Alternative Economic Strategy or Socialism? (1982)

From the May 1982 issue of the Socialist Standard

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Cardiff Group

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