Wednesday, February 12, 2014

A hundred years of the Labour Party (2006)

From the April 2006 issue of the Socialist Standard

The Socialist Party was formed in 1904. The Labour Party didn’t come into being until two years later when a number of Labour and Liberal-Labour MPs, elected at the 1906 general election, set up a parliamentary group. We look at the Labour Party’s dismal anti-socialist performance over the last hundred years.

The 1906 General Election is memorable for two reasons. Firstly, the Liberal Party won a remarkable landslide victory, returning 400 MPs to Parliament. Secondly the fledgling Labour Representation Committee (LRC), under the leadership of James Keir Hardie, trebled its vote to gain 27 parliamentary seats, increasing its representation to 29. These dramatic gains prompted the LRC to rename itself and a little over 100 years ago, in February 1906, the Labour Party came into being.

The earlier decision to set up the LRC was a response to dire working class poverty and more particularly to the legal threat to the trade unions, which were attempting to ameliorate these conditions. Throughout the nineteenth century the state had consciously obstructed collective bargaining, even though legislation passed during the 1870s exempted trade disputes from the conspiracy laws and legalised peaceful picketing. The ‘new unionism’ of the 1880s rapidly expanded trade union representation and, combined with the success of the London Dockers’ strike of 1889, raised concerns that working people were becoming too organised and might mount a challenge to the owners’ interests. The state and employers propagated the notion that unions were synonymous with ‘socialism’, which they claimed would lead to social disintegration, and they looked to the courts to weaken emerging unionisation that might defy the domination of capital.

The trade unions became receptive to the idea of parliamentary representation shortly after the great engineering lockout in 1897-8 and then the Lyons v Wilkins judgement of 1899 which reversed the provisions of the 1876 Trade Union Act that had allowed for peaceful picketing. The 1899 Trade Union Congress proposed a meeting between union representatives, the Social Democratic Federation, the Fabians and the Independent Labour Party to seek agreement on an agenda for parliamentary representation to secure political protection for ‘free negotiation’ with employers. The subsequent conference held in February 1900 agreed that the LRC would be supported by trade union affiliation fees and it elected Ramsay MacDonald as the new organisation’s secretary.

The LRC’s first priority was survival. It was desperately short of funds and its base was extremely weak. In 1900 only 13 percent of the working class had trade union membership and only 18 per cent of these were initially affiliated to the LRC - just 41 unions with 353,000 members. The new party had no programme as such and incorporated various groups that, while calling themselves socialist, held an array of conflicting views. Calls that the organisation should be based on a ‘recognition of the class war’ or commit itself to anything beyond trade union representation were rejected. The LRC was convinced that capitalism could be humanised by reforms and refused to entertain any notion that the organisation should advocate socialism as an immediately realisable objective. Instead, its task was to reform capitalism and strive for a ‘level playing field’ to enable workers to negotiate ‘a fair day’s work for a fair day’s pay’ without state interference.

Trade union affiliations to the LRC were boosted after a disastrous strike in August 1900 by workers in the Taff Vale Railway Company. The workers demanded better working conditions and the right to join a trade union - the Amalgamated Society of Railway Servants (ASRS). The strike was broken and the employers pressed their advantage by fighting and winning a legal action for damages against the ASRS, thereby pushing the union to bankruptcy and making future union strike action virtually impossible. This threat to trade unionism served to reaffirm the LRC’s contention that only by winning political power could workers influence their conditions within capitalism, which in this case meant passing laws to reverse the court’s decision and legalise industrial action.

Despite its weakness, the LRC ran 15 candidates in October 1900 and won two parliamentary seats – Keir Hardie winning Merthyr and Richard Bell taking Derby.

To many unions, however, affiliation to the LRC was not an automatic choice. A succession of unsympathetic Conservative governments between 1885 and 1905 had compelled unions to look to the Liberal opposition for support, although by 1900 some doubts had arisen about the Liberals’ genuine commitment to trade unionism. Nevertheless many trade unions continued to support the Liberals and, in the same 1906 election that saw the LRC make its dramatic gains, 24 trade unionists were elected as Liberal MPs.

It would be misleading, however, to regard the LRC’s 1906 electoral gains as altogether surprising. They were in fact largely attributable to the organisation’s willingness to make alliances with avowedly capitalist political organisations and in particular with the Liberal Party. As an organisation pledged to maintaining and eventually administering the capitalist system, the LRC saw no inconsistency to agreeing an electoral pact with the Liberal Party in 1903, whereby the Liberals agreed to run only one candidate in certain two-member constituencies, leaving the other anti-Tory candidate to come from LRC. The Liberals were eager to avoid splitting the anti-Conservative vote and the LRC was eager to increase its influence.

The fact that such a pact was forged says much about the intentions of the LRC and the later Labour Party. The Party’s objective was to protect workers’ conditions by striving to administer the system and to give workers a ‘fair deal’ within capitalism. The LRC and Labour Party never looked beyond this objective and accordingly did everything in their power to mute any overt hostility to the capitalist system or attract opposition from the owners and their government. Ramsay MacDonald exemplified this strain of thought, arguing that the theories of Marx, the class struggle and the necessity of a politically conscious socialist working class without leaders enacting the social revolution were outdated and invalid notions. Instead, he embraced the views of Bernstein and the German ‘Revisionists’, that ‘socialism’ would come about gradually within the existing structure of society and develop as a result of the growing success of capitalism. It was therefore determined that the Labour Party’s task was to promote this success and to pass useful reforms that would theoretically steer the working class towards a distant socialist society. It was an organisation where ‘immediate demands’ within capitalism took priority over everything else.

Not unsurprisingly the first legislative measure of the new Labour Party and its Liberal allies was to reverse the Taff Vale judgement. This was achieved under the Trades Dispute Act of 1906. The Labour Party also made small amendments to the Workingmen’s Compensation Bill and the School Meals and Medical Inspections Act, but by 1907 the Party had run out of ideas and was reduced to simply accepting Liberal Party reforms. The passing of the Trades Dispute Act, however, coincided with a reduction in real wages and a rising tide of industrial disputes, and these factors encouraged further union affiliations to the Labour Party. The affiliation of the Miners’ Federation in 1909 was of major importance, since mineworkers’ votes cast in favour of the Labour Party represented potentially another 60 parliamentary seats. Potential became reality in 1918 when the Liberal electoral pact was no longer in operation.

By the end of the First World War – in which the Labour Party abandoned any class solidarity and enthusiastically supported British capitalism – it was well on its way to becoming the main opposition in parliament. Towards the end of the war the planned extension of the franchise, combined with the 1917 Bolshevik revolution in Russia, prompted the Labour Party to redraft its constitution under the influence of the ‘radical’ Sidney Webb. The recast constitution included the famous Clause Four that was intended to appeal to the anticipated ‘leftward’ swing in public opinion and to draw a clear distinction between Labour and the Liberals by committing the Labour Party to nationalisation or state-run capitalism.

The Labour Party participated in minority administrations in 1924 and again in 1929, but it had to wait until 1945 – and the carnage of another World War, in which it again wholeheartedly supported British capitalism – before fully completing the transformation from trade union parliamentary pressure group to a party of capitalist rule. The 1945 Labour government is best remembered for its programme of nationalisation that was touted as solving many of the problems of working people but failed miserably to do so. It is also remembered for its welfare reforms which were presented as bringing improvement to working-class conditions of life but whose main aim was to improve the efficiency of working men and women without provoking a general wage increase. Further opportunities for Labour Party management of British capitalism occurred in 1964 under Harold Wilson, in 1974 first under Wilson again and then James Callaghan, and finally under Tony Blair from 1997.

Given its early history it is hardly surprising that the Labour Party should have developed in this way. The LRC and later the Labour Party were never organised to challenge capitalism or eradicate the irreconcilable class differences between the working class and the owning class that lives on expropriated labour by virtue of their ownership of the means of producing and distributing wealth. At no time in its history has the Labour Party advocated revolution for socialism, but rather, until relatively recently anyway, relied on a cynical propagation of the pretence that state-run capitalism and reforms represented ‘stepping stones’ to a socialist society.

The Labour Party consciously steered the social-democratic or socialist movement of the early twentieth century away from social revolution to a futile policy of ‘reformism’, maintaining unswerving support for the exploitation of working people, the wages system, commodity production and the private ownership of the means of producing wealth. The one-hundred-year history of the Labour Party is one of deceit and opportunism that has given a bad name to socialism and induced working people to hand political power to representatives of their class enemy to administer capitalism against the working class interests that Labour has pretended to represent.
Steve Trott

Cooking the Books: Green Recipe for Raging Inflation (2014)

The Cooking the Books column from the February 2014 issue of the Socialist Standard

‘The Green Party believes’, reads a resolution carried at their annual conference in September, ‘that the power to create money must be removed from private banks.’ What power, and how?

At one time ‘money’ was defined just as the notes and coins issued by the government or a central bank, but modern economists have come to include bank loans too as money. This can be confusing if it is assumed that these two types of money are the same, as is often done. For instance, the Green Party resolution says that only 3 percent of the UK’s ‘money supply’ is issued by the central bank as notes and coins, with the remaining 97 percent taking the form ‘of credit that is created electronically by private banks through the accounting processes they follow when they make loans’ (emphasis added).

This figure is correct (except that some of the 97 percent are loans made by other credit institutions) but, while the 3 percent is ‘created’ in the sense of not existing before, the 97 percent is not. It is already existing purchasing power, originally generated in production as wages and profits, which  banks and other credit institutions transfer from savers to borrowers. The Green Party resolution assumes that this too has been created from nothing and wants to transfer this supposed power to a government agency so that 100 percent of the ‘money supply’ will be under government control:

‘A Green Government will therefore develop and implement a programme of banking reform based on the following principles:

(a) All national currency (both in cash and electronic form) will be created, free of any associated debt, by a National Monetary Authority (NMA) that is accountable to Parliament.’ (

All money. Not that it would be ‘debt-free’ since money issued by the state is counted as part of the National Debt.

‘(d) Any new money created by the NMA will be credited to the account of the Government as additional revenue, to be spent into circulation in accordance with the budget approved by Parliament.’

That’s much easier than the government having to raise revenue by taxes or borrowing, too easy in fact as the experience of countries like Zimbabwe shows.

For this scheme to work, banks and other credit institutions would have to be banned from making loans as these are part of the modern definition of the ‘money supply’.  This isn’t explicitly stated but it follows that if alongside the activities of the NMA private banks were just to continue to make loans as before there would be a massive increase in the money supply (as most broadly defined today), with the NMA now ‘creating’ the equivalent of the 97 percent, far more fiat money than required by the functioning of the economy, on top of the activities of the private banks. Hello, Zimbabwe.

To avoid this the banks would have to be reduced to institutions which merely take in money and use it to make payments to and for depositors (or focus even more than is the case now on dodgy asset management activities). This would most likely create other economic problems, in particular depriving capitalist enterprises of a key source of funding, so slowing down capital accumulation. Maybe this is what the Green Party wants as it is opposed to ‘growth’, but under capitalism you can’t stop this without provoking an economic crisis.

Clearly, those behind the Green Party’s resolution have not thought it through, but then a party with no chance of forming the government can afford to have barmy policies.