Finance and Industry: What of the future (1963)

The Finance and Industry Column from the November 1963 issue of the Socialist Standard

What of the Future

After a period in the doldrums the motor industry is booming again. To judge solely by the British press one would imagine the boom was confined to these shores. In fact, the U.K. industry is doing no better than most of its competitors and in some cases is not doing as well. Production, for example, is up by 15 per cent. in Britain so far this year compared with 1962; this is higher than the increase in Germany (14 per cent.). but less than in France (17 per cent.) and in Italy (28 per cent.). Even the recently stagnant U.S. industry has managed to show a rise of about 12 per cent.

The export comparison is even less flattering. U.K. exports in the first six months of this year are up 6 per cent. over 1962; but for France the rise is 18 per cent. and for Germany 21 per cent. Italy, on the other hand, has shown virtually no rise in exports at all and has had to contend in addition with a tremendous increase in imports.

All the big national producers in fact are turning out cars faster than they have ever done before. Total U.S. production is reckoned at over 8 millions for the whole of this year whilst Germany will probably produce about 2½ millions, Britain and France 14 millions each, and Italy near enough a million. The automobile is fast becoming as crucial to the Western European economies as it has long been to the American. “When Detroit sneezes,” it has been said, “America catches a cold “; the same can now be said of Dagenham, Wolfsburg, Billiancourt, Turin.

The urge towards more production and bigger sales has become hectic. Every firm in every country strives to keep ahead of its rivals; every national group tries to beat its competitors. New model follows new model with bewildering rapidity; there is new styling; engines go from the back to the front, and from the front to the back; gimmickry of one kind or another has free rein. To keep sales buoyant, it is essential to put something new before the buyers. Once a model like the old Ford 8 or Austin 7, or the Volkswagen, or long Citroen, went on for 15 or 20 years; now it is the exception if a model lasts a third of that time.

Having overwhelmed the small car sector with a vast range of differing models, the car manufacturers of the world are now switching their attention to the medium bracket. British Ford has currently no less than 17 different types in its Consul/Corsair complex in an attempt to cater for every idiosyncrasy on the part of buyers: other firms, such as Renault, Simca, and Volkswagen, are only just coming into the field with perhaps one or two models, but are geared up nevertheless to turn them off the assembly lines at 500 a day.

Apart from the rivalry between individual firms inside their own countries, competition has spilled over national boundaries. To get a foothold in the French market, British Ford and B.M.C. are selling cars at prices that must be bringing them little if any profit. Renault and Simca are doing the same in the U.K. Since the removal of certain tariff restrictions by Italy, the market there has been invaded by cars from Britain, France, and Germany (Volkswagen alone has taken up 5 per cent, of the market). Germany itself will import about 160,000 cars this year, 12 per cent. of new licences.

But in spite of all this frenzied activity, many firms are worried. Although they are turning out cars in large numbers, the profits are not coming so easily. Competition is intense, and the outlay on new plant, factory extensions, and more and more research, is a heavy burden. Most of the new production has been in small cars and the profit on these is low. The firms with the vast capital resources to cope with this mass production will have the best chance of survival, the others will either be taken over or will amalgamate.

The chief threat will come from American capital; from Ford with its holdings in Britain and Germany, General Motors again in Britain and Germany, and Chrysler in France. Volkswagen is already said to be feeling the pinch from Ford and Opel (General Motors), and Rootes has long suffered the same uncomfortable position in this country. Rumours continue to flourish in Europe about amalgamations of various “family”‘ concerns to counteract American pressure —Fiat in Italy, Mercedes—Auto Union in Germany, Citroen and Peugeot in France. That they all have reason to be afraid is emphasised by a recent calculation made in a European trade paper: General Motors in the U.S. would apparently still have made a profit of almost £300 million if they had given away free the whole of the production from their Opel plant in Germany.

It will be interesting to see for how long the independent European car producers can continue to stand up to the might of the American colossi. In the meantime, they carry on the frenzied struggle to sell their cars with one eye fixed anxiously on their European rivals and the other looking apprehensively at the United States. No wonder they cannot see where they are going—perhaps its just as well for them.

It’s all as planned

When trade booms the politicians dispute with the business men about the responsibility, both claiming the credit. When trade slumps the business men blame the government and the government blames the greedy workers or the wicked foreigners. The truth is that neither business men nor Cabinet Ministers can have much certain knowledge of the future ups and downs of home and foreign trade, or do much to control it: but some are luckier than others.

One widely held belief of our age is that governments can manipulate trade expansion and therefore can know what the future will bring because they control it. Sometimes they appear to be right not because they made it happen but because it was going to happen anyway and in spite of their efforts. An example of this was recently commented on by Paul Bareau in the Daily Mail on September 9th. He recalled that earlier in the year the Chancellor of the Exchequer undertook to promote an improvement in trade by running a budgetary deficit. Trade did improve between April and September but without the deficit having happened.

“The Chancellor of the Exchequer, therefore, budgeted for a current deficit of £90 million, a capital deficit of £597 million, and an overall deficit of £687 million—or ten times the modest and mean figure for 1962-63.

So far, virtually nothing of this worthy intention has been translated into fact. In the first five months of this financial year the current deficit was £28 million larger than in the corresponding period last year, but the capital deficit was £3 million smaller, leaving an almost negligible £25 million change in the overall deficit.

The recovery which has taken place in the economy, therefore, owes virtually nothing to the stimulus that was to be applied through the Budget.”

Business men may say that this just shows the limitations of politicians and their theories. But a recent book on the American Ford Company (The Fate of the Edsel, by John Brooks) recalls a colossal blunder of that company. They went to great expense to give the public just the car they wanted. It was a flop and lost £100 million.

Stan Hampson & Edgar Hardcastle

Letter: Russia's Future. (1933)

Letter to the Editors from the September 1933 issue of the Socialist Standard

Russia’s Future.

Why not a development towards Socialism? 

A group of workers in New York have put the following interesting questions about Russia: —

A group of workers—20 all told—are interested in your viewpoint on the following questions :—

1. Can the Soviet Union ever become economically self-sufficient ?

2. Can Socialism be built in Russia alone ?

The argument we were presented with recently was that—starting out with its present enormous resources and labour power, and the money it may borrow abroad, the Russian State will sell Russian products abroad, turn the part of the surplus value that is left after the payment of interest, State expenses, etc., back into its industrial enterprises, developing its industries to the point of satisfying all national needs till in time there is attained the nearly total economic independence of the country from the rest of the world. This will offer the basis for Socialism in Russia.

Please answer in detail and in simple language why, for economic reasons, or any other, (1) and (2) are impossible. Have your explanation appear in the Socialist Standard if possible.

Reply.

If the question of self-sufficiency in Russia could be considered simply as a technical question of adjusting the living habits of the population so that they ate, and wore, and used up in other, ways, only articles which could be produced inside Russia, then self-sufficiency would be quite practicable, as indeed it would also in India, China, the U.S.A. or the British Empire.

The question, however, cannot very usefully be considered in that form because in no country is the production and distribution of wealth simply a technical question. In all countries it is as well a political question, involving the wealth and position of separate classes.

Before going further into that aspect, let us put another question. Is Russia becoming more self-sufficient or less ? The answer is that the development of Russia is away from self-sufficiency—not towards it.

Back in the eighties of last century, Russian imports and exports together amounted to only about £100,000,000 a year. For a country of that size it was negligible, as can be seen from a comparison with England’s foreign trade, which was seven times as great, although Russia’s population was several times as large as England’s. Russia then, particularly as regards the great mass of the population, was all but self-supporting.

By 1914 her trade had nearly trebled, showing clearly that Russia, like the other countries, was giving up self-sufficiency. During the six years after the war, Russia’s foreign trade was ruined, and again Russia was practically self-sufficient. Since 1924 her foreign trade-has rapidly grown again, and by 1930 and 1931 had reached a level not very far short of the pre-war level.

The present world crisis has, of course, adversely affected Russia, as was pointed out at the World Economic Conference by M. Litvinoff, who represented the Russian Government. (See Report of his address published in the Monthly Review of the Moscow Narodny Bank, Ltd., London, June.) The crisis compelled the Russian Government to curtail its imports because, owing to the fall in the prices of the articles Russia was exporting, the Russian Government was unable to obtain sufficient foreign currency to pay for the imports it had planned.

This does not, however, mean a permanent increase in Russia’s self-sufficiency. On the contrary, M. Litvinoff held out to the Conference delegates the attractive offer that the Russian Government “might agree to place orders abroad in the near future to the sum of about one billion dollars” (about £200,000,000), which, he said, “would have no small influence in the alleviation of the crisis.” To do this the Russian Government would need easier trading conditions from foreign, manufacturers.

Now that we have shown that Russia is moving away from self-sufficiency, let us ask why. Why does Russia or any other country import some articles and export others? Usually, it is because it is cheaper to produce an article in one country, and in particular areas of the same country, than in other areas or other countries. The cheapness may be due to climate and soil, cheaper labour-power, the presence of coal, iron or other mineral deposits, lower rates and taxes, lower tariffs, etc. (There are, of course, other complicating factors, such as restrictions or subsidies resulting from the military needs of the Governments.) The net effect of these differences is that it is more profitable to the English capitalist to invest his money in, say, machine manufacture and shipbuilding, than it is to invest it in cattle raising in England. The consequence is that certain industries survive in one country and are able to undersell and ruin their competitors in other countries and we get world trade and a large measure of interdependence. Governments often try to impede this development, either in order to help their friends in certain industries by means of tariffs, or for military reasons; and in times of acute depression almost all Governments try to restrict imports as a means of protecting their gold reserves, which they fear may be drained away to pay for the imports, and thus destroy confidence in the financial stability of the Government. If the difference in the cost of producing certain articles in different countries is sufficiently great, the import and export of these articles will surmount all obstacles.

For example, Russia at present is able to produce cheaply oil, timber and various foodstuffs, but cannot yet produce equally cheaply much-needed ores, metals and machinery. Therefore it “pays” Russia to concentrate on the production of certain' articles for export and use the money to pay for imports. On balance this is more profitable than trying to be self-sufficient. The world crisis and consequent slump in prices of oil and grain and timber has hit Russia’s export industries, but even a slight recovery in the world prices of these articles will restore the position of the years before the crisis, when it will again be profitable for Russia to maintain and expand her industries producing for export.

Our correspondents envisage the possibility of Russia “developing its industries to the point of satisfying all national needs.” This assumes that the conditions favouring the development of Russia’s foreign trade are disappearing or will disappear, but is there any reason to suppose that this will occur ? The mere growth of Russian production due to an all-round increase of productivity in all branches of industry and agriculture, mining, etc., will not make foreign trade any less profitable, for it will be accompanied by a parallel increase of productivity in industry all over the world. If it pays Russia to import machinery paid for by the export of oil or timber, any increase in the productivity of the Russian timber or oil industries will lead to a growth of foreign trade, as also will any increase in the productivity of the machine manufacturing industries outside Russia. On the other hand, Russia’s foreign trade would decline in volume if her machine manufacturing industries became more productive (that is cheaper) than the foreign machine manufacturing industries, or if the Russian oil and timber industries become less productive than their foreign competitors.

From what we know of the way in which agricultural and industrial technique advances all over the world, we can say with some certainty that for many years to come no changes are likely to occur of so revolutionary a nature that they will destroy the factors militating against self-sufficiency in Russia or any other comparable area.

The second question relates to building Socialism in Russia alone. Here again we can say that if Socialism depended only on the technical possibility of maintaining the life of the population on products within a given area like Russia or U.S.A., there would be no impossibility about Socialism in Russia alone. In fact, however, Socialism pre-supposes a whole range of conditions which are wholly or mainly lacking in Russia. It pre-supposes a population which has exhausted, and knows that it has exhausted, all the main possibilities inherent in capitalism, and knows and wants Socialism.

Russia, owing to the relatively backward condition of its industry and agriculture and to the fact that the overwhelming mass of its population has not spent its lifetime under conditions of highly developed industrial capitalism, has not exhausted the possibilities of capitalism. So far, therefore, from welcoming Socialism, the mass of the Russian population wants nothing better than to be left alone to enjoy the fruits of expanding capitalism. The efforts of the Government, carried on for sixteen years, to crush, placate, or remould the peasants, are evidence of the magnitude of the force against which Socialism in Russia would have to struggle. The attempt of the Bolsheviks to force an unwanted social system on an unready population, by means of its control of the State machine and the armed forces, will fail, as Marx said it would.

Our correspondents can perhaps grasp this best by considering the impossible task of forcing Socialism on the population of the U.S.A., a country far better equipped in every way than Russia for such an experiment.

Edgar Hardcastle

Finance and Industry: Exports and hard work (1965)

The Finance and Industry Column from the September 1965 issue of the Socialist Standard

Exports and hard work

“Everyone must do a full day’s work for a full day’s pay from now on.”

“This is not a year in which we can afford large wage increases.”

“There is far too much indiscipline in every part of the nation.”

“We can no longer afford workers who inflict harm on production and the public with sporadic strikes.”

“Production, more production, more efficient production, cheaper production.”

These are typical of the pleas we get from Wilson and his Ministers almost every weekend now. We are told that there is a serious balance of payments problem which must be solved if prosperity is to be maintained. Labour Ministers, joined the other week by Prince Phillip, entertain us with stories about the simple economics of the family: if you spend too much you can only make this up by sacrifice and hard work. The implication of such stories is that the population of Britain, like members of a family, have a common interest. Socialists deny precisely this; today society is composed of two classes with completely opposing interests. This is why the analogy of the family is invalid; though there is perhaps a sense in which a nation can be likened to a family: a family of capitalists who have banded together for the furtherance of their mutual interests. When people talk of “the nation,” “the country” or “Britain” they are, in fact, referring to this small capitalist minority. For they are the country; Britain in this context is just a fancy collective name for them; the so-called national interest is their interest.

The balance of payments are the overseas trading and investment accounts of the capitalist class. They record, on one side, exports, loans from other capitalist groups, income from overseas investments and the investments of foreign capitalists in the home country. And, on the other side, imports, loans to other capitalist groups, income from foreign investments in the home country which goes abroad and overseas investments. These accounts are generally divided into two parts: the actual balance of trade (exports and imports) and what in Britain is called the “capital account” which records loans and investments. The balance of payments as a whole must, in accordance with simple accounting principles, balance. A deficit in the balance of trade, for instance, must be made by a surplus on the so-called capital account. Balance of payments difficulties arise when payments continuously exceed receipts. Before the last World War the deficit in the balance of trade of the British capitalist class was matched by an inflow of Profits and Interest from overseas. However, many of these overseas investments had to be sold to pay for their war. As a result at the end of the war the British capitalists found that they couldn’t go on as before: now they had to try to eliminate the trade deficit altogether by increasing exports. This is their much-publicised “exports problem.” The position of British capitalists is further complicated by the fact that its currency, Sterling, is one of the international means of payment and also by the fact that they act as bankers to a whole group of capitalist states known as the Sterling Area.

No group of capitalists can go on running a balance of payments deficit without in the end risking bankruptcy. There are various measures that can be taken to try to avoid this dire result (though, of course, the ups and downs of industrial production and trade mainly depend on factors which governments can’t control): loans from other groups of capitalists, cut down imports, try to increase exports and to reduce costs. Devaluation, which involves making it cheaper for foreigners to buy Pounds Sterling, and thus making British exports more attractive in the World Market.

When the Labour Party took over the management of the common affairs of the British capitalists last October, they were immediately faced with a serious balance of payments problem: imports rising, reserves falling, confidence in Sterling disappearing. As they themselves have since revealed they considered that their first duty was to “Save the Pound.” They got a loan from the International Monetary Fund, put on the import surcharges and the like. Most of their promised social reform schemes were “postponed” under the excuse of “clearing up the mess the Tories left.” Since then a major part of their economic policy has been directed to “saving the Pound,” from Wilson’s pleas for a New Britain with boardrooms full of fighting go-ahead managers and salesmen and factories full of hard-working, docile workers who have abandoned strikes, tea-breaks and clock-watching, to Brown’s futile prices and incomes policy. The emphasis is always the same: old attitudes must go, British capitalism can’t afford anything which increases costs from expense account lunches to Trade Unions using their economic strength to the fullest.

The general logic of this policy flows from the (correct) assumption that the continued employment of the working class depends on the continued prosperity of the capitalist class; thus to keep full employment, it is argued, the Government has to take measures to preserve prosperity (including using armed force to protect oil in South Arabia and copper, tin and rubber in Malaya) and avoid measures which threaten to upset it (like expensive and interfering social reform schemes). This might be reasonable if you accept, as the Labour Party does, that the working class must for ever be dependent on the capitalist class.

After all it was Marx himself who wrote that an “indispensable condition for a tolerable situation of the worker is the fastest possible growth of productive capital.” But this is merely the result of the utter dependence of the working class on the capitalist for a living in the first place. This is a dependence which Socialists say amounts to enslavement. We are wage-slaves, condemned to work all our lives for the capitalists in return for a wage or salary. But more than this we can only find employment when our masters can sell what we produce, when they are prosperous and affluent. Socialists say that this economic dependence on the capitalist class can and should be ended. Socialists have always urged workers to realise that their interests are completely opposed to those of their employers and to pursue policies in line with this. On the economic field the conscious pursuit of this class struggle involves using the trade unions to fight and improve wages and conditions all the time; and on the political field an organised struggle in an uncompromising Socialist Party for the conquest of political power in order to achieve Socialism.

Once it is realised that society is not one happy family with a common interest, but rather is composed of two hostile groups then it can be seen how dangerous from the working-class point of view are the Labour Party pleas for hard work, moderation in wage demands and co-operation with capitalist enterprises (“enlightened management and co-operative labour” is what Callaghan once called for). For if accepted this would amount to a complete capitulation to the capitalist class. The Labour Party is, in fact, saying, “If you want to exist under capitalism you must do so on capitalism’s terms, so WORK HARD, DON’T STRIKE, CO-OPERATE.” Socialists have heard this before and have always fought against this servile attitude. Under capitalism the working class must struggle; they have no choice as their economic position forces them to—this, in fact, is why this particular policy of the Labour Government must fail.

Exports, gold reserves and balance of payments only come into this insofar as the prosperity and affluence of the capitalist class in Britain—and so also the continued employment of us their slaves—is particularly dependent on its overseas trade. Today the workers are slaves whose interest it is to organise and struggle to free themselves. Once this is realised then it becomes obvious that exports and the like are not problems that concern the working class at all.

Rachman and rent control 

In the May Socialist Standard in a discussion of the Milner Holland Report we drew attention, as an example of the futility of reformism, to the fact that operators like Rachman were the products in part of rent control. A recent pamphlet by the Conservative Political Centre, Target for Homes, now says:

“The particularly unpleasant strong-arm practices associated with the name of Rachman resulted from control and not from decontrol. It was only the enormous financial attraction of vacant possession that rendered it so profitable to use these unconscionable pressures to get rid of controlled tenants. If there had been no rent control and no controlled tenants this particular exercise would have had no conceivable purpose. And it is significant that Rachman’s operations started some years before the 1957 Rent Act and ceased very shortly after it was passed—long before his activities became public” (p.44).

Adam Buick

Your wages are a problem (1962)

From the August 1962 issue of the Socialist Standard

Do wage increase put up prices?

One of capitalism’s toughest problems is the size of the wage which is paid to the working people who keep the system operating.

Basically, it is a problem of almost mathematical simplicity. The working class produce values which are higher than their wages. They produce a surplus value which goes to their employers. If the workers can force their wages up, there is less of the surplus left for their employers. On the other hand, if the employers can force wages down, more of the surplus will go to them. This must hold good, however the productivity of the worker may be altered by changes in natural conditions or in the intensity of his labour.

It is inevitable that capitalism’s governments should concern themselves in this dispute which, by the way, is known as a “class struggle” by Socialists, who have an uncomfortable habit of calling a capitalist spade a spade. Governments do their governing in the interests of the employing, owning class of capitalism. It is, therefore, equally inevitable that when they concern themselves with the class struggle over wages, governments should take the side of the capitalist class.

Thirty or forty years ago there was no great need for the government’s intervention to be especially vigorous. With capitalism in the doldrums, with never less than one million unemployed in this country, the working class were badly placed to push home any demand for better wages. If they did push any such demands the government had only to stand aside and watch the workers starve themselves onto their knees in a strike or a lock-out.

Since the war, conditions have been rather different. Wage rises must now be restrained by government action and appeals, rather than by the old method of both sides beating their heads together. Sometimes, indeed, conditions have defeated even the appeals and the government itself has surrendered, offering wage increases rather than face a strike. This has happened more than once over the railwaymen, much to the annoyance of newspapers like The Economist, which irritably demands at such times to know whether the government is serious in its desire to stop wages going up.

An essential part of the official campaign on wages has been the thinking up of responsible-sounding excuses for refusing the workers’ demands. These excuses must be epitomised in a snappy name for the refusals. This time last year it was the pay pause which, it seems clear, was designed to hold wages in check for a few months. There are signs that the pause was at least as successful as the government could have hoped. Apart from the rises which were denied to government employees, the engineers themselves forebore to press a wage claim last autumn. The engineering employers have now conceded a three per cent. rise, but in the opinion of at least one newspaper, this would have come earlier but for the pay pause.

Now the “guiding light” on wage increases has replaced the pause, although it is being somewhat buffeted by the arbitration tribunals.

It is safe to forecast that, for those who are willing to do a little research and remembering, the events of capitalism will expose the government’s excuses for what they are. Just after the war, for example, the Attlee government launched a great campaign on wages. There was a propaganda drive to convince everybody that rises were inadmissible because, among other things, Britain’s international balance of payments was in jeopardy. Ministers lost no chance of parading statistics which showed how the British capitalist class were spending more on their imports than they were receiving from their exports. We heard many homely analogies about the difficulties of families which spent more than their income and we were invited to regard ourselves as members of a big, British, capitalist family.

A lot has happened since then. The international trading situation of Britain has varied considerably over the years. Once before—during 1959—the British capitalist class actually had a favourable balance of payments. Now it has happened again. The Treasury has announced that the first quarter of this year yielded a payments surplus in Britain’s international trade of £21 millions. The terms of trade—the ratio of import to export prices—are set fair for British capitalism and have been so for some time. The Chancellor of the Exchequer has suggested that over the year the surplus in payments might come to something like £150 millions.

At the same time another of the difficulties which faced the Labour government has gone, to be replaced by its opposite. There is no longer a desperate need to rush into a gaping wide world market, a market waiting to be filled with any substandard commodities which could be produced fast enough to pump into it. Coal, for example, was one of the big needs of the post war years. But so much has the demand for coal decreased that the National Coal Board has closed many of its pits and intends to close still more.

The dilemma

NCB chairman Lord Robens, speaking at the last annual conference of the National Union of Mineworkers, put his finger on British capitalism’s present dilemma:

“This is not an era of coal at any price—that ended in 1957; we are in the era of hard selling based on price, quality and service, and in this situation the fundamental need is to be able to produce the right produce at the right price.”

Conditions, then, have decidedly changed since the 1945 Labour government and in doing so have wiped out the excuses which were used to justify the wage freeze and the other restrictions of Crippsian austerity. The government itself has changed. But government policy on wage increases remains unaltered. All that has happened is that the old excuses have been replaced by the new. The catch-phrases of the late forties have given way to those of the early sixties. A pay pause may sound different from a wage freeze, but in fact it means almost exactly the same.

In one respect the government has not been caught napping by the changes of the past seventeen years. They have not run out of excuses. Now, we are told that wage rises are inflationary. The argument which goes with this assertion has almost become part of the mystique of modern capitalism.

When wages rise, runs the argument, the costs of production go up and the employers automatically increase their prices to recoup this. Higher prices mean that any unit of currency is able to buy less than before, which means that more currency units are needed to circulate the same amount of commodities. Thus wages are supposed to be going up closely followed by prices which, as they rise, nullify the wage increases and cut the purchasing power of the pound. This, say the pundits, is inflation.

This argument ignores several basic facts of capitalist life. Wages are the price of the commodity labour power and generally will fluctuate in accordance with the state of the labour market. But a market for one commodity can be buoyant at the same time as for another it is depressed. Although the coal mines are having difficulty in selling their product it is still possible for miners to get rises because at the moment most of them could get another job without great difficulty. The prices of many of the commodities which will for ever be associated with the so-called Affluent Society—television sets, refrigerators, washing machines—have tumbled over the past few years. But, as we have seen, the wages of the electricians and the engineers who make these goods have increased.

Karl Marx made the point over a century ago and it is still valid today. Highly paid workers can produce cheap commodities, and vice versa. A wage rise need not, therefore, be followed by a price rise.

The Guardian recently challenged the starting point of the inflation theory. In an editorial published on June 25, they said: This is the same mode of thinking as the one that regards success in enforcing a pay pause as the overriding test of present British economic policy. But in fact labour costs in the United States have risen sharply in periods of falling production and have actually declined in periods of recovery in spite of bigger increases in wages. . . . There is much evidence that the same is true of Britain.

Where, now are the protestations of The Guardian—and of other papers—that wage increases must put up labour costs? Are they buried, along with the other stale excuses? If so, we may be sure that they will return, even if in reincarnation.

Yes, wages are a problem and like most problems they are fertile in paradoxes. Perhaps the biggest paradox of all is that the problem will not be solved by putting wages up, or down, but by getting rid of them altogether.

Ivan

The continuing trade war (1987)

From the Winter 1987-88 issue of the World Socialist

For a long time we have been hearing about "the trade war" with Japan. According to the media, the whole populations of America and Britain have been incensed about the flood of Japanese imports and the reluctance of the Japanese to buy foreign goods, and are demanding that their governments put pressure on Japan to stop it.

This is a half-truth that is wholly misleading. The American and British companies making fat profits importing Japanese goods, and their customers who buy them, are not incensed and are not asking their governments to do anything. They "buy Japanese" because the goods are cheap, and they want to go on buying them. The people who do want it stopped and who happen to have got the support of their governments are those American and British manufacturers who are being driven out of business because they cannot produce as cheaply as can their Japanese rivals. It is a development seen many times before in the history of world capitalism, but with different countries taking the leading role.

At first it was Britain, "the workshop of the world", which flooded other countries with its cheap manufactures. Among the later leaders have been the USA and Germany. Now it is Japan, but in due course it will be the Japanese manufacturers complaining about cheap imports. Already there are signs of this but it will be the Japanese manufacturers who will complain, not the Japanese import companies and their customers.

The important aspect of this to take note of is that it is just one example of the sectional conflicts of interest inside the capitalist class in each country — those who favour "free trade" and those who favour protective tariffs; the borrowers who want interest rates to fell and the lenders who want them to rise; the export industries pressing for a lower foreign exchange rate for the currency and the import industries pressing for a higher rate; and the capitalists who want inflation with its higher prices, those wanting deflation with its lower prices and those who prefer the gold standard and a stable price level.

Illusions about Free Trade

The row with Japan raises the issue of Free Trade. In the mid-nineteen century two Liberal politicians, Cobden and Bright, evolved a comprehensive theory. Each country should, they said, cease all forms of discrimination against foreign goods and always buy in the cheapest market. Prices would fall, production would increase and all would benefit through universal peace and prosperity.

It suited British manufacturers at the time because the cheapness of their manufactures would give them access to the markets of all countries operating a free trade policy. The Tory, Benjamin Disraeli, understood the world better than did the Cobdenites when he said that "the Continent will not suffer England to be the workshop of the World". Not only was he right about that, but within thirty years, when British goods no longer had the advantage of cheapness, the manufacturers were campaigning for protection against foreign imports.

The error of the Cobdenites was in their belief that the nations are simple geographical associations of manufacturers, traders and workers happily co operating together and ready to join with those in other nations to the advantage of all the people. As a picture of the one hundred and sixty nations in the world it is not recognisable. Capitalism is not like that. In all the nations there is exploitation of one class by another, production carried on for sale and profit, and armed forces both to protect the property of the owners and to maintain their interests against the other nations. The nations were born in conflict and live in conflict.

The nations came into existence, with greater or less violence, out of the break-up of the old empires such as the Turkish and Austro-Hungarian, and later, out of the dismantling of the British, French, Spanish and Portuguese colonial empires. How violently, can be seen in our own times because nation-forming is still going on: the creation of Israel and its wars with neighbouring states; the breakaway of Bangladesh from Pakistan and of Pakistan from India, which now faces separatist movements of the Sikhs in the Punjab and the Ghurkas in West Bengal; the Corsican independence struggle against France and of the Basques against Spain; the Tamils in Sri Lanka and the movements by the Kurds in Turkey, Syria, Iraq and Iran to form a Kurdish nation. In other parts of the world there are similar movements including parts of Russia. Twenty years ago the Nigerian government in a bloody civil war beat off an attempt by oil-rich Biafra to form an independent state.

There is a common pattern in all the past and present, successful and unsuccessful attempts to form new nations. Local groups of politicians and businessmen who think they can do better for themselves on their own form so-called national independence movements, using as their power-base local populations having the same language, or religion, or tribal loyalties or the the same facts or legends of history (some Israelis invoke the real or supposed events of 2,000 years ago).

Constant battle for resources and trade routes

Marx and Engels sketched out the nation-forming process in the Communist Manifesto in 1848. In opposition to the idealised vision of Cobden and Bright, Marx and Engels wrote:

The bourgeoisie finds itself in a constant battle . . . at all times, with the bourgeoisie of foreign nations.

The principal forms taken by the constant battle are attempts to grab sources of raw materials, minerals and fuels needed for industry and the need to protect the sea and air routes along which they are transported. An interesting example comes from Alsace and Lorraine. Acquired by France in the 17th and 18th centuries, this area was taken in war by Germany in 1870; reoccupied by France in 1918; retaken by Germany in 1939 and returned to France again after World War II. The lure was the rich iron ore deposits.

Then there is the so-called trade war between the nations. It has been widely misunderstood and has produced a crop of fallacious theories from economists and others to explain how it works. It can happen, though instances are few, that a group of capitalists can induce the government to turn trade war into real war, as when, early in the 19th century, Britain made war on China to force the Chinese government to allow the import of opium into China.

The extent to which a nation depends on foreign trade reflects the extent to which it has all the resources it needs within its own borders. For the USA and Russia, with their great land mass, exports are only ten per cent of total production and are correspondingly of limited importance except to the industries concerned. For Britain it is about 30 per cent and for Belgium, Switzerland and some other countries very much more.

In general foreign trade ranks in importance far below the vital strategic interests of the nations. Despite the long "trade war" between the USA and Japan no one has suggested that it might lead to real war: the mutual interest of the two governments in strategic control of the Pacific is much too vital. As Professor Edwin Cannan pointed out during the 1914 war:

Where there are not supposed to be divergent strategic interests, no amount of divergent or supposedly divergent commercial interests produces either war or preparations for war.

Several writers, including J.A. Hobson, Major Douglas, founder of the Social Credit movement, and the economist J.M. Keynes, took a different view, giving the pressure to find export markets an importance out of all proportion. Keynes, in particular (in the last chapter of his General Theory), holding that the pressure to export is a principal cause of war. All three based their theories on a supposed, but in fact non-existent, overall "deficiency of purchasing-power" in every nation.

Fallacies about why countries export

The governments in all countries face an acute political problem in the discontent that arises if large numbers of workers are unemployed. They and their advisers are therefore concerned to find out what it is that causes the periodic crises, and the depressions which follow the crises, that are an inevitable feature of the whole modern world.

One of the flimsiest of the anti-Marxist theories selects as the cause of crises the restricted purchasing power of the working class. Because the ability of the workers to buy consumer goods is limited to their wages, the theory held that the industries producing consumer goods soon find themselves in financial difficulties as they compete with each other for a limited market, so a crisis occurs. This theory was known to Marx, who ridiculed it. He pointed out that in the boom which is the forerunner of every crisis, the wages of the whole working class not only rise because wage-rates rise and more workers are in work, but the working-class "get a larger share of the annual product intended for consumption". So the sales of the consumer goods industries do not go down but go up. As Marx said, "such a period should rather remove a crisis".

Hobson, Douglas and Keynes put forward a more substantial version of the deficiency theory. They argued that the combined purchasing power of the capitalists and the workers together is insufficient to buy all the commodities on sale in the market. They offered different reasons for this deficiency. Hobson said it was due to the existence of monopolies, Douglas said it was because the government did not put enough currency (notes and coins) into circulation. Keynes said it was because the government borrowed and spent too little to create full employment.

There is no need to go into the details of their theories because history has disproved all of them. Crises and depressions with mass unemployment have occurred before monopolies were formed and after they had been suppressed. The amount of currency in circulation in the 1980's when unemployment has been over three million is a dozen times more than it was in the 1950's when there was a continuing labour shortage. There has been a similar big increase of government borrowing and spending in the 1980's compared with the 1950's.

Louis Boudin, who had written usefully about Marxian economics in The Theoretical System of Karl Marx, went quite off the rails about the supposed deficiency of purchasing power and consequent compulsive pressure to find markets for exports. He argued that industrially developed countries cannot export to each other at all. Their only outlet, he said, is in primitive economies not yet in the sphere of capitalism. So, as those economies become industrially developed all exports would dry up. Rosa Luxemburg put forward a similar theory in her book the Accumulation of Capital. Boudin and Luxemburg expressed these views some seventy years ago, but the volume of world trade now is enormously greater than it was then, most of it between the industrially developed nations.

If it were true that capitalists have to export because of a deficiency of purchasing power at home and therefore British capitalism had to export £75,000 million of commodities in 1985, who is it who bought the £80,000 millions of imports?

The Marxian Position

Marx dealt with and disposed of the whole deficiency theory. There is not and cannot be an overall deficiency of purchasing power to buy all the commodities on sale in the market; however possessing purchasing-power is not the same as using it at once to buy the commodities in the market.

Marx made this point in his reply to the French economist J. B. Say, in the first volume of Capital (Chapter on Money, or the circulation of commodities). Say held that serious depression is impossible because, in his phrase, "every seller brings a buyer to market"; by which he meant that every capitalist who has sold commodities then has the money with which to go out at once and buy other commodities. To which Marx replied by pointing out that being able to buy at once does not mean that the capitalist has to buy at once. "No-one is forthwith bound to purchase, because he has just sold." He went to say:

If the interval in time . . . between the sale and the purchase becomes too pronounced the intimate connection between them, their oneness, asserts itself by producing — a crisis.

If the buyers of a certain line of commodities suddenly cease to buy them the industry producing the commodities is in financial trouble.

This happens because in every boom some industries overproduce for their particular market. Prices drop, profit margins disappear and production is curtailed or halted. Because of growing unemployment, the total wage of the working class falls and with it the sale or consumer goods too.

Capitalists produce to make a profit. They are not interested in production for its own sake. It is how capitalists behave that causes crisis, not the limited purchasing power of the working class.

What about imports?

It has to be emphasised that the "trade war" is not just about exports but about both imports and exports. The pressure behind both is the same, the search for profits by the import and export capitalists.

The competition is the same. Export capitalists compete with each other for overseas markets and with foreign manufacturers. Import capitalists compete with each other and with foreign manufacturers for access to the home market. Each section seeks to get the backing of the government and some governments help export industries with subsidies. But equally, some governments put obstacles in the way of the export industries in order to help home producers.

At the beginning of the century the British government levied a heavy tax on every ton of coal exported. The coal owners objected but it was welcomed by British factory owners because it meant lower coal prices in the home market. The Argentine government levies a tax on the export of wheat and the Indian government fixes a minimum price for the export of tea. Only the high-priced tea can be exported, with the effect of keeping prices low and promoting sales in the home market. Developing nations producing raw materials to be manufactured abroad eventually decide to restrict exports in order to promote the development of manufacture at home. It all depends on which section of the capitalist class succeeds in getting government support for its particular benefit.

Edgar Hardcastle (Britain)

Blogger's Note:

As both Louis Boudin and Rosa Luxemburg are mentioned in Hardcastle's article, readers might be interested in the following articles and book reviews from the pages of the Socialist Standard and the Western Socialist that covers both writers in greater detail:

• A review of Louis Boudin's The Theoretical System of Karl Marx by Ren (1968 No. 3 issue of The Western Socialist)
• A review of Louis Boudin's The Theoretical System of Karl Marx by Edgar Hardcastle (August 1968 issue of the Socialist Standard)
• Rosa Luxemburg and the Collapse of Capitalism by John Crump (January 1969 issue of the Socialist Standard)

Made in Britain (1962)

From the October 1962 issue of the Socialist Standard

Exports and Imports

Before the war “Made in Britain” was a selling point. At any rate, enough manufacturers thought so to make something of a splash about it in their advertisements. We don’t hear so much of this now. Down at any youth club, we know, it is Italian clothes which are all the rage. Swedish tableware has won a name for itself as an elegant, durable wedding present. The black leather jackets knock up their tons on motor cycles from Japan, which also supplied a lot of the cameras that clicked away on our damp beaches this summer.

To the casual observer—and this is how we can describe most of the workers whose fortunes under capitalism depend upon their observations being anything but casual—this gives the impression that British industry is being engulfed by a wave of foreign imports. This impression is often coloured by heart-racking stories of the cheap labour which foreign industries are supposed to use. Stories of pregnant Japanese women sweating out long hours in textile mills for next to no pay. Of slum dwellers in Milan being squeezed in the factory until their pips squeak. English employers, of course, are supposed to play fair. No cheap labour is used here. All of this country’s exports are fairly priced and compete honestly on the world’s markets. So runs the popular story. You can hear it in any City restaurant any day of the week.

From there, the argument progresses simply. Because they use cheap labour, the foreign industries can knock out dirt cheap goods. But the British manufacturer, selling his products as if he were playing cricket, sticks to the rules and poor, simple, honest fool that he is, is undercut and outsold all over the world. So British industry packs up and we are left unemployed, staring at shop windows full of cheap cameras from Tokyo and cheap shirts from Hong Kong. This should be enough to teach us all to buy British, even if it does cost us twice as much from our wages.

This argument is so popular, so convenient to British capitalism—and so wrong—that it is worth dealing with.

First of all, nobody should run away with the idea that imports are a one-way traffic. This country, although it imports an enormous amount of wealth, is also one of the world’s great exporters. Last June, for example, Britain exported £327.8 million worth of goods. This holds good also for the specific case of Japan, which is the villain of so many of the dark import/export sales. According to the Director of the Anglo-Japanese Economic Institute, who wrote to The Guardian on 15th August last, Japan is importing British goods at the rate of one million pounds worth each week. Japanese business men do not like the prospect of being outsold any more than their English counterparts do. The letter went on:

” . . many Japanese industries have been protesting to their own Government about possible flooding of the Japanese market by foreign goods once Japan’s 90 per cent import liberalisation plan is in full operation this October. It seems there are two ways of looking at everything.”

British business men should appreciate the force of this as much as anyone. For they, like the Japanese, complain about foreign imports at the same time as they are exporting for all they are worth. Some of them shelter behind protected markets in this country, but demand that the industries which supply them with their raw materials should be subjected to the rigours of freely competing imports. The agricultural interests in this country are notorious for adopting this attitude. Although they prosper on padded home market, British farmers do not care about undermining the interests of other industries in this country, if this means that they might be able to buy cheaper food for their animals or cheaper fertilisers. They object to the chemical industry having its own protected market, making them pay more than they would for foreign chemicals. Last March, for example, the chairman of the Farmers’ and Smallholders’ Association was advising all farmers to buy Italian fertilisers because this was cheaper than the same stuff turned out by British chemical firms. This may be good business for the farmer, but not so for ICI, who were at the time agitating for an anti-dumping duty on imports of the fertiliser.

Another example of this is the attitude of British European Airways, who can always be relied upon to put up a bitter opposition to any private airlines application for a licence to ply along one of their routes. BEA’s objections have nothing new about them. They plead that they have spent time and money on building up the routes and that they will only be able to afford the expensive equipment which a big airline needs if they are allowed a monopoly of British operators on their routes. In their last annual report, they said that they would not make up their mind about how many of the new Trident jets they would order until they knew what competition the government is prepared to allow over these airlines.

Nobody who knows anything about capitalism would expect BEA to surrender their established fields of exploitation without a fight. Neither would they expect any capitalist concern to protect some other industry’s interests. In the same report, BEA announced their new, cut-rate “walk-on” fares to Glasgow, Edinburgh and Belfast. These low fares are especially designed to attract passengers away from the railways. It is obvious that BEA, like any capitalist business, favours competition when they are making the running. In fact, the railways could reasonably object to the new fares by using the airline’s own arguments against them. They could plead that they have built up the passenger traffic over the routes which BEA is now trying to dominate. They could argue that they have a lot of expensive equipment to buy and do not know whether this will be worthwhile if they are to be so easily undercut.

Undercutting

This sort of tangle is not confined to domestic industries. Early last year, an application from the Steel Company of Wales to be allowed to import cheap American coking coal was fought, and defeated by the National Coal Board. The fact that the coal industry had succeeded in preventing the Americans from undercutting them did not stop them trying to do the same thing to coal industries abroad. Lord Robens, chairman of the NCB, is itching for this country to join the European Common Market and on August 29th last he gave his reasons for this. British coal, he said, could undersell coal from the Ruhr into Hamburg; the only thing that slops it doing so is the import quota which the German government, doubtless under pressure from Lord Robens’ counterparts in their country, uses to restrict British coal imports to 400,000 tons a year. Lord Robens frets under this restriction. Without it. he thinks, the coal mines could double or treble their sales in Germany. He likes competition provided it is the “heads-I-win-tails-you-lose” variety.

It is obvious, then, that this business of imports and exports is very much two-sided. A broad view sees that the exports of British coal mines are the imports of German power stations and that the exports of the Honda motor cycle firm are the imports of the British dealers in those machines. But capitalists are seldom interested in broad views or any ether such concept. Any industry in capitalism must sell to survive and none of them can afford to be particular about how they make their sales. Sometimes they have to put in some backstairs pressure work upon a government department to protect their market. Sometimes they have to indulge in some double-talk and black-is-white argument. Sometimes they must be inconsistent. And sometimes they must tell lies. For none of them can ever cry enough. While they protect their own markets they must always be seeking new ones, always trying to move into some other industry’s established field of selling. This is typical of the muddle and wasteful anomalies which capitalism produces in such abundance.

Unhappily—and in some ways almost unbelievably—many workers take their masters’ part in this struggle. The miners were behind the NCB’s fight against the American coal. Presumably Japanese workers will back their employers in their protests to the government in Tokyo over the freeing of imports into Japan. Textile workers over here complain about the cheap goods coming in from Japan and other Far Eastern countries, without realising that these goods may have been made in such abundance and so cheaply on machines which were exported from this country. It is too obvious that international trade in an established part of capitalism which no amount of prejudiced and one-sided objection can break down.

This reasoning may not appeal to the redundant motor cycle worker as he watches the Hondas roaring along the bypass. But he would do better to consider the root cause of his unemployment. He was laid off because it was not profitable to employ him any longer. Because everything it makes is meant to be sold, capitalism fits everything into the strait jacket of profitability. If profitability says that foreign goods must be imported, in they come. If it says that an industry must close down, if does so.

Profitability, for example, says that shipworkers must be laid off. In the boom of the early fifties many ships, especially tankers, were produced on speculative orders which hoped that when they were built there would be a market for them. But by the time the ships were ready a new trading pattern had developed and with it a demand for the enormous “super tankers.” This forced a lot of the smaller tankers into the grain market, flooding the market for bulk carriers, bringing freight rates down and driving the shipping industry into a slump. This is typical of the anarchic problems which capitalism’s profitability mania creates in abundance, but can never solve. It was not caused by foreign competition; only aggravated by the fact that all the world’s shipyards were going flat out in boom time to cash in on the market. That is something which every industry tries to do, and will always try, so long as capitalism is with us.

That is where our unemployed worker, and the clerk in the City restaurant, should look for the key to unravel their problems. There has never been any lack of medicine men to peddle their remedies for capitalism’s ailments. But the ailments keep on showing themselves with ever greater complications. Nothing can be too drastic to cure them. Even a bit of straight thinking about capitalism.

Ivan

Foreign trade and the workers (1948)

From the September 1948 issue of the Socialist Standard

On every conceivable occasion the Labour Government has urged the workers to work harder to wipe out the gap between imports and exports. “When this gap has been closed,” says the Government, “Britain will again be prosperous; there will be plenty to buy in the shops, and the workers will no longer suffer the shortages and restrictions of the present day.”

A glance at history is sufficient to show the fallacy of these claims as far as better working-class conditions are concerned.

The closing years of the nineteenth century and the early years of the twentieth found British capitalism enjoying unparallelled prosperity. Exports, profits on shipping, and returns on foreign investments more than balanced the value of imports. Looked upon as “the workshop of the world” Britain had rich and plentiful rewards for those who invested in her industries. An idea of the wealth being acquired by the British capitalists at that time can be gained by a glance at the estates upon which death duties were levied in 1903. According to the “Daily Mail Year Book” for 1904 (page 270) five millionaires left estates totalling nearly eight million pounds, whilst two hundred and nineteen further members of the comparatively small capitalist class left a total of nearly forty-nine million pounds.

Yes! England was certainly a, rich country at that time—yet, for the workers, where was the freedom from shortage which, according to the Labour Government, comes with this national prosperity?

Let us refer to a writer of the time, Mrs. Bernard Bosanquet. Imbued with immense but ill-founded optimism, Mrs. Bosanquet and other philanthropists mistakenly imagined that help from the rich could reduce the poverty of the workers. Yet, so bad were working-class conditions, that even Mrs. Bosanquet’s great optimism became depleted and we find her writing in her hook, “Rich and Poor” (published 1896) : —

“Of other charities it would take too long to speak. The parish is beset with them at certain seasons of the year; and money is flung in amongst us much as nuts are flung to boys to scramble for. Soup-kitchens, philanthropic societies, country holiday funds, ragged school funds, funds from all the enterprising newspapers, and funds from all the political clubs in the district; church funds and chapel funds, missions and mothers’ meetings, all are engaged in pouring money into a slough of poverty which swallows it up and leaves no trace of improvement.” (Page 37.) (Our italics.)

Let us revert to the “Daily Mail Year Book” for 1904. On page 141 we find that the number of people seeking poor relief in the year 1900 was 1,882,000, and when referring to the unemployed in 1903 Mrs. Bosanquet said :

“They seem to increase year by year, and the next trade depression will probably show them in formidable numbers.” (Page 9.)

Page 246 tells us that a Professor Vort gave the minimum cost of the diet required by an average working man, his wife and three children as twelve shillings to thirteen shillings and sixpence per week. This diet was so stringent that it did not allow for tea or cocoa—only water. Looking then at the wages of agricultural workers (same page) we are informed that in England the average weekly pay was 17s. 1d., whilst in Wales and Scotland the averages were 16s. 5d. and 18s. 2d. respectively.

Eighteen shillings per week in wages when the weekly cost of the barest food necessities for a man, wife and three children was round about thirteen shillings. Five shillings left over for the provision of rent, clothing, insurances, etc. ! And what of those married workers who had more than three children to support?

The “Twelfth Abstract of Labour Statistics,” issued forty years ago by the Board of Trade, gives us further information. It states that “on every day throughout the year 1892 the average number of persons in receipt of poor relief was 953,719, this number rising steadily each year with but very slight fluctuation to 1,103,724 in 1906, being an increase not only in the number, but also relatively to the increase of population.”

Such was the prosperity of many workers during the Golden Age of British Capitalism when the export trade was said to be in a highly flourishing condition.

Experience shows that whilst the capitalist class is endeavouring to sate the world’s markets it will keep wages as low as possible, for only by doing this can commodities be produced at a price that will allow the undercutting of rival competitors.

On the other hand, as soon as the markets are filled and commodities can no longer be sold profitably, production is curtailed and large numbers of workers are thrown out of work. The capitalist class does not employ workers out of benevolence, but for the express purpose of amassing profits from products that will sell. When commodities cannot be sold it is useless, as far as the capitalist class is concerned, to retain workers in commodity production.

Thus it is seen that whether trade is balanced, or whether there is a gap between imports and exports, the lot of the workers, as a class, remains much the same.

Only Socialism will end commodity production with its wage-cutting;, “sweating,” unemployment, and wars over markets, etc. Only Socialism, wherein the means of production and distribution will be commonly owned, will bring production for use and not for sale. Only within Socialism will production bring plenty to every man, woman and child.

F. W. Hawkins

The Common Market Special Survey: 4. Agriculture (1962)

From the January 1962 issue of the Socialist Standard

Agriculture may not be the most important problem for Britain in its negotiations over the Common Market but it is certainly going to be one of the trickiest.

Nor should it be forgotten that agriculture has been causing a great deal of trouble within the Common Market itself. Only recently, France declared that she would veto any fresh moves on the industrial front until West Germany showed more enthusiasm for removing the barriers on the agricultural side. The motive, of course, was the usual one—France is keen to get a larger slice of the German market for her agricultural exports.

The fact that Denmark, another large exporter of foodstuffs, has also applied for membership of the Community will cause further complications. It will be interesting to see how all these conflicting interests are finally sorted out, if in fact they ever are.

Britain

But there can be no doubt that British agriculture has plenty to worry over. Home farmers are overwhelmingly opposed to Britain going into the Common Market and have done their utmost to prevent it. There is equally no doubt that it is fear for their agriculture that has caused many Commonwealth countries to make such an outcry about Britain’s application to join. But in this modern world of capitalism it is the interests of industry that call the tune and the Macmillan Government has gone on regardless of both farmers and Commonwealth.

British agriculture has good reasons to be wary of the Six. In the first place, in spite of all the efforts during and since the war to step up home production, the U.K. has still to import more than half its food. Most of these imports come from the Commonwealth—meat and dairy produce from New Zealand and Australia, wheat and coarse grains from Australia and Canada, and such things as fruit from all three. Much of this comes in at preferential tariff rates, though this benefit is not so important as it once was.

On the other hand, the Common Market is virtually self-sufficient in foodstuffs. Indeed, certain countries like France and the Netherlands are now actually piling up surpluses. France in particular, as a result of improved methods since the war, is rapidly coming to the point of crisis in the production of some items, for which she is becoming desperate to find markets. Nor is the position going to improve since she has vast capacity to expand. By far the largest country in area (second only to Russia in Europe), and larger still in actually usable agricultural land, it has been estimated that with fully improved methods she could supply the whole of the Six with some products, notably wheat and beef. It is the fear that France may insist on supplying Britain with wheat that is causing Canada particular concern.

Both France and the Netherlands, and Denmark if she also joins, see Britain’s entry into the Common Market as providing a welcome outlet for their agricultural exports. The British farmer takes a much less rosy view of the prospect.

His pessimism is made worse when he considers a further important difference between the way his products are sold compared with the Six. This is strange on the face of it because food prices are generally higher within the Six than they are in this country and this should apparently be to his advantage.

But the reality is not so re-assuring. The reason why food prices are generally lower in Britain is because it has long been the policy of British governments to keep them down artificially. Their method of doing this has been to allow food to come into the country almost free of restriction and let prices find their own level irrespective of the fact that these prices are below those at which the home farmer can produce economically.

This policy if left unchecked would, of course, soon bring most British farmers to bankruptcy. To avoid this, the Government has regularly made up the difference between the farmers general price and the imported price by means of subsidies. This difference is certainly not chicken-feed—it amounts to about £250 million a year, plus many more millions in the way of other payments to assist and improve their farming.

The Six

This procedure is in marked contrast to the system in most countries of the Six, whose governments have been more inclined towards policies of keeping out foreign imports by means of tariffs and quotas. They have been able to do this mainly because they are largely self-sufficient in food and the result has been that though prices are higher they are at the same lime more closely related to the farmers’ actual costs.

In practical terms, of course, the two systems boil down to essentially the same thing. All that happens is that the subsidies needed to help out the British farmer are found from extra taxation so that overall the amount actually received is near enough the same. But it has been an exceedingly useful method for the British capitalist class in keeping food prices stable and thus of helping to keep wages under better control. It was, of course, used to its greatest effect during wartime and in the critical period immediately afterwards.

The Six have already made it clear, however, that they will expect Britain to fall in with their system. It is also pretty obvious that the British Government will not in fact be unduly upset about this since whatever merits the subsidy system has had in the past it has been causing them a lot of headaches recently. They are particularly restive about the financial burden: assistance to be paid out to farmers is even higher than usual this year, enough to make them wonder whether the time hasn’t come to have done with it altogether.

Prices

If therefore Britain does join the Six a rise in food prices seems highly likely. Estimates about this vary from a shilling or two per head per week to something very much more, but the truth is that nobody really knows. One thing is certain, however, and that is that it would provide the Government with a wonderful opportunity to whittle down the effective buying power of wages at a time when the wind of competition within the Common Market was already making the British worker feel chilly.

Agriculture is notoriously a difficult subject to make forecasts about. Governments play about with it and it has always provided a voting lobby sufficiently powerful to make political parties commit themselves to all sorts of peculiar things to win farmers’ support at election times. In addition, until the atomic bomb came along to make the question academic, capitalist governments everywhere have always had some regard for its importance in times of war. The fear of blockade has always been a bogey for them. One can never be certain, then, of what will happen when governments start talking about agriculture and even less certain when a group of their spokesmen get round a conference table to bargain and horsetrade.

A few things can be said, however. It seems fairly certain, for example, that if Britain does go into the Common Market ii will do so at the considerable expense of Commonwealth countries. Present indications are that whilst the Six may how some special consideration for New Zealand, whose economy is almost completely independent upon Britain taking all her meat products and butter, they will have little time for the claims of Australia and Canada who will have to start looking elsewhere for markets for their products. Australia has in fact already begun to do this and is now selling to China and Japan.

Bigger Units

Agricultural interests in France and the Netherlands would gain from this, though Denmark will provide extra competition if she also joins. Italian horticulture will also be given a fillip since the hitherto heavily protected U.K. market seems almost certain to be made more accessible. It is hard to see anything other than a catastrophic effect upon British horticulture, in fact, unless the negotiators bring something remarkable out of the bag. Expensively-heated glasshouses are no match economically for free sunshine and fast transport and can only have their existence in (he mad world of capitalism.

But even more clearly than with industry, the future of European agriculture is going to reflect the inexorable drive of capitalism towards bigger units, mechanisation, and more economic production.

In Italy, 44 per cent. of the population are still dependant upon the land for their living. In France the proportion is 25 per cent. and even in Germany it is 15 per cent. The figure in Britain is 5 per cent.

All these countries are taking deliberate measures to get their peasants off the land and into the towns and factories, though economic forces themselves are probably doing the work more effectively on their behalf. Hundreds of thousands of small farmers are fated to leave their farms in the not far-off future and their land will be merged into larger holdings, revert to its natural state, or be transformed into state forests.

Even in this country the process is still going on. Many small farmers are only able to keep going because of their subsidies from the State. Each year still shows a drop in the number of people getting their living from the land.

The Common Market, therefore, only throws into prominence a process which has been part and parcel of capitalism since its existence. In fact, the Common Market is itself a reflection of this process on the international field. The same impetus which forces firms to amalgamate within a country’s boundaries now forces the countries themselves to look outside their boundaries.

Surplus

But whilst the implications for industry of this process are great, for agriculture they are enormous. That is why all the negotiators at Brussels, whether they belong to Britain, the Six, Denmark, Ireland, or any other country with agricultural interests to protect, are going to talk tough and bargain hard.

And, very much in their minds and hanging darkly over all, is the shadow of surplus. Surplus in a world where half the population live near to starvation and another quarter not very much better.

And that for us is the real dark shadow over all this business of agriculture and the Common Market.

Stan Hampson

The Common Market Special Survey: 5. The Commonwealth (1962)

From the January 1962 issue of the Socialist Standard

It is going to be a trying time for our politicians. British capitalism has been forced, after much dithering, to face up to the harsh realities of its own world. No more can it ignore the increasing challenge to its position in a highly competitive world market, and the fact that the relatively easy markets of the British Commonwealth are no longer sufficient to offset this. As The Observer pointed out almost three years ago:

“At the moment the Commonwealth accounts for nearly half our trade but it would be foolish to pretend that it offers anything like the growing market of Europe.”

This must be a major consideration to our rulers, despite the high-flown claptrap which they have talked on occasions about “Commonwealth family of Nations.” So Britain goes cap in hand to “the Six” and Tory Ministers make a flying tour of the major Commonwealth Countries in an effort to ride out the inevitable storm of protest which their decision has aroused.

Since the end of the Second World War in particular, successive Governments have never tired of telling us how important it is that Britain should export more and more. So perhaps we may be forgiven if we have forgotten that Britain itself is a large and important market for goods coming from Canada, Australia and New Zealand, for example. And it is the fear of losing this which is behind the undignified squabbles which have taken place over the past few months.

Canada

In a recent survey by The Times we read that “. . . . there is an undoubted fear that by Britain’s closer association with Europe, Canada is going to suffer in what is her second best market, especially in agricultural and chemical products as well as in a newly found market for her manufactured goods.” So seriously do the Canadian capitalists view the prospects, that only on November 11th last, The Observer was able to report that relations between Canada and Britain on the Common Market issue were worse than at any time since preliminary negotiation began.

Over the other side of the world in New Zealand, there is near-panic at the threat of a shrinking market for primary products—lamb, wool, butter and cheese—in Great Britain. Understandably so from the viewpoint of the N.Z. farmers. Apparently fifty-seven per cent. of their total exports were sold in the United Kingdom in 1959. And more recently The Dominion (Wellington) asserted that some eighty per cent. by weight of N.Z. dairy products now go to the British Market. The remarks of Prime Minister Holyoake further emphasise with what trepidation the future is viewed; just listen to his words, reported in the National Party Journal Freedom for July, 1961 :

“It is no exaggeration to say that our dairy industry and our lamb production have been based on and are designed to serve the needs of the United Kingdom Market. They have been based on the idea that our expanding production could receive a full and remunerative outlet. Without it, the whole economic future of New Zealand is thrown out of balance.”

Strong words indeed! And matched equally by (hose of leading government spokesmen in nearby Australia. Their Common Market Communique issued on July 11th speaks of “. . . the serious adverse consequences for Australian producers and for the Australian balance of payments which would confront Australia if the United Kingdom were to enter the Common Market on a basis which failed to safeguard Australian trade interests for the future.”

Australia Looks Elsewhere

Wheat, meat, dairy products, bas; metals, sugar and fruits constitute the bulk of Australian exports to Britain and are currently valued at almost £200 million Sterling. The Minister for Trade, Mr. McEwen, has asserted that Britain is Australia’s biggest market. So little wonder then, that there was such “full and frank” discussion with Mr. Duncan Sandys when he paid his visit a few weeks before.

But despite the forebodings of official spokesmen, it does not seem that Britain’s decision has taken the Australian Government completely by surprise. For some years now, attempts have been made to find alternative markets, and it is interesting to learn that Japan has now become the biggest buyer of Australian wool and a top-level buyer of many other important products. Trade with Japan in 1960 was worth £160 millions.

In a press interview on last July Mr. Menzies admitted the great political implications of the Common Market. He has described it as possibly “a third power” in the world :

“(But) we record our view that the Commonwealth will not be quite the same . . . this will lead to a loosening of Commonwealth relations.“

So where will they turn then? Might there be just the possibility that yet “a fourth power” will emerge, embracing Australia, New Zealand and other far eastern States, and with Japan as a leading member? Does it sound too far fetched? Nothing should surprise us in a capitalist world. Canada in her turn could swing politically in favour of the U.S.A. if the tariff walls of the Common Market go up against her. She already has close economic links and American capitalists have large investments in Canada.

And for the workers of the Commonwealth? Well, there is one market which they have always had in common with their opposite numbers in every other part of the world, and that is the labour market. This basic fact will not, of course, be altered. They will remain workers facing the common problem of Capitalism—and how to get rid of it.

Eddie Critchfield