The politics of recession (1981)

From the September 1981 issue of the Socialist Standard

In the world today, one person dies of starvation each second, but food is deliberately destroyed in order to maximise prices and profit. Production is being cut back in all vital areas, with one major exception. The world's governments are now spending a million pounds a minute on weapons of destruction, to defend the property and privilege of their investors. Clearly, society is not being run according to a principle of human well-being, but to provide profit for the holders of property.

There is a lot of talk at the moment about the recession. The Tories pray that it will lift in time for the next General Election. The Labour Party claims to have a master plan with which to beat it, but is increasingly cautious in its claims. Financial institutions such as the World Bank and the London Chamber of Commerce speak desperately about it “reaching the bottom” and “turning the corner” in the hope that they can inspire confidence among investors and make their predictions come true. Politicians like Geoffrey Howe and Francis Pym argue over when business is likely to pick up again. Perhaps the most honest judgement has come from the Employment Secretary, James Prior, who said “Frankly, I don’t know what the forecasts will show or what the results will be in three years’ time.” (Guardian. 2914/81.)

This might lead you to believe that the recession has a mind of its own. Labour politicians speak of magical spending programmes which they intend to offer up as sacrifices to soften the temper of the crisis. Certainly, world recession can no more be produced or ended by governments than the “boom” periods with which it alternates. But as an integral part of the present social system, it is ultimately a human creation which can be removed once it has been understood.

We are taught to regard social institutions such as nations, employers and money with a kind of religious reverence which gives them an eternal air. We allow them to dominate over us, so that the relations between us develop a greater importance than our wish to survive in comfort and security. The present world economy of capitalism is based on the blind anarchy of competition between companies and nations. It does not serve the interests of the majority but it is kept in being by distortion and confusion.

The Trade Cycle

The mass unemployment and destruction which is a sign of recession is an inevitable part of the profit system which dominates the entire world today. It is a demonstration of the natural insecurity of the wage-worker or salary-earner. Even in “boom” times there is unemployment. Keynes, who expounded the theory that higher government spending could relieve unemployment, only ever hoped to reduce it to a rate of five per cent, which Geoffrey Howe recently referred to in a Commons Treasury Committee paper as the “natural rate” of unemployment.

Most of the factories, offices, farms and other productive and distributive machinery are in the hand of a tiny minority. In Britain, for example, only seven per cent of adults have any shares whatsoever, and the richest one per cent have more wealth than the poorest eighty per cent (Royal Commission on the Distribution of Income and Wealth, 1979). The majority are forced to work to live, but are only allowed access to the work-place on terms which are beneficial to the employer who owns it. Of all the wealth produced, only some is paid to the employees who create it all, just enough to keep us fit for work at an accepted standard of living, while the remainder is accumulated as capital. The surplus goes to the parasitical, unproductive minority in the form of rent, interest and profit. They only employ us when they think it will be profitable—that is, when they think they can sell the goods and services we produce. When we have produced too much for the market, so that people cannot even afford to buy back what they have made, the market dries up and redundancies occur. Food is destroyed, politicians moan about the “lakes of wine” and “butter mountains”, and “destocking” takes place until a chance of a profit arises again.

This system of wages, profits and prices is based on competition. Instead of working together, pooling resources to satisfy needs, we are regimented into the armies of companies which compete over the profits they make in the world market. Like a monster breathing in and out, this anarchy leads to a continuous cycle of stops and starts. After a period of rapid growth in production, market demand falls behind in a particular industry, so investors pull out, bringing further decline in that area. They switch their money into other fields, where production increases until it outstrips market demand, when, again, profitability is threatened and investors pull out.

The process spreads in a matter of years, across the world, and a crisis of “overproduction” is declared. Overproduction for the restrictive market system, it should be noted, not for the needs of humanity. While industrialists complain about the lakes of wine, workers are told to “pull our belts in”, and cut back on “luxuries” like bottles of wine. The United Nations recently declared that half of the world’s population is severely malnourished. Millions of workers are put on the dole. War breaks out as nations compete over reduced profit margins and glutted markets. The Italian stock exchange was closed for three days recently after £4 billion had been wiped off the value of companies. State-capitalist countries like Russia and China are affected too. The Polish government recently announced that unemployment will be unavoidable there and Janos Kadar, the Hungarian Communist Party leader, has stated that the relative “liberalism” of recent years must end, and that a tougher line is needed.

When there has been enough destruction and human misery to deplete stocks to the point where market demand is greater than supply, when industry has been stripped of enough capital, including workers, then production will pick up again. In one area after another the prospect of profit will persuade the capitalist class once again to allow us to work for them. And so the cycle continues. The vast destruction of the second world war. It was partly through the reconstruction necessary in the post-war period that there was relatively full employment in the ’fifties and ’sixties.

The Social Effects of Crisis 

The symptoms of the present recession have been well documented, in the national press as well as in this journal. Signs of frustration such as domestic violence, alcoholism, suicide and rioting all increase in such times as these. For example, the Office of Health Economics have published a report (Suicide and Deliberate Self Harm) showing that there were 4,200 suicides in Britain in 1979, 500 more than in 1975. The last surge in suicides was in the 1930s. These examples of the social problem are present even in time of “boom”. The fact that they multiply during capitalism’s recessions proves that they are caused by the inherent poverty of the working class, since recession increases economic frustration.

Those who depend on a wage or the dole suffer much more from the cutbacks in production than those with unearned incomes to support them. Some companies declare losses of millions of pounds. But often they more than make up for this in periods of expansion, and sometimes these “losses” are declared after dividends have been paid. For example, on 19 March this year, the Guardian announced that “The GKN group lost more than £100 million last year”, but further down the article explains: “tax charges and redundancy and closure costs of £49.8 million compounded the loss, and these, together with the expense of dividend payments, put the loss at £103.1 million”. Individual capitalists do not tend to pull their belts in. Recent figures from the Government’s General Household Survey show that an increasing number of families need two people to go out and earn a wage. But have investors been driven to take their spouses with them to the Stock Exchange? Interviewed on television recently, Rupert Dcen explained:

Daddy never worked: nor have I . . . I have various businesses . . . Speaking personally, the recession doesn’t affect me at all because I’m not employed. (Man Alive, BBC 2, 6 March 1981.)

 An official report in France refers to over a million young, second generation immigrants of whom “a substantial fraction is in process of becoming a sub-proletariat which will prove socially and politically intolerable in the coming years” (Guardian 24/3/81). As long as the proletariat behaves itself, and does not become “sub”, the ruling class is fairly confident of keeping its hold.

The Political Reaction

The government in every country, regardless of its rhetoric, is forced to defend the interests of capital. That is what is expected by the shareholders who pay taxes by the million. The openly reactionary and pro-capitalist regimes of Reagan and Thatcher, the so-called “socialist” President of France, the word-twisting dictators of the Eastern bloc: all have the same aims. They want to encourage investment, inspire confidence, get the profit system moving again. They want to encourage a harmonious friendship between workers and employers, while making sure that the brunt of the pain falls on labour rather than capital.

The idea is to employ less workers (“rationalise”, “shed excess labour”) so as to reduce the wages bill, while squeezing greater productivity and profit out of those who remain. Wages are cut by offering rises which do not keep up with price increases. Incomes policies have been advocated by all parties now and in the past, including the Labour and Social Democratic Parties. On 28 April of this year a conference in Amsterdam of the twelve European “socialist” parties announced that the time had come “to promote wage controls” (Guardian 29/4/81). In June Geoffrey Howe held up Germany as an example, where wage settlements have been around four per cent, and the Confederation of British Industry has demanded that increases be “substantially less” than at present, although present “increases” are in fact cuts. Inflation is not caused by wage increases, but by the government printing money.

The most outspoken minister, however, has been the Trade Secretary John Biffen. By pointing out how the recession can be turned to the employers’ advantage, he has exposed the unavoidable class struggle which some of his brothers-in-arms had hoped to conceal while they fought it. “Let no one suppose there is not a national advantage”, he said, and went on to list the advantages (Guardian 11/8/81). These included a reduction in over-manning and “a much quieter situation in respect of industrial relations”. The number of stoppages in 1980 was the lowest since 1943. This is because competition for jobs forces workers into submission. Biffen also boasted that pay settlements had fallen to single figures.

Where, then, are those trusty supporters of the working class, the Labour politicians? The helpless attitude of Michael Foot was made clear at the 1975 Labour Party Conference. At the time he was the Employment minister of a government which presided over a doubling of unemployment and planned cuts in government spending of billions of pounds. On that occasion, he called for both wage restraint and the exercise of what he called the “Socialist Imagination”. Take a cut, pretend it’s a rise, and we’all be friends together. They might wish to improve conditions for the working class, but this is an uncontrollable system. The Labour Party formula is “public spending to create jobs”. From 1973 to 1980 public spending increased fourfold, from £20 billion to £80 billion. Over the same period, unemployment rose from half a million to over two million. The formula has been disproved, as has Thatcher’s “monetarist” madness.

Solving the Social Problem

The plain fact is that capitalism, in boom and slump, does not serve the interests of the majority. The answer to an insane system of market forces is not struggle to control those forces, as the Labour Party has sometimes tried, and as they claim to do in state-capitalist Russia. The answer is to remove the market forces altogether, by ending the institution of property. The answer is not to increase the power of the state, it is to end the power of the state. The answer is not to take less, but to take control of the world as a democratic community. The answer is not to work harder for our bosses, but to stop working for them altogether, and to start to work for the common good of society. To produce for direct use, not for the profit of the few. This can only be achieved through understanding and cooperation. A democratic society can only be created democratically. What is needed is political organisation. Dissent of all forms against the status quo, frustration at the thousands of problems which capitalism continually produces, has to be united in one mass movement, with the clear and open aim of establishing a society in which each will work according to his or her ability and take according to his or her needs.

Today, we are prevented from realising our expectations, from engaging in creative work and from developing ourselves freely. The choice is forced upon us, between the destruction and waste of the commercial system, and the harmony and freedom of a society which will be democratically and consciously run according to a common plan.

Clifford Slapper