or with any other country, can be developed on a one-sided basis consisting only of the export of British manufactures without corresponding imports from those countries? Why do Danish eggs make his heart ache, but not Chinese eggs? and Danish butter, but not Russian butter? When Russia buys agricultural machinery, tractors and ploughs and other means of increasing the productivity of Russian agriculture, the effect will be to throw still cheaper Russian wheat on to the British market to undercut British farmers.

Mr. Shaw also wants to develop Empire trade, and says: “We want to see . . . Canadian fruits and Canadian grain far more widely sold in our markets." And what about British fruit growers and grain growers? Is it any nicer to be ruined by Canadian competitors than by Danes. And again how will this solve the unemployment problem?

Foreign Trade and Unemployment.

Mr. Shaw makes the usual assumption that unemployment can be reduced by the development of export trade and by the development of home manufactures. Let us remind him, therefore, that in 1928 exports were greater than in 1927, and imports were less than in 1927.

The total amount of wealth produced in this country was greater, yet at the end of 1928 the numbers unemployed were 200,000 or more above the level at the end of 1927. More wealth and more exports accompanied by more unemployment!

Lastly, Mr. Shaw speaks of remedying unemployment by reducing the expenditure on armaments. What is going to happen to the thousands of men now withdrawn from the labour market for service in the forces ? What of the ship workers engaged in naval construction and the engineers employed in the manufacture of rifles, ammunition, etc.?

And, lastly, does he not recall that in 1924 the Labour Government incurred some criticism because it laid down 5 new cruisers, and that one of the reasons given by authoritative Labour Ministers for that step was the need for making employment?

Economists in confusion (1969)

From the May 1969 issue of the Socialist Standard

Devaluation of the pound showed how much confusion there is in the minds of government ministers and their economic advisers; subsequent events have added to it. It was carried out in November 1967 by the present Chancellor of the Exchequer, Roy Jenkins, only four months after his predecessor James Callaghan had denounced such a measure on the ground, among others, that it would lower real wages by raising prices. Naturally Jenkins had to claim that it was a very good thing and that it would give a golden opportunity to cure the balance of payments. He was confident that, as he put it, "of one thing we can be sure: 1968 will be different” (Article in Financial Times, December 30, 1967).

Apart from the fact that devaluation, as anyone could have foreseen, produced a big increase of profits for exporting companies, 1968 has been just like 1967—crises, government attempts to keep wages down, and a balance of payments deficit very little less than in the previous year. On the first anniversary of devaluation the financial columns were full of articles by economists and financial experts trying to explain why their forecasts had gone wrong. Some of them, influenced by American economists, have begun to question the validity of their own theories about money. This has been helped on by the disquiet of the International Monetary Fund and other bankers who lent the British government large sums of money to support the pound. They want to be sure that their loans will be duly repaid, and not in a currency depreciated by still further devaluation. The IMF insisted that 'the money supply' should be kept under control and from time to time they come over to ask Jenkins what about it. They are well aware that the prevailing theories held by the government and its advisers reject the idea that there is any need to control money supply and that, on the contrary, it should be expanded.

It is true that every Chancellor in the past quarter of a century has proclaimed his intention of stopping inflation, but this was merely a sop to electors, not to be taken seriously. George Brown recently admitted that inflation was government policy, but that it was to be kept to 'a minimum' (Sunday Times March 31, 1968).

The consequence has been a full-scale controversy about money itself. In the autumn of 1968 scores of articles appeared attacking or defending accepted theories; confused however by the fact that the writers could not agree among themselves what it was they were discussing. A typical statement appeared in The Times (September 28, 1968) from a correspondent who pointed out that while the International Monetary Fund defines money as currency (notes and coin) plus the money on current account in the cheque issuing banks, the British government’s Central Statistical Office defines it as also including money in deposit accounts of banks, and also money on deposit in other financial organisations—a difference running into something like £400m.

Still another school treats money in the much more limited sense of notes and coin only, which the last official committee on the question, the Radcliffe Committee, in its Report in 1959 airily dismissed as only “the small change of the monetary system".

The controversy was brought a stage further by an article in the Evening Standard (March 11, 1968) by Prof. Victor Morgan who demands a return to the Quantity Theory of Money. Unfortunately he too omits to say which definition of money he is using. His meaning is thrown more in doubt because he writes of the Quantity Theory having won general acceptance in the late 18th century and having continued to be accepted until the 1930s; the fact is that there have been several quite different theories under the same name, differing from each other in how they defined money. One of the earliest held that the price level is raised or lowered according to whether there is a large or small amount of precious metal in the country. (This was dealt with by Marx in Capital, Vol. I. p.139, in the Kerr edition).

Other quantity theories have been based on notes and coin; on those plus bank deposits on current account; or plus all deposits. It is possible that Prof. Morgan means one of the two last-named.

By contrast it is clear that when Lord Cromer, former Governor of the Bank of England, attacks the government for unduly increasing the money supply he means the note issue.

Prof. Morgan gives a description of the Quantity Theory which would fit several variations of it, saying for example that there is a strong connection between the growth of the money supply and the price level, and he cautiously adds that “no-one has yet demonstrated conclusively the precise ways in which monetary influences are transmitted” (meaning transmitted into changes of the price level).

He made no reference to Marx’s study of the subject. Marx did however supply the missing link. He showed that gold functions as the money commodity, the universal equivalent for all other commodities because, like them, it is an embodiment of value, the socially necessary labour required to produce it. When a certain total quantity of gold in the form of coins functioned as money in this way, to meet market needs corresponding to a given volume of production and buying and selling transactions, it represented a total quantity of value. Marx showed that if gold coin is replaced by inconvertible paper money and if the issue of paper money is increased (the note issue in Britain is about six times what it was in 1938 though production has less than doubled) the result is a corresponding rise of the price level, in addition to any other factors pushing prices up.

The crux of the matter is that if the notes in circulation are doubled they still represent only the same total amount of value, so that each note represents only half the value represented by each note before the doubling took place. It takes two notes to buy what formerly one note would buy: prices are doubled.

Unlike other theories, Marx’s explanation does in fact explain the big increase of the general price level and this is the answer to the economists (including Keynes) who dismiss Marx as of no account. The re-appearance of quantity theories of money marks the growing disillusionment about Keynes and his theories.

The body of opinion behind the views of Prof. Morgan is growing in this country and it is possible we may see a shift of official opinion in that direction, particularly if the Tories come into power. Prof. Morgan outlines what he considers to be the advantages of so doing:

  If the Quantity Theory is right, then so long as the money supply is unchecked the combined efforts of Mrs Castle, Mr Jones, and Mr Woodcock will be powerless to control inflation; only an effective control of the money supply could achieve this end, and if this control were made effective both incomes policy and the present interference by the Bank of England would be unnecessary.

Someone thinking on similar lines is Sir George Bolton, chairman of the Bank of London and South America, but he takes a gloomier view. He told his shareholders that "if the capitalist system is to survive, confidence in paper money must be restored”.

If such a shift of government monetary policy takes place it should not be forgotten that we have had it all before; both the long periods in which there was no excess currency issue and other periods (as at present) when it is the rule. Capitalism works just as evilly for the workers whichever way it goes. It is a capitalist problem, not a working-class one.

Edgar Hardcastle

Who Gains Through Devaluation? (1968)

From the January 1968 issue of the Socialist Standard

Devaluation, as its name implies, is the act of lowering the value represented by the currency of a country in relation to gold. It is a particular form of currency depreciation. Keynes in his Tract on Monetary Reform, published in 1923, suggested as a distinction between the two terms that devaluation is currency depreciation which has been “fixed and confirmed by law”.

Its importance to capitalism lies in the fact that contracts and loans are drawn up in terms of pounds, dollars, marks and so on, but the values represented by them may be changed, sometimes drastically. If someone lent ￡100 twenty years ago and received it back to-day it would buy only half what it would have bought when it was lent. A textbook case is that of a British bank which in June 1914 lent 750,000 roubles (worth 78,000) to a Russian bank. Years later when the loan was repaid in the form of 750,000 roubles the rouble had been so devalued that all the British bank received was ￡5, and the courts upheld this. (It will be noted that the document under which the British Government recently borrowed a large sum through the International Monetary Fund contains a clause that the money has to be repaid, not in pounds, but in the currencies of the lending countries. This is to prevent the lenders being caught by another devaluation of the pound).

In order to guarantee a large measure of stability to the value of the pound, British law for a century before 1914 gave the holder of Bank of England notes the right, on demand, to convert them into a fixed amount of gold, or to convert gold into notes – the rate being approximately a quarter of an ounce of gold to the pound. Under that guarantee the pound was “as good as gold” and was accepted as such in other countries. Now the note in inconvertible, and owing to over-issue, has depreciated so much that at the new rate of $2.4 its equivalent in gold has fallen to less than one fourteenth of an ounce instead of the original quarter of an ounce.

If a currency is fixed in terms of a certain weight of gold, devaluation would take the form of fixing it at a smaller weight of gold. The American dollar, under an act of 1900, was fixed at about one twenty-first part of an ounce (one ounce was equivalent to $20.67). In January 1934 it was devalued to one thirty-fifth of an ounce (one ounce is $35).

For many years the British pound has been held at a specified rate against the dollar; at $4.03 from 1940 to 1949, then at $2.8 and now $2.4. Through the dollar the pound is thus indirectly related to gold.

Devaluation, both in our own times and historically, has been a common practice. Pick’s Currency Year Book 1966 recorded that in a period of twelve months 22 countries had devalued their currencies, six of them more than once. Keynes observed that “there is no record of a prolonged war or a great social upheaval which has not been accompanied by a change in the legal tender”. He held that this historical process was no accident but was the outcome of two factors; the desire of governments to reduce the burden of national debts by repaying them in depreciated currency and the political pull of money borrowers who have a like interest against money lenders.

English history has the example of kings, notably Henry the Eighth, who depreciated the currency (and pushed up prices) by issuing coins whose real metallic value was below their face value. The seller of an article would insist on being paid a larger number of the debased coins.

Though changes of value are usually downwards they are not invariably so. The German Government upvalued the Mark in 1961 and has recently contemplated a further upward revaluation.

It is mistrust of the stability of most of the world’s currencies that has produced massive private hoarding of gold, wherever this is legal and often where it is not.

Generally speaking, while each government can make its own currency legal tender within its own boundaries, payments to other countries must be in the currencies of these countries or in gold – among the exceptions were the pound when it was convertible into gold, and the dollar. If exports from a country are sold abroad in large enough quantities the foreign money received for the exports will be sufficient to pay for imports. American exports have for years been large enough to produce a big surplus, but the size of American investments abroad and of overseas military expenditure including that on the Vietnam war, has been so great that there have had to be large payments abroad in gold. Although American gold holdings are still very large the belief has been encouraged that the American Government may in due course devalue the dollar again.

The situation of British capitalism has been much more precarious. There has not been a large export surplus, and at times there has been a deficit, and foreign holders of balances in London (estimated at about ￡4,000 Million) fearing devaluation have been in a position to create “a run on the pound” by pulling out their balances. The British gold and dollar reserve has been much too small to withstand the pressure, even with the help of foreign loans.

Foreign bankers and others with balances in London lacked confidence in the pound because they could observe the adverse trade figures, and also the depreciation of the pound internally, as measured by the continued rise of the price level, a much faster rise than in the USA. They have observed the policy of successive British governments of pushing up the issue of currency notes without any regard to the additions really called for by the growth of production and trade. (One of the conditions attached to the latest foreign loan obtained by the British Government through the International Monetary Fund is that “the growth of money supply will be less in 1968 than the present estimate for 1967”).

In accordance with the Marxian law of value, commodities express their value in the universal equivalent, gold, the money commodity, because gold, like the rest of commodities, represents a given amount of socially necessary labour.

If day to day buying and selling transactions were carried out in gold coin a certain total amount of gold would be required, representing a certain total value. If the gold is replaced by inconvertible notes the total value represented by the notes remains as before.

If the note issue is doubled the effect is merely that two notes are now functioning in place of the one unit of gold, and the outcome is that prices are doubled. If an article had been priced at ￡1 when the pound was ¼ of an ounce of gold, the doubling of an inconvertible note issue raises the price to ￡2. A larger increase of the note issue would correspondingly raise the price level still more.

At one time many economists, though rejecting the labour theory of value, nevertheless arrived at the same practical conclusion. Now the fashion is largely to disregard it.

The British currency note is more than five times what it was before the war, although total production has not even doubled. There are other factors affecting prices one way or the other but this is the main one in recent decades.

This policy of depreciating the pound has produced soaring prices – which all the post-war governments said they did not intend, and has produced the ceaseless race between wages and prices.

Their excuse for the policy of depreciation has usually been that it stimulates the growth of total production, but there is little evidence that it has done so.

But higher prices exact a penalty by increasing the difficulty of selling exports profitably. The Board of Trade reported recently that British exports were less well placed to compete in markets abroad in respect of price than they were twelve years ago – this in spite of big investments of capital to cheapen costs.

The Financial Times (21 November) stated that many firms fail to press exports because they are not sufficiently profitable.

Devaluation is a measure designed to counteract in export markets the higher prices resulting from the depreciation of the pound.

An example will show how the 14.3 per cent devaluation affects the prices of articles bought or sold in a country which has not devalued. Before the devaluation of the pound a $1000 article bought in USA for import to Britain cost ￡357. After devaluation it costs ￡417, an increase of 16.67 per cent. Conversely a British export selling in USA for $ brought in ￡357 before devaluation and ￡417 after, again an increase of 16.7 per cent.

The broad result is that devaluation helps British export companies but hits companies dependent on imported raw materials. Within a few days of devaluation it was being said that the better prospects for exports would put up profits by ￡250 million (Daily Mail 22 November). It was also forecast that the internal price level would rise by perhaps 5 per cent or 6 per cent.

The effects of devaluation cannot be isolated from other factors and it is not safe to read into the future what happened in the past. However, for what it is worth, after the 1949 devaluation of 30 per cent prices rose rather faster than they had been rising in the years before, profits rose sharply for two years and then dropped equally sharply, and the balance of payments moved in somewhat the same pattern. Unemployment rose a little then fell, but was back again at a fairly high level within three years.

The Wilson Government’s antics over devaluation followed the same humbugging course as in 1949―first the protestations that the government would not devalue because that would be bad for the workers, then the deed, then the pretence that it was a good thing after all.

Just before the Attlee Government devalued the pound on 18 September 1949 the Labour Party monthly journal Fact published an article explaining why the government would not devalue:

  If the pound were devalued to three dollars… up would go the price of bread. A similar rise would be unavoidable in the price of every commodity in which raw materials imported from outside the Sterling Area are a part of the cost. Thus, if devaluation succeeded in closing the gap (which is doubtful) it would do so by lowering our standard of living. The pound would buy less in Tooting and Bradford, as well as in New York and Winnipeg. Devaluation is therefore an alternative to wage-slashing as a device for cutting our prices at the expense of the mass of the people. (Fact, August 1949)

In 1967 it was the Chancellor of the Exchequer, Mr. Callaghan (now Home Secretary) who himself emphasised what a shocking thing devaluation would be; and then devalued.

The following are extracts from a speech by Mr. Callaghan in the House of Commons on 24 July 1967 (Hansard Cols 99 and 100.)

  Let there be no dodging about this. Those who advocate devaluation are calling for a reduction in the wage levels and the real wage standards of every member of the working class of this country. They are doing this, and the economists know it… This is a nostrum among economists who are quite clear-sighted and cold-hearted about its purpose. Un¬  fortunately it has been picked up by a number of people who clamour for devaluation because they believe that it is a way of avoiding other harsh measures. The logical purpose of devaluation is a reduction in the standard of life at home. If it does not mean that, it does not mean anything.

In 1949 after devaluation the Labour government insisted that wages should not go up because prices had gone up. In 1967 one of the “intentions” notified to the International Monetary Fund in connection with the loan reads: “There is no criterion for pay increases related to changes in the cost of living”.

Capitalism is not changed by devaluation: it has not become better or worse for the workers. “Strong” currencies or “weak” currencies do not alter the position of the workers.

British capitalism has been running an adverse balance of payments, has devalued its currency, and has about 600,000 unemployed.

German capitalism has been running a favourable balance of payments for years, altered the exchange rate of its currency upwards in 1961 not downwards, and early in 1967 had 655,000 unemployed !

There are no ways of making capitalism operate in the interests of the workers.

Edgar Hardcastle

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?

WTO rules, ok? (2019)

The Cooking the Books column from the April 2019 issue of the Socialist Standard

The World Trade Organisation, of which nearly all states are members, regulates trade between them. Its basic rule is the ‘Most Favoured Nation’ clause which lays down that, if a state grants favourable terms to another state, say, by reducing tariffs on imports from it, it has to apply the same terms to all other WTO member-states. This applies to customs unions as well as states.

Tariffs are a tax on imports which increase the price of the imported product. This ‘protects’ the home industry producing the same product from competition from cheaper imports. The EU, as a customs union, has to follow WTO rules when it imposes tariffs, as it does to protect agriculture, the car industry and much more. If Britain leaves the EU trading bloc it would have to ‘trade on WTO terms’ but this is merely stating the obvious; it says nothing about what the trade and tariff policy conforming to these terms is going to be.

Some Brexiteers think Britain should abolish all tariffs. ‘Liam Fox, the international trade secretary, wants a move to zero tariffs in as many areas as possible’, while for Jacob Rees-Mogg ‘cutting import tariffs would lead to cheaper food, clothes and shoes’ (Times, 18 February). Tim Martin, owner of the Wetherspoon pub chain, wants to ‘abolish all the taxes (tariffs) on non-EU imports, like oranges, rice, coffee, Aussie wines and a total 12,651 products. This will reduce prices in the shops, making for a better-off public’ (Wetherspoon News, Winter 2018/19).

But would workers be better off if the prices of everyday products fell? This is a claim made by free-traders since the time of Richard Cobden who campaigned successfully to get the Corn Laws repealed in 1846. These had been introduced after the Napoleonic Wars to maintain the high war-time prices of wheat, barley and rye and so protect the rents of landlords whose tenants grew these. Industrial capitalists resented this as the artificially high food prices meant they had to pay more as wages.

Cobden’s Anti-Corn Law League sought working class support by claiming that cheaper bread would make them better off. Engels, who had been working in his father’s factory in Manchester at the time of the repeal campaign, recalled that its aim had been ‘to reduce the price of bread and thereby the money rate of wages’ which ‘would enable British manufacturers to defy all and every competition with which wicked or ignorant foreigners threatened them’ (Labour Standard, 18 June 1881).  Challenged by a Cobdenite, he explained why the League’s theory that ‘dear bread meant low wages and cheap bread high wages’ was wrong:

  The average price of a commodity is equal to its cost of production; the action of supply and demand consists in bringing it back to that standard around which it oscillates. If this be true of all commodities, it is true also of the commodity Labour (or more strictly speaking, Labour-force). Then the rate of wages is determined by the price of those commodities which enter into the habitual and necessary consumption of the labourer. In other words, all other things remaining unchanged, wages rise and fall with the price of the necessaries of life.

So, insofar as abolishing or reducing tariffs on items of popular consumption reduced the cost of living this would exert a downward pressure on wages. Fox, Rees-Mogg, Tim Martin and other modern-day Cobdenites are wrong when they claim that the end result of cheaper food, clothes, shoes, oranges, rice, coffee and Aussie wine would be that we would have more to spend.

The Good Time Coming ! (1929)

Editorial from the February 1929 issue of the Socialist Standard

This year; next year; sometime; never !

It is the duty of Bank Chairmen and Prime Ministers to make forecasts every year of the coming trade revival. They do this because it fills the mind of the unemployed with hope. This year Mr. Baldwin says: -

  We may reasonably look forward, without being called unduly optimistic, to a general expansion of trade in the country. (Daily Express, 21 December.)

Some people, remembering last year, and the year before, and the year before that, and so on, do not believe Mr. Baldwin. But those who believe and those who disbelieve, nearly all accept the assumption that if trade improved, then our problems would be solved. The Socialist does not accept this view. We point out that the workers are poor always, good trade or bad, and that the Capitalist class, whatever the state of trade, go on having a large and growing share of the wealth produced.

During the five years ended March 31st, 1927, less than 100,000 super-tax payers (90,000 in 1922/23 and 98,000 in 1926/27) had incomes totally over £500 millions a year. The total increased year by year from £516 millions to £568 millions.

The Tory says that unemployment would decline and wages rise if only we made more articles at home and imported less from abroad. The Liberals and most of the Labourites say that unemployment would go if we could only sell more English goods abroad. It is interesting to notice that during 1928, as compared with 1927, both of these things have happened. More goods have been sold abroad and less goods imported. Comparing the first eleven months of 1928 with the same period of 1927, we find that imports fell by £18,475,254 (1.7 per cent.) and exports increased by £11,281,897 (1.5 per cent.). (See “Economist," December 15th.) Now let us look at the unemployment figures. The number of registered unemployed on November 28th, 1927, was 1,172,000, and on November 28th, 1928, 1,439,000. Observe, not a decrease, but an increase of 267,000! (“Ministry of Labour Gazette," December, 1928.)

So much for Liberal, Labour and Conservative economic theories.

The facts are that an increase of exports and a decrease of imports may mean, but do not necessarily mean, that more wealth is being produced at home; and a decrease in foreign trade may coincide with an increase in production. Further, an increase in trade and an increase in production can both take place while, owing to the use of more machinery and improved methods, fewer workers are being employed. This is one of the effects of Capitalism, and the remedy is Socialism.

Not enough gold? (1963)

From the December 1963 issue of the Socialist Standard

We are being asked to concern ourselves with another crisis, caused this time by the decline in the American gold reserve and by the steps the American Government proposes to take to stop the loss.

The alarm was sounded in an article in the Economist of July 27 of this year, and the problem has since been discussed at conferences attended by financial authorities of ten leading industrial countries at Washington in October, followed by meetings in Paris last month.

A natural reaction of those who are unfamiliar with the intricacies of the problem is to leave it to the experts to tell us what to do. Unfortunately for that view the “experts” are unable to agree on the solution, or even on the problem. As recently as a year ago the late Per Jacobsson, Managing Director of the International Monetary Fund, speaking in Washington, said there wasn't anything to worry about. The Daily Telegraph on September 18, 1962, reported him as saying that “there were indications the world was approaching a state of economic equilibrium solid enough to withstand monetary tension." In particular he believed that it would be possible "to assure a stable exchange rate structure without altering the price of gold," and that "the ample monetary reserves of individual countries, together with central bank credits, and the increased facilities of the Fund, provided formidable lines of defence against any pressures that might arise.”

But the Economist article, referred to above, denies everything that Dr. Jacobsson said and demands early action to do the things he said were not necessary. It also threw in the interesting titbit that the banking experts do not know their job at all—"The difficulty lies with bankers all over the world who still do not really understand modern monetary economics.” (It will be interesting to look later at some of the odd economies of the Economist),

The Financial Times on September 9th added the further observation that the central bankers (who according to the Economist don't understand what they are doing) cannot ever agree among themselves. It pointed out that while the bankers of the Bank for International Settlements "dismissed the problem of international liquidity as artificial,” the other lot in the International Monetary Fund "takes a very different line," and the paper calls on governments to take action to stimulate demand. The Financial Times actually quotes the late Dr. Jacobsson as having urged courses the reverse of those he was advocating in September, 1962. So much for the experts.

What then is the problem? It is a truism to say that the exports of goods and services of all the countries in the world balance the imports of all the countries in the world: two ways of looking at the same thing. But in practice any one country may at a given time be exporting insufficient to pay for its imports, or may be exporting more than enough to pay for its imports: again, the total “surpluses ” of exports over imports balance in amount the total "deficits."

What then happens to a country which is importing more than it can pay for by its exports? If it had large gold reserves or reserves of dollars or other currencies it might use them to pay for the excess of imports. Or it might pay for them out of loans or gifts or capital investments from one of the countries running an excess of exports over imports: the United States is such a country, in spite of which it is in difficulties. American exports do exceed its imports, but the amount of American money spent abroad in aid, loans, investments, tourist spending and the maintenance of armed forces has been so great that the huge American gold reserve has been running down at the rate of $3,000 million to $3,500 million a year, and the American Government proposes to cut its foreign spending deficit by that amount. The Economist admits that in theory this should not matter because other countries running a surplus of exports could themselves step up their own foreign loans, investments and did to the countries running a deficit. "But everybody knows that the pattern of deterioration will not work itself out with this marvellous neatness, and that all the finance ministries of the world are not sufficiently enlightened to react to it with absolute logic."

Instead, thinks the Economist, the developed countries which could step in to fill the gap will not do so but will start cutting their imports and production to protect their own reserves of gold, etc.; and the underdeveloped countries will have to cut their own development programmes because the capital they need from outside will not be forthcoming. Then there could be a general world lessening of trade, with an increase of unemployment as has happened so often in the past century and a half.

To Socialists this is just another demonstration of what an anarchic, unstable and wasteful system capitalism is, and of the need to end it and get the world operating on sane lines. Not so to the Economist and the rest of the experts. For the writer in the Economist, “the best and most idealistic method” is not the commonsense one of ending a system which does on repeating crises of this kind but the idea of establishing "some new international central bank that would create some $3,000 or $3,500 millions a year of new deposits with itself which it could put to the credit of underdeveloped countries."

This makes sense to the Economist because they believe that it is all due to there not being enough money, but while the Economist waits to form still another bank to offer to lend still more money, the Guardian city editor on September 30 was reporting that one of the existing two international bodies, the World Bank, is facing the dilemma of having money to lend but not being able to find borrowers to whom it is safe to lend it:

  The problem is not a lack of money but rather a lack of borrowers—at least of borrowers who can meet the stiff terms on which the bank has so far always insisted when making loans.

Despite this the Economist believes that there is not enough money about and that this is due to scarcity of gold:
 There is at least some element of truth in the ridiculous thought that if some aged prospector in Australia in the last century had made a luckier strike in the outback, or if the ancient Egyptians had given the first mystical monetary significance to some commodity which had subsequently proved to be more easy to produce than gold, we would not now face quite the same danger of unnecessary restriction of world production and trade as we face today.

Which goes lo show how little the Economist understands about the capitalist system which it defends so stoutly. During the past 150 years capitalism has boomed when gold production was rising and when it wasn’t, and slumped into depression when gold production was rising and when it wasn’t. And in the course of history governments have indeed tried some other commodities, including silver, without in any way avoiding booms and slumps.

What the Economist does not recognise is that the exchange rate between commodities, including gold and silver, depends basically on their values. The total world output of silver, measured by the tonnage produced, is six or seven times the output of gold, but the value of gold (on the current price relationship) is about 28 times the value of silver, ounce for ounce. So if the world used silver for its reserves instead of gold, or if gold were so plentiful than an ounce of gold could be mined as cheaply as an ounce of silver, the gold or silver reserves of the world would need to be something like 28 times as large by tonnage as they are now, the price of each ounce being one twenty-eighth of the present price of gold. The Economist would consequently still be saying, during recurrent balance of payment difficulties, that it was all due to the insufficiency of the then not-so-precious metal.

In the meantime, the Russian Government is helping to lessen the immediate problem by using the hundreds of millions of dollars of its gold reserve to buy wheat in Canada, U.S.A. and elsewhere because of the failure of the Russian harvest. This throws light on the real nature of the problem. Vast quantities of wheat and other foodstuffs have been produced in those countries and held in store because it was surplus to market demand and could not be sold profitably.

Russian gold has been there all through the years that the American Government has been holding the unsaleable stocks, and the Russians could have bought if they had wanted to. They didn't want to because they, too, had surplus foods in years of good harvest. And all the lime, side by side with private hoarders who hold enormous quantities of gold, there have been hundreds of millions of people (including some in America and Russia) who would have been glad to have more food but lacked the money, and they lacked the money not because of a mistake by the ancient Egyptians but because capitalism divided the population into owners and non-owners, into rich and poor.

The ideal and only practical solution to a problem that capitalism cannot solve (except in the temporary fashion of each expansion of production and trade being followed by a contraction) is to get rid of production for profit and for the market.

Edgar Hardcastle

Unique New Zealand (1969)

From the August 1969 issue of the Socialist Standard

New Zealand’s development has perhaps been unique in two fields. First, certain reforms were achieved in New Zealand at a very early stage. As early as 1879 men had the vote, and by 1893 women were also entitled to vote. But even today certain restrictions are placed upon Maori voting. By 1894 New Zealand was the first country in the world to have established the system of compulsory state arbitration for fixing wages and settling industrial disputes. This was a retrograde step as far as the workers were concerned, for as all class-conscious workers know, in practice, courts for fixing wages etc. are there purely to prevent workers from striking as further pressure for their claims. Arbitration courts are often long-winded and the capitalist knows that the majority of workers can be distracted from their original determination if things drag on too long.

These early reforms and others, like the eight-hour day in 1897, plus a restricted programme of immigration (thereby maintaining a fairly full state of employment) have tended to give the New Zealander a false sense of security.

As well as long hours of overtime and wives going to work, secondary employment has become to the New Zealander an accepted way of life. He has his house, car, and washing machine, but the price has been high, New Zealand being only second to America in the number of hours worked per head of population. The veneer of affluence, like that of any so-called affluent country, for the working class is very thin.

The second unique aspect of New Zealand’s development is that it has been a farming community from the start and has remained so ever since. This can be a very precarious situation since New Zealand’s exports, the greatest bulk of which go to Britain, are made up almost wholly of agricultural produce—meat, wool, tallow, butter, cheese, powdered milk, and some timber.

Reading an extract from The New Zealand Trades Alphabet, 1968 edition, we can see just how far New Zealand is committed to agriculture as a means of overseas earnings, and to Britain as the buyer.

  For more than a century, Britain and New Zealand have been trading partners. New Zealand, whose whole economy is based on our ability to produce cheap foodstuffs, has sold them to Britain in return for goods and services we cannot provide for ourselves. The money which changes hands in trade between New Zealand and Britain now exceeds $860 million a year.
  New Zealand’s farming industry has been developed primarily to suit British needs and tastes, and Britain now buys some 85 per cent of New Zealand’s butter exports, 92 per cent of the lamb, and 78 per cent of the cheese. Last year sales of these three products were worth $216 million, or 30 per cent of this country's total export earnings. Outside Britain there is simply no substantial market open for any of them.

It is no wonder then that the clouds of economic anxiety began to gather over New Zealand when in 1958 the European Economic Community or Common Market was formed.

Looking at New Zealand over the past few years, one can sense the air of change. Unemployment has crept into existence, something until recently almost unheard of, and while the government tries to tell us that today we are back to full employment it fails to take into consideration the 11,064 persons that constituted a population loss to New Zealand in 1968, (see Auckland Star, December 10, 1968). Industrial unrest has been greater than ever as workers are trying to maintain their standard of living. Big mergers are taking place with almost indecent haste to constitute a position of strength for the struggle that is almost inevitable. We see Mr Holyoake a very worried man, chasing around the world talking and almost pleading with prime ministers of various Common Market countries in a puny effort to try to avert the disaster that could come to New Zealand if Britain joins the Common Market. We can see a great need for trade union solidarity. But most of all, if there is a lesson to be learned from this, it is that we can see a greater than ever need for socialist organisation for the overthrow of capitalism.

Ernie Higdon, 

Socialist Party of New Zealand.

Alternative Economic Strategy or Socialism? (1982)

From the May 1982 issue of the Socialist Standard

The current crisis of British capitalism has clearly demonstrated the failure of the strategy which had dominated government policies (both Labour and Conservative) since the end of the Second World War: to manage the economy for continued growth, and a steady expansion in the social and welfare services. The capitalist propagandists insisted that Keynesian policies had cracked capitalism’s biggest problem. The period of cyclical crises during which there were attacks on working class living standards had, at last, come to an end. It was, they said, uphill all the way. Ideologies (by which they meant Marxism) were a thing of the past.

Since the late 1960s, however, it has become widely accepted that Keynesian policies were not the reason for the postwar economic boom. Rather, government policies (Labour and Conservative) were riding the crest of the economic wave. It was not that government policies were controlling the economy; that was a mere illusion. On the contrary, it was only because of the economic boom that governments were able to pursue their Keynesian policies of increased state intervention. As the economic wave came crashing down, governmental attempts to bail out the economy by more and more state spending became increasingly frantic. They found that the Keynesian bucket was full of holes. The Conservative Party, in particular after the failure of the Heath government, ditched its allegiance to Keynesianism and publicly declared its conversion to what it called “monetarism”. The monetarists had a religious faith in the ability of “market forces” to direct capital to where it was most profitable. Also, they believed that this policy of allowing the “invisible hand” of the market to hold sway would result in benefits to the working class as well as the capitalists.

The Labour Party did not at first reject its Keynesian past. In 1974, Harold Wilson led them into government with a so-called radical manifesto of policies intended to bring about “a fundamental and irreversible shift in the balance of wealth and power in favour of working people and their families”. But the Labour government did nothing of the kind. Instead, the rich got richer, and it was the working class instead of the rich who were “squeezed until the pips squeak”. The Labour government imposed severe austerity measures upon workers and their families. These, we were told, were because of economic necessity. Once again, as during the 1964-1970 government, Labour had been ‘blown off course”. In response to the deepening crisis, the government cut welfare and education services and, with the collaboration of the TUC, imposed a “voluntary” wages policy which resulted in a fall in real wages. The aim of these policies was to increase the level of profits kept by the capitalists for the accumulation of capital, and to reduce the proportion of profits spent on the reproduction of labour.

Since its defeat in the 1979 election, a debate has been going on within the Labour Party as to whether its programme in office was the appropriate one, and what it will offer the working class at the next election. A large number of Labour Party members and supporters, who view the last Labour government’s policies as a betrayal by the leadership of genuine socialist policies, have increasingly been talking about an Alternative Economic Strategy (AES). Although there is more than one version of the AES it will, whatever its form, be the main plank of Labour Party and left-wing propaganda in the run-up to the next election.

The aims of the AES
The AES seeks to get British capitalism out of its present crisis whilst at the same time meeting what are considered to be the immediate needs of the working class, and to weaken the role of the profit motive in production. This is seen as providing a platform for a “socialist transformation of Britain”. Thus, the AES is not viewed as a programme that will in itself create a socialist society, but as “a strategy that can win tangible gains in the form of greater working class control over production. Moreover, rather than pursue such gains within the constraints imposed by the existing structure of economic relations, it seeks constantly to anticipate, challenge and progressively dismantle those constraints and substitute new forms of control” (Conference of Socialist Economists London Working Croup, The Alternative Economic Strategy, CSE/Labour Co-ordinating Committee, 1980, p. 7; hereafter referred to as CSE). All that lies beneath this veil of words, however, is yet another attempt by the Labour Party and its left-wing followers to pass off reforms of capitalism as socialism.

Adopting a radical Keynesian stance in opposition to the “monetarism” of the Conservatives, the AES proposes a massive increase in government spending (figures range from £6,000,000,000 to £16,000,000,000, depending on which version of the AES one reads). The argument is that it is the lack of investment which is at the root of the crisis. Capitalists, according to the left-wing, prefer to invest in property and in foreign countries (in 1980, £7,000,000,000 was invested abroad) and to indulge in conspicuous consumption. The blame for the crisis is put at the door of traditional Labour Party bogies: the City, financiers, currency speculators, foreign multinationals, the IMF, and so on. It is the inability of these institutions to invest in Britain on their own accord which necessitates their being brought under control of the nation. The interests of these individual institutions is in opposition to the interests of Britain as an economic unit distinct from other national units. Aaronovitch has stated: “The dominant forces of capital and government have sacrificed the productive base of the British economy at all critical stages (except for world wars). This has been in striking contrast with, for instance, the policies of the ruling groups of those of our main rivals who have grown faster” (Aaronovitch, The Road From Thatcherism, Lawrence and Wishart, 1981, p: 5). In other words, the Labour Party is saving British capitalism from the capitalists!

Previous attempts by Conservative and Labour governments to induce industrial growth have been based on generating increased demand in the economy through such measures as increased government spending and lower taxation. It was believed that to meet this increase in demand there would be a corresponding increase in industrial production. However, this did not happen. In order to ensure that production does increase to match demand, the AES includes policies which directly intervene in production.

The main means to achieve this is through planning agreements, based on a five-year plan, but negotiated every year with private enterprises. These will involve decisions on “investment levels and location, employment, price policy and the like” (CSE, p. 71), and would be negotiated between “management and government with trade unions playing an important role” (CSE, p. 71). These various planning agreements will be coordinated by a National Planning Commission. To ensure that the agreements will be fulfilled, the government will have the power to enforce a range of sanctions against both capitalists and trades unions. The ultimate sanction would be the nationalisation of the enterprise, which would give “a 50:50 sharing of control between labour and capital” (Labour Co-ordinating Committee, There Is An Alternative, Labour Co-ordinating Committee, 1980, p. 14).

Another important part of the AES is the proposal to ensure that finance will be available for investment. This is to be achieved through state control of the major financial institutions. The capitalists, it seems, are unable to do this by themselves. A future Labour government will utilise the pension and insurance funds as well as the revenue from North Sea oil through a National Investment Bank, comprising government, capitalist, and trades union directors. Also, there are plans to nationalise the four major Clearing Banks (Barclays, Lloyds, Midland, Natwest), and to create a State
Bank through the merging of the Bank of England and the National Savings Bank and the Girobank. These re-formed financial institutions would provide credit to industry at more favourable rates than at present. Finally, there is a proposal for an Investment Reserve Fund through which a proportion of pre-tax profits would be used for specific schemes.

According to the left-wing, the crisis is a product of Tory policies, precipitated to bring about a weakening of the industrial power of the working class. This it has achieved through allowing the “laws” of the free-market to operate unfettered. As the left-wing sees it, to overcome the present crisis and prevent a future one, requires that the market forces be tamed and brought under state control; “an essential part of the industrial strategy is to reduce the role of profit in the economy, both as a source of funds to finance investment and as a criterion that determines where investment should or should not be made” (CSE, p. 45). The policies mentioned above are supposed to achieve this. But the hope that the role of profit can be reduced is vain. The disastrous economics of the Soviet Union and Eastern Europe are examples of this.

Operating in a world economy in which capital flows between nations, capital is invested where it produces the highest profit. If the return on capital were lower in Britain than in other nations, capital would not be invested. If the AES were implemented foreign capital would not be invested. Furthermore, British capital would be exported to an even greater extent than at present. Any attempt to prevent the export of capital would not ensure that it was invested in Britain. Instead, it would not be invested at all. Only complete state ownership would ensure the use of this “idle” capital. Whatever policies were attempted, the likely result would be a further decline in industrial output.

In talking of reducing the role of the market, all that is meant is that there will be increased attempts at planning, and a reduction in the role of the profit criterion. It does not mean the end of production for a market in which independent producers attempt to sell their products. It does not mean the replacement of production for profit by production for need. On the contrary, the supporters of the AES are opposed to production for need: “Production only creates jobs if the products can be sold. Production for use is nothing more than a romantic fantasy unless there is some way of transforming social needs into effective demand . . .” (CSE, p. 50). Not even the most avowed supporter of capitalism would object to this Labour Party “socialism”.

Import controls
The Alternative Economic Strategy is not merely a national programme. It also has international implications. During the period of industrial re-structuring, British capitalists’ interests will have to be protected from “unfair” foreign competition, and the flooding of the British home market by cheaper imports. This flooding would have a disastrous effect on the embryonic British industries, which would be unable to sell their products even in the home market. This would mean that they would be unable to earn the profits necessary to invest in new productive plant, resulting in a further decline in competitiveness. To ensure that the new British industries are not aborted, the AES plans to nurture them behind a trade barrier. This would allow British capitalism a breathing space in which industries are tooled-up with the most advanced technology, and labour productivity increased (that is, the level of exploitation is increased), so that when the process has been completed, British capitalism will be better able to compete in the world market. That improved competitiveness is the aim of the AES’s call for import controls is made clear in the LCC pamphlet: “What we have to develop is not just a system of import controls to protect the profits of home manufacturers but a system of planned trade which seeks to develop exports” (p. 20).

The AES attempts to link the interests of the working class with the success of British capitalism in its trade war with its rivals. The aim of the import controls is to save “British” jobs by supporting British capitalism against Japanese, French, and German capitalism. To the workers however, it is irrelevant whether they are exploited by British or Japanese capital. This would result in retaliation by other nations, reducing the level of exports and consequently increasing unemployment. Furthermore, since import controls tax imports and force workers to buy more expensive home produced ones, they lead to an increase in the cost of living for the working class. The net result of import controls would be to increase unemployment among workers abroad, and to whip up hatred of “foreigners”. In other words, they would divide the working class of the world. The AES also attempts to reduce the militancy and independence of the British working class by incorporating it into the apparatus of the capitalist state, and reconciling its interests to the fortunes of British imperialism.

It is clear from the programme of the AES that the danger to “Britain” is not capitalism, but the domination of British capital by multinational and foreign capital. How else to explain the emphasis put on the failure of British capital to invest in British industry, and instead invest abroad. Capitalists who fail to invest in Britain are criticised for being “unpatriotic”, for not putting their faith in “Britain”, and not for being capitalists. Accordingly, the answer to such “unpatriotic” behaviour is for capital to be nationalised or brought under the control of the state.

Workers' control or control of workers? 
One of the main points emphasised to sell the AES to the working class is increased worker involvement in decision-making. Supporters of the AES “attach an overriding importance to the extension of workers’ power-both at the point of production and within the wider democratic process of arriving at economic and social goals” (CSE, p. 80). They appear to think that if there are workers (for them, the working class consists of the industrial workers and certain kinds of “white-collar” workers, and not all those who sell their labour-power, at whatever price) involved in making decisions about how a particular enterprise will develop, that the profitability criterion will not be so important. But is is already the working class which runs capitalism (although not all workers are involved in decision-making. However, it does not matter whether the decisions are made by capitalists, management-workers, or a combination of shop-floor workers, management-workers, share-holders, and the state. What matters is that they are making decisions in the interest of capital. It is not who plays the game which is important, but what the rules of the game are to begin with. The rule of capitalism is a simple one: No Profit, No Production. Opening the books, workers' plans, workers’ co-operatives, or worker directors will not alter this.

Supporters of the AES fear that a high rate of what they call inflation will threaten the hoped for expansion of the economy and lead to the abandonment of increased government spending. Ignorantly, they argue that control of inflation requires that workers do not demand high increases in wages. Although there is controversy on the left as to whether there should be a formal incomes policy, there is agreement that wage increases have to be controlled. Aaranovitch states that any increase in wages would have to “take into account the overall direction of the economy” (p. 44). Agreements on wages would attempt to ensure that wages would not fall, and that “consequently growth in real wages would be ensured except in the circumstances of an uncontrolled fall in the terms of trade” (CSE, p. 132, emphasis added). In other words, whenever things got bad for British capitalism, the working class would carry the burden as usual. No doubt the attack on the working class would be couched in the familiar terms of “the national interest”. If, as some have estimated, 5 million new jobs have to be created for unemployment to fall to the level of the 1960s, the Labour government, with the support of the TUC, would argue that this can be achieved only through wage restraint. Another ploy would be to make increased involvement in decision-making dependent on wage restraint. However, the experience of the last Labour government showed that “non-monetary” gains do not impress the workers in the face of reductions in living standards. As an example of a monetary compensation for wage restraint, Michael Meacher MP suggested recently: “This could be either government repayment, after say three-five years, of a proportion of workers’ income tax as index-linked savings according to the degree of pay restraint, or better still, once planning agreements were in place, a right to share in the firm’s capital appreciation tomorrow to match pay limitation today” (New Statesman, 14 August, 1981). But workers’ experience shows that such deals are not in their interests.

The socialist alternative
The AES is a bridge to state capitalism, not socialism. State capitalism is no more in the interests of the working class than free-enterprise capitalism. The state control of capital would strengthen the power of capital over the working class.

Socialists are not concerned solely with the standard of living of the working class and increased involvement in decision-making. Our opposition to capitalism strikes at the very root of the working class condition: the need to sell our ability to work to those who own and control the means of production and distribution. The only way to ensure that the interests of the working class are fulfilled is through the abolition of the working class itself. Indeed, the working class is a class whose interests are destined never to be fulfilled. This does not mean that it must give up the struggle to improve its conditions. That would be a disastrous course of action. What it does mean, however, is that in the struggle to improve its conditions, the working class will come up against the limitations of what can be achieved under capitalism. They will necessarily confront the conditions of their existence as a class. This leaves two courses of action open to the working class. First, it can work within the limitations of capitalism to obtain what it can. But the history of the working class shows that this is precious little, and there is no reason to believe that the future will hold anything different. Or it can take the second course of action: to confront the class limitations with the determination to break them down. To abolish the condition which creates and recreates the working class: the ownership of the means of production and distribution by the capitalist class.

A reformist accommodation to capitalism’s problems, disguised as an embattled militancy, not only puts off the time when capitalism will be replaced by socialism, but also postpones the discussion of why only socialism is the solution to the problems confronting the working class. But the reformist argues that something has to be done now! If this or that problem can at least be ameliorated, then this is a worthwhile goal; they cannot wait for socialism to provide a solution. When challenged to give an example of a solution to a working class problem, the reformists will be at a loss. They will even go so far as to agree with the socialist that capitalism has no solutions. But, they will retort, at least a reform will ensure that fewer people are suffering from this or that problem: something is better than nothing, isn’t it? There is a gaping hole in this argument. The justification for supporting reformist proposals is the comparison of the position before and after the reform. Before the reform, there are, say, 60,000 people living in stinking, rotten houses, whereas after the reform there are hoped to be a mere 40,000. How could the socialist deny support for the reform? Not to support it would condemn 20,000 more people to living in stinking, rotten houses than need be.

But socialists, in not supporting the reformist programme, are not advocating that nothing be done. Far from it. We are calling for the working class to unite to introduce socialism now. In comparison with living conditions possible in a socialist society, the reformist changes are bloody disaster for the working class. The choice for the working class is not between Reform or Nothing. It is Reform or Revolution.

Cardiff Group

References:
1. Aaranovitch, S. The Road From Thatcherism, Lawrence & Wishart. 1981.
2. CSE London Working Group. The Alternative Economic Strategy, CSE Hooks/ Labour Co-ordinating Committee, 1980.
3. Labour Co-ordinating Committee. There Is An Alternative, Labour Co-ordinating Committee, 1980.