Tuesday, July 30, 2019

The Great Crash of 1929 (1969)

From the October 1969 issue of the Socialist Standard

The events of October 1929 which have become known as the Great Crash have been written not only into capitalism’s history but also into the system’s mythology. There are still plenty of people living who remember it, who recall with bitterness the seemingly endless unemployment, the contemptuous clerks at the Labour Exchange, die indignities of the Means Test. Many political prejudices were set solid in those dark days, forty years ago.

The economists also remember and promise us that 1929 will never happen again—which might have more force, were it not for the fact that in 1929 the economists were confident that the Crash could not happen in the first place. The promise, in any case, is always conditional on our doing as the economists say, with 1929 held over our heads much as Napoleon held the threat of Jones' return over the animals in Animal Farm. This, for example, was Harold Wilson’s warning to the 1966 TUC about what would follow a rejection of the government’s policy of wage restraint:
  . . . one false, careless, regardless step . . . could push the world into conditions not unlike those of the early Thirties.
Wilson is here making the familiar claim that the economy is now under control, even if sometimes it needs drastic measures like wage freezes and devaluations to remind it of the fact. And behind this lurks the notion that the economists of capitalism have learnt something from the Great Crash which they will never forget.

As 1929 started, the world was not entirely empty of optimism. Since the last great depression of the 1890’s there had been many developments in fields like electricity, the motor car and telecommunications and these were widely assumed to be bringing in their train greater freedom and equality. It was true that in Britain there was a chronic unemployment problem but the United States was in the midst of a prolonged stock exchange boom which convinced millions of people that mass production, credit trading and private enterprise were among the best things ever invented by man.

At the year’s opening the Conservatives in Britain were looking back with satisfaction on the work Parliament had just finished on amendments to the Book of Common Prayer; if there was an unemployment problem, they were confident they had dealt with it in their Derating Bill and Tory politicians toured the country telling everyone that prosperity was on the doorstep. This hilarious tone was kept up by Stanley Baldwin during the general election that year, when he managed to forget that basic industries like coal, steel and shipbuilding were depressed and pointed joyfully to the unmistakable signs of recovery to be found in the export of Cornish broccoli to Europe. Perhaps it is not surprising that the Tories lost the election.

The unpalatable fact was that Britain’s economy had been in decline for something like sixty years and in particular had emerged from the war to find the tendencies which had previously undermined British dominance — foreign competition, tariff barriers and the growth of home industries in former markets abroad-—were all accentuated. Soon after 1918 there was a surprise boom, largely due to the replenishment of war-depleted stocks. Prices shot up to impossible heights and, despite the demobilisation of 4 million servicemen, there was virtually full employment. But as raw materials which had been held up by the lack of shipping began to come onto the market the boom collapsed. By early 1922 prices had been halved; in 1921 unemployment exceeded 2½ million.

The slow recovery from this recession was probably due to the British government’s decision, in 1925, to return to the Gold Standard. The government were aware of the possible effects of this, but they found themselves in something of a cleft stick, having to choose between slowing down a possible recovery and risking contamination by the inflation which was destroying so many European currencies. (At the end of that inflation, prices in Poland had risen 2½ million times their pre-war level; in Russia 4,000 million times; in Germany one million million times.)

In America, where the Great Crash was first heard to rumble, things were rather different. The American capitalist class had had a lot to win in the 1914/18 war and came out of the peace talks as an exceedingly strong power. Their exports were increasing in trades which were expanding—in contrast to those of Britain, Which made most ground in declining trades. America suffered a few short recessions during 1920/21, 1924 and 1927 but always recovery followed quickly and taken as a whole the period from 1922 to 1929 was one continuous boom.

These conditions were of course registered on Wall Street, where the New York Times index of 25 industrial stocks rose in a smooth curve from 110 in early 1924 to 338 in January 1929. Just before the Crash, in September, it reached 452. This was the sort of evidence which persuaded many people, anxious to make their own paper fortune, that eternal prosperity had arrived. The monetary authorities seemed to be alone in their concern at the hectic activity on the stock exchanges —on one day just before the Crash over 12 million shares were traded and during the period 1927 to 1929 the bank borrowings of stock brokers rose from $3,500 million to $8,500 million—and when the slide started in October they welcomed it, in mistake for a minor adjustment which would quickly be followed by another bout of expansion.

Early in the New Year there was indeed a slight recovery and the experts announced the recession’s end. But then agricultural and raw material prices nosedived and this was followed by three waves of bank failures between the end of 1930 to mid 1932 which destroyed deposits, caused a panic-stricken contraction of bank loans and finally brought paralysis in the winter of 1932/3.

The bank failures revealed a new and poignant aspect of the Crash. Now it was not only the unemployed industrial and agricultural workers who were queueing and begging; they were joined by small businessmen, shopkeepers and stockholders who had seen their life savings disappear and who, when ruin stared them in the face, sometimes chose to end it all with a bullet or a jump from an apartment window.

The American government, following the customary policy of treating symptoms rather than deal with causes, tried to force prices up by cutting back production and restricting competition. In many cases this policy was superfluous; producers who were faced with a glutted market needed no official prompting to destroy food, and industrialists who found that they could not sell their goods had no alternative to closing their works. From the point of view of capitalism, it was all very logical but it meant that the world was presented, in what was supposed to be a great age of freedom and prosperity, with the spectacle of millions of underfed people while wheat was being burned; of men searching desperately for employment while factories were shut, while the winding wheels stayed still at the pit shafts and the great cranes hung silent and motionless in the almost tangible gloom of the shipyards.

Yet even these drastic and inhumane measures did not work. Tom Johnston, who was one of the Labour ministers given the job of ending unemployment in Britain, spoke about them with grim realism:
  It is in vain that the United States keeps 250 million bushels of wheat, or contact wheat, off the market in an endeavour, by a limitation of supplies, to peg or to stabilise prices. Only the other day wheat sold in Liverpool at a lower price than it has been sold since the days of Charles II. lower than it had been for two and a half centuries. (House of Commons. April 16 1931).
The Great Crash, and the slump which followed, have been subjected to innumerable autopsies and inquests. Perhaps the most familiar has been the theory of overproduction, that the world had simply made much more than it needed. At the time, some experts believed that the developing productive techniques were held back from exerting their full effect by the 1914/18 war, and afterwards made themselves felt in a more concentrated manner. As a result of these developments, productivity increased faster than real wages—one estimate for new manufacturing industries was three times as fast—which led to a surplus of goods on the market with no wages to buy them. (It is worth commenting that nowadays the explanation for economic crises is exactly the opposite — real wages increasing faster than productivity.)

Undeniable as it is that people without money cannot buy anything, the overproduction theory does not explain the fact that the “surpluses” existed while people were literally starving and only too anxious to consume more. It is a theory which only meddles with the symptoms of the crisis and does not touch the cause, nor the stupidity and inhumanity of it.

Then there were the financial theories, which blamed the Crash onto the wild antics on Wall Street and the subsequent slump onto a loss of confidence in investing in production, public works and so on. These ideas cannot tell us why it affected so many countries, whether they had had a stock exchange spree or not; they do not explain why an investment flood should so mechanically bring an investment drought, nor why both these opposite conditions should be blamed for having a similar effect. It is true that capitalism's financial machinery, which is supposed to be such a model of efficiency and such an aid to production can often aggravate a recession. But it cannot produce one—at the most a stock exchange, like a barometer, registers conditions but does not alter them.

What the Great Crash did illuminate was the impossible anarchy of capitalism, the basic contradiction in a system where wealth is socially produced but privately owned. The Thirties might have been years of productive advance but they turned out to be a decade of collapse and stagnation, when capitalism was in the throes of a crisis which hit all states, whatever surface differences there were between their political and economic organisations and whatever remedies they tried.

The political results of the Crash were varied. In some countries the working class opted for what they thought was change; in others they turned for assurance to the more traditional parties. In America, Roosevelt defeated Hoover in the 1932 election by the staggering margin of 472 electoral college votes to 59 and the Democrats won large majorities in both House of Congress. Roosevelt’s New Deal was later given much of the credit for the end of the slump but in fact it was a matter of luck. He had campaigned on a promise to cut Federal spending by 25 per cent and to balance the Budget. But he was as impotent to control events as anyone else and when a policy of deficit financing was forced upon him this happened to coincide with the beginnings of the recovery.

In the same way, the Nazis were lucky in Germany. The recovery started as they came to power, allowing them to spend on armaments and communications and this was enough to convince many people that Hitler also had a magic formula, which included replacing parliamentary democracy with a “strong man” dictatorship and crushing the trade unions.

In Britain the workers took shelter with the established parties. One of the first acts of the 1931 National coalition was to cut unemployment pay but this did not prevent the working class gratefully voting for them in 1935, running up big Tory votes in industrial centres like Manchester, Liverpool, Newcastle and Sheffield.

The Great Crash, then, did nothing to undermine capitalism and it did not. as many left-wingers expected, cause the system to collapse. It merely contributed another chapter to capitalism’s mythology, in which one set of politicians were stubbornly blind to remedies which were obvious to another. And this leads on to the other myth—that the new enlightened experts have learned how to control the system and we should all be grateful to them and if we’re not—why, then, we will have Jones back and 1929 will happen all over again.

As if those were the only two choices.

[In a future issue we shall be serialising an abridged version of our pamphlet "Why Capitalism Will Not Collapse." This pamphlet, which w'as published in February 1932, examines the after-effects ,of the Great Crash and showed what influence they had on capitalism,]

Letters: More on Squatting (1969)

Letters to the Editors from the October 1969 issue of the Socialist Standard

My letter, (July Socialist Standard), was written in order to find out whether you have a coherent party line on reformism. Your reply suggests that you have not, and reveals a deep confusion as to how you think a worker should behave under capitalism.

You say that you “support the efforts of workers to improve their housing conditions under capitalism—even by squatting”, and yet you are “opposed to all reformist movements.” Your reason for thinking there is no inconsistency in this position is that "squatting is no more a reform than stealing.”

But it is. For example, although the East London Squatters encourage homeless people to occupy empty dwellings they do this as a means to the reformist end of persuading local authorities to change their housing policy. It just so happens that there you have a reformist movement which uses direct action instead of the orthodox political channels. So if you support people squatting then you support their engaging in reformist activities. This, I agree, is not the same as supporting a reformist movement, but since when did the SPGB support the workers in being reformists? To put your dilemma another way, if you support people in squatting but are opposed to all reformist movements would you allow a member of the East London Squatters to join your party?

You ought to, of course. For what is the difference between getting what you can out of capitalism by joining a trade union and doing the same by joining the Squatters or a Tenants' Association? The only difference I can think of is that possibly Marx would have approved of the first of these but not the other two. But I am sure you will agree as scientific socialists that this fact on its own is worthless (After all, Marx approved of support for bourgeois revolutions).

To sum up: it would be convenient if you could simply register opposition to all attempts at reform, right across the board. But apart from the sheer inhumanity of such a position, you are precluded from adopting it because of your views on trade unions and the vote. To draw the line here looks suspiciously arbitrary and anyway from what you say about squatting it looks as if you don’t draw it here. So where do you draw it? You think that workers should get what they can out of capitalism. So suppose a man could do this by joining the British Humanist Association (because this would give him contacts for a job offering more pay for less labour-power). You would then, prevent him from adopting it because of your views on something of which you approve.
W. Warwick, 


I am intrigued by your reasoning in your reply to Mr. Warwick. I pass over the use of somewhat ill-chosen emotive terms to compare squatting with stealing, for there is no certainty that stealing will lead to greater equality of wealth, and in most workers’ minds the term suggests the bank robber carrying off not the bank’s wealth but the workers’ savings.

When you say that in supporting squatting you are not supporting reforms — is this because you give generalised support, but do not intend to take part in any attempt to help squatters do the squatting?As besides the workers involved a number of politicoes are there to help, redecorate the house, hand out leaflets explaining the case, print those leaflets, argue with and resist bailiffs and police and so forth. The family who squat, are certainly engaged in a day to day struggle to defend their living conditions, but what of their sympathisers and supporters?

In Ilford as in many other instances part of the support has meant that leaflets have been distributed explaining that as an immediate possibility such and such houses are empty, will be empty for some years as the council has not yet permission to undertake the scheme under which they are to be pulled down and does not anyway intend to tackle this part of Ilford until 76 and so on . . . Arguments are put that lack of housing is the product of the profit motive and not any intrinsic impossibility as to building; but specific demands are made for the here and now.

Some years back one of your members in an article condemning anarchists argued that syndicalism was reformist—reformism by blows, but reformism nevertheless — this would appear to be the case of squatting; I would prefer to use the phrase gradualist revolution, but if the argument is true of the one then it is true of both. 
Laurens Otter, 
Thornton Heath

Our coherent policy on reforms and reformism is set out briefly here:
  1. We are opposed to reformism, or the futile policy of trying to make capitalism work for the good of all.
  2. We are opposed to political groups which pursue reformist policies.
  3. We are not opposed to all reforms of capitalism.
  4. We do not advocate or propose reforms. .
  5. Reforms will be offered by capitalist governments when the Socialist Party grows stronger.
  6. We urge workers to resist the downward pressures capitalism always exerts on their living standards.

Since it is this last point which worries Mr. Warwick let us go into it further. We appreciate that as long as workers are not socialists, this resistance will often be carried on in a disorganised and ineffective way usually involving support for reformist policies and parties. As long as socialist numbers are small (as now) there is little we can do to remedy this save urging workers to recognise the futility of reformism and to become socialists and wage the class struggle in an organised and conscious way.

There is a difference, which we are sure Mr. Warwick can see, between giving support to the general aim of working class resistance to capitalism and giving support to any and every specific method a non-socialist working class might use. We only endorse those methods which we consider to be in the interests of the working class, e.g., some aspects of trade unionism. We oppose those methods which we consider do not measure up to this standard, e.g., reformism.

Now, where does squatting come in? Obviously we should have made it more clear what we meant by ’’squatting” when we said it was the kind of action a worker could take to improve his housing conditions under capitalism.

Originally the word meant to occupy land without title and has come to refer also to occupying empty houses. When we referred to ’’squatting” in the April Socialist Standard and in our July reply to Mr. Warwick we meant the simple act of a homeless family moving into an empty house, i.e., the act of an individual, family trying to get better housing. We are not opposed to, and will not criticise, workers for doing this. We did emphasise also that this was not the way to solve or even palliate the working class housing problem.

However, it is true that ’’squatting” also has a broader meaning: the sort of policy outlined by Mr. Otter with the aim, as Mr. Warwick says, of ’’persuading local authorities to change their housing policy”. This we are opposed to and to organisations like the “East London Squatters” whose reformist policy Mr. Otter was outlining.

Mr. Warwick is obviously unaware that SPGB members are in tenants associations, student unions, parent-teacher groups as well as in trade unions. This is not part of their Party activity but part of their activity as workers, who are tenants or students or parents and who are trying to resist capitalist pressure. This has long been our attitude. We refer Mr. Warwick to the Socialist Standard of January 1932 where a correspondent was told that “members of the SPGB are permitted to belong to certain of the organisations of the unemployed”. The emphasis was put on certain because some of these and other organisations are merely fronts for reformist groups. We would say this is true for the various so-called Squatters campaigns which serve the ulterior motives of assorted anarchist and trotskyist groups. Obviously an SPGB member could not join an organisation of this type.

Our policy on trade unions has been worked out in the light of modern industrial and political conditions. While we recognise that the socialist movement owes a great debt to Marx who first put its theory onto a scientific basis, we have registered our disagreement with the attitude he took up on a number of points (war, nationalism and even reforms).

Finally, we only drew a parallel between squatting and stealing to show that we were not worried that squatting was illegal. The law only exists to protect private property and who are we to respect it?
Editorial Committee