Time's Little Joke ! (1947)

From the October 1947 issue of the Socialist Standard

  “First, the balance of payments. Here we have done very well so far, much better than most experts expected; and there is no prospect of any ‘crisis.’ As Hugh Dalton has said, controls would prevent this; and all that could happen at the worst would be a prolongation of austerity. If we do not export enough, we shall have less oranges, bananas, tobacco, sugar, limber, etc., to consume. That is all.

  “But the figures are encouraging. It was expected that in 1946 we should have a total deficit on the balance of our oversea payments (including Government expenditure abroad) of about £750,000,000. But in fact it has only turned out to be about £450,000,000.

  “Since only £300,000,000 of this was due to ordinary exporting and importing, our excess of imports over exports in 1916 (if we allow for the changed value of money) was scarcely greater than the average for the 1930’s. This is an incredible success, which has not been widely enough realized.

   “It is for this reason that the American Loan is being used up so slowly. Those who say that it is being used fast have evidently not examined the figures very carefully. Hugh Dalton told us recently in Parliament that in the last six months of 1946 some 600,000,000 dollars of the American loan had been spent. This is a rate of spending of £300,000,000 a year. Since the effective part of the loan amounts to £937,000,000, it would last at this rate for rather over three years, i.e. till the autumn of 1949.” 

 (Douglas Jay, Labour M.P., “Labour Press Service,” March 7th, 1947.)

The Labour Party and Palestine (1947)

Editorial from the October 1947 issue of the Socialist Standard

As long as capitalism endures the problems of human relationships take on a capitalist form; all “solutions” must be capitalist solutions — which often means that no real solution is possible. Labour Party conferences thought to solve the Jewish problem by setting up a Jewish National Home in Palestine and Mr. Bevin, with more optimism than foresight, staked his reputation on achieving a solution before he left office—but capitalism has the last word. If Socialism had already been instituted there would not be rival capitalist Powers fighting each other for control of the strategically important Middle East and its oil and other natural resources; no Arab ruling class anxious to keep out the alien capitalism they see in the Zionist movement; no Arab peasants and workers fearful lest their livelihood be endangered by the Jewish invasion; no army of persecuted and homeless Jews desperately seeking what looks to them like the only safe refuge. But when the Socialist says that the task coming before all others is to hasten the achievement of Socialism by winning over a majority to the Socialist cause our opponents have their glib answer ready. Socialism, they say, cannot he won quickly, therefore it is necessary to be practical and find a solution to these dire problems now. So they draw up their solutions, not one solution but many, and engage in bitter conflicts with each other over them. Some are idealistic, humanitarian schemes that capitalism simply laughs out of court. Then come the cynical compromises arrived at after making concessions to the demands of the rival capitalist groups, and the human beings on whose behalf the schemes are supposed to have been drafted are lucky if their last state is not worse than their first. The good intentions of those who moved and supported resolutions at Labour Party conferences come to miserable fruition in the deplorable transport of thousands of homeless Jews back to Germany. Mr. Bevin wanted to solve the Jewish problem but he has to subordinate his desires to the need of British Imperialism. He declares that he has no intention of abandoning Imperial interests in the Middle East and he therefore hesitates to open up Palestine to all the Jews who want lo go there because this would antagonise the Arab States. His opponents urge equally hopeless and dangerous courses. Blandly ignoring the wishes of the Arabs who form the majority of the Palestine population they demand unlimited Jewish immigration. At the end of that road may be a monumental mutual slaughter of Jews and Arabs, with U.S.A., Russia, Britain and the Arab States furthering their own imperialist interests by arming and encouraging the contestants.

How little humanitarian sentiments effectively enter into it is shown by the reluctance of all the Governments to throw open their own frontiers so that the Jewish and other refugees may find refuge. Here working class ignorance and prejudice play a part. Not understanding that capitalism itself is the cause of poverty and unemployment many workers support the exclusion of foreign immigrants because they imagine that by so doing they can shut out unemployment and lowered standards of living.

So we come back to the point from which we began. The spread of Socialist understanding will do more, even as an immediate, practical contribution, than the attempts to solve such problems within the framework of the capitalist system.

The Common Wealth Party and State Capitalism (1947)

From the October 1947 issue of the Socialist Standard

In our August issue, in the article “Why Can’t we all get Together?”, the statement was made that the Common Wealth Party supports State Capitalism. On August 17th we received from Mr. W. J. Taylor, Political Secretary of Common Wealth, a letter of protest which contained the following:—

   “I was amazed to read in the August issue of the Socialist Standard the following sentence: 'We are utterly opposed to the support of State Capitalism given by Common Wealth.' I am not, of course, amazed that the S.P.G.B. is opposed to support for State Capitalism; but I am at the suggestion that Common Wealth gives such support. 'Nationalisation is not Socialism' is the title of one of our pamphlets, issued shortly before the S.P.G.B. pamphlet of a similar name, 'Nationalisation or Socialism?’ In this pamphlet it is clearly shown that mere nationalisation is not, in itself, Socialism. In fact, this is one of our major points of difference with the present miscalled 'Socialist Government’.”

We replied to Mr. Taylor in a letter dated August 28th:

  "We would first point out that disagreement with the Labour Government’s method of operating Nationalisation and a desire to have nationalised industries operated differently does not in any way meet our criticism. It merely means that you and they both favour State Capitalism but disagree on more or less important details.
    "May we refer to 'Common Wealth Manifesto’ (Second Edition, August, 1943) in which you make it perfectly clear that Common Wealth intends to retain all the essential features of capitalism, in the State Capitalist form. You are going to Nationalise 'all credit and investment institutions’—what function can they perform under Socialism? You are specifically retaining the wages system, which again is quite incompatible with Socialism. To clinch the matter you state (p.8) that what you describe (wrongly) as common ownership is State Capitalism as it exists in Russia.”

We received from Mr. Taylor a further letter dated August 30th which contained the following:

  The 'Manifesto’ to which you refer has not been re-printed since the split in the party in September, 1945, when this issue of State Capitalism was the fundamental underlying the division of opinion in the party. That ‘Manifesto’ will not be re-issued—a new one has been in course of preparation for some time.
  'The pamphlet to which I referred in my previous letter 'Nationalisation is not Socialism' states categorically ‘ The wages system . . . must be abolished.'
   "Recent publications by this party—and notably articles in our monthly Review have shown our changed viewpoint regarding the U.S.S.R. and its State Capitalism.
   "The purpose of 'nationalisation of credit and investment institutions4 is an obvious one—one nationalises (or brings them under common ownership to put it more accurately) for the express purpose of destroying their capitalist function. One cannot create socialism over-night, and though I do not here intend to be drawn into a discussion on the transition period, which would be short and as abrupt as it could be made, it is quite apparent to anyone not completely blinded by wishful thinking that remnants of capitalism will continue to exist for a long time (though diminishing steadily) after the major battle has been fought and won. The remnants of feudalism are still with us.
   "If the issue is one of ultimate aims, then it is doubtful if there is much between us—if it is one of attainment of those aims, then there is—and I most certainly would not object to criticism of that nature, based on facts. I do, however, consider that you are neither advancing the cause of Socialism, nor even the cause of your own party (two not necessarily identical objectives) by ill-informed and misrepresenting comments of the kind to which my earlier letter referred." 

It will be noticed that Mr. Taylor does not claim that Common Wealth always opposed State Capitalism but only that in September, 1945, it ceased giving support and went over to opposition. This in itself deserves some comment. Socialism and State Capitalism are opposites; nobody can support both at the same time. Nobody who understands Socialism could imagine that State Capitalism is the same as Socialism or could support it. It is, of course, possible for an individual who once supported State Capitalism and opposed Socialism, to learn the error of his ways and come to support Socialism and oppose State Capitalism, but this does not explain the antics of Common Wealth. Mr. Taylor says that they supported State Capitalism before September, 1945; what he does not point out is that before 1945, as afterwards, they claimed that their aim was Socialism based on Common Ownership of the means of production and distribution.

The only possible explanation is that before 1945 they had not a glimmering of understanding of what is meant by Socialism and Common Ownership.

It remains to consider whether they are in any better state now. Mr. Taylor would say that they are. He claims that they are now in favour of the abolition of the wages system and recognise that Socialists must be opposed to State Capitalism. He quotes the following passage from a Common Wealth pamphlet as proof of his assertion: “The wages system . . . must be abolished.” The interesting part of this quotation is not what it says but what it leaves out, for the whole passage from page 2 of the pamphlet “ Nationalisation is not Socialism” actually reads:

   “The wages system as we now know it must be abolished . . . ” (Our italics).

And if there is any doubt that Common Wealth is still in favour of the wages system it is only necessary to go to the September issue of Common Wealth Review where we read in an article on the incentives of a Socialist society ‘‘We must accept the need for a planned system of wages and prices and reject the old bargaining methods by sectional interests.” (P.ll).

In short, Common Wealth’s idea of Socialism and common ownership still is, as it always was, State Capitalism.

Mr. Taylor’s letter of August 30th contains two other points that require comment. Asked what function credit and investment institutions could serve under Socialism (when production will be solely for use and the wages system will have been abolished) Mr. Taylor replies that when Common Wealth declares for the "Nationalisation of credit and investment institutions ” the purpose is to bring them "under common ownership,” and destroy ‘‘their capitalist function.” Could anything be more muddled? May we ask Mr. Taylor just how credit and investment institutions can be commonly owned, and how institutions that exist only for the purpose of carrying on Capitalism can be shorn of their capitalist function and retained. What are their functions other than capitalist ones?

It will be observed that Mr. Taylor still claims that common ownership is a more accurate way of describing nationalisation, when in fact the two terms mean something entirely different.

The other point is Mr. Taylor’s statement that remnants of capitalism will continue to exist for a long time under Socialism, a statement that he backs up with a reference to the remnants of feudalism which continued under capitalism. What he overlooks, and it is a fundamental point, is that feudalism and capitalism are both of them systems based on private ownership and the exploitation of one class by another. Socialism means the end of class ownership and exploitation. That is why there is no analogy with the retention of feudal remnants under capitalism. Under Socialism there cannot be, either for a long period or a short one, a continuation of class ownership and class exploitation. Common Wealth still confuses the issue by describing as Socialism, to which it is opposed, State Capitalism, to which it gives support.

Editorial Committee

A Letter To An Irish Worker (1947)

From the October 1947 issue of the Socialist Standard

Not far away lies the country where you were born, Ireland—Ireland, geographically, but not politically. Politically, there are two lands—as you know—Eire and Northern Ireland. Ireland as a geographical unit does exist—Ireland as a nation, no.

Unpalatable as this fact may appear to you and the majority of Irishmen and women in this country it remains none the less a fact and to ignore it in any review of the situation in Ireland would be sheer folly, if not deceit. More important still: since it is the position of the working class with which I am concerned it is from that class point of view that I examine Ireland. To express any other point of view but the working class one would not only be detrimental to the real interests of Irish workers both here and in Ireland, but would also be tantamount to a surrendering of my Socialist principles.

At present you are being asked to give your support to a campaign to ”end partition in Ireland.” You are asked, as an Irishman, to "help end the unnatural division of Ireland, to make Ireland, once more, as she was in the past, a free and united nation.” Those organisations that are very much interested in getting your support for their nationalist policies are constantly reminding you of “your glorious heritage,” of ”your proud past, your great Irish nation and your nationality.” However, I would urge you to stop and think, and ask yourself what it’s all about—remember, the hand that heartily slaps you on the back may yet conceal a knife.

Ireland, today, represents a glaring example of the utter futility of supporting nationalist parties, from the workers’ view point. From long before the French Revolution to the Civil War of 1920 Irish men, women and children, have died a hundred-and-one deaths through war, famine and pestilence caused either directly or indirectly by the pursuing of this "pure ideal” of national independence. Of course, one can look back upon it all as ‘‘just history” and murmur about the "inevitability of social development.” However, such an attitude is not enough—to stop there is to close your eyes to what is happening now and what may happen in the future. History follows no preordained, inexorable path—it is men who make history, and men who change the world. And because Irish working men and women still give their allegiance and support to this nationalist ideal of a “free and united Ireland” so are they also prepared to follow in the footsteps of those who went before them and lay down their very lives, in one way or another, for something they believe to be in their interests.

And what has been the result of it all in Ireland? What has been achieved through the misery and the suffering and the death of the countless thousands of unnamed Irish peasants and workers? What concrete and tangible gains have been made by those who always bear the brunt of wars, whether national or international? Shall we assess our gains? Surely it is high time we did.

Now, then, note these data: Eire (26 of the 32 Irish counties) is a Republic, an independent state. It has a population of about 3,000,000, of which number 66 persons are considered wealthy to the extent that they receive an average £27 10s. each per day; the great remainder of the population—the working class—being so poor that their income is below the 1939 cost-of-living figure by over 30 per cent. in the cities and 15 per cent. in the country areas; of the 70-odd-thousand registered unemployed members of this population the unmarried man “exists” on the munificent sum of 22s. 6d. per week. Emigrant ships (you’ve experienced the luxurious comfort of these sea-greyhounds!) have carried on an average a daily cargo of 78 Irish men and women to this and other countries since 1922. Slums, hovels and dilapidated houses that constitute “habitable accommodation” for a great many; all the poverty-diseases, of which tuberculosis causes one-half of all the deaths between the ages of 15 and 25 each year. One hundred and forty politicians who prate about "equality of sacrifice” and, at the same time, increase their salaries from £40 to £52 per month while 140,000 old-age pensioners “exist” on £2 10s. per month. Charitable organisations are as much a part of the Irish scene as are the Mountains of Mourne or the Blarney Stone. (One of these organisations issued its 157th annual report in June. That report stated that in Dublin City—capital of this proud “Irish nation,” Eire—about 8.500 families are trying to live on incomes of between five shillings and £1 per week. It continued, in like vein, to enumerate the many afflictions from which the working people of city, town and village suffer; and for the hundredth-and-fifty-seventh time this unctuous, back-slapping Christian organisation, shedding crocodile-tears, bemoaned the fact that to find large families accommodated in one ramshackle room, damp and miserable, without anything like sufficient food, clothing and bedding is a common experience.)

Well, that’s Eire today after a quarter of a century’s self-government. I think you’ll agree that all the “heroic” national struggles that have been waged in Ireland have—so far as the Irish worker and his family is concerned—achieved absolutely nothing. Today, behind the brave talk of the politicians, behind the backs of the cultured gentlemen of the Gaelic League and the language revivalists, beneath the cloak of nationality and religion, lies the stark reality of the slum, of rampant disease, of poor wages, of high prices, of dole and emigration queues—poverty is the daily companion and bed-fellow of the majority of men and women in Ireland.

Yes—of course—there have been changes, the strategically-important seaports are no longer the legal property of the British Government, the British Governor-General is gone, the tricolour now flutters triumphantly in the breeze over Government House in Merrion Square . . . Changes? Well, of a sort; changes which certainly haven’t changed your wage-slave position in the least—and, surely, that’s the one thing worth changing?

No, nationalism has nothing to offer you—except a change of masters. Whether the Eire Government of De Valera or the Northern Ireland Government of Basil Brooke rules the whole, or only part, of Ireland, whether the flag be the tricolour or the Union Jack, whether partition ends or continues, you, as a worker, will in no wise be any better off. Your problems will still continue, will still confront you—worrying you and causing you many a headache—while the present system of society lasts. To solve those problems—which never leave yon, be you in Ireland, Britain, America or any other part of the world—you’ll most certainly have to struggle.

But let your struggle be one against the real origin of your problems, against the system of capitalism, and against those who support it. Struggle against the system which condemns all workers, regardless of the place of their birth being Ireland, Britain, America or anywhere else, to a life-time of toil and poverty, from cradle to grave ; struggle against the wealthy few who, because they own the factories, mines, railways and all of the means and instruments for producing wealth, compel you—because you own nothing—to labour for their benefit.

Your struggle, in common with the struggle of workers everywhere, to be successful must be a revolutionary one. Your aim? To take from the capitalist class its ownership of the means of production and make them the common property of all mankind, without distinction of race or sex. When you’ve achieved that—when you’ve won that revolution — living will really be worthwhile then, it will be a joy and an adventure.

Then things will be produced because people need them and not in order to sell for the purpose of making profit; then poverty will disappear, insecurity vanish, and wars will be nothing but memories . . . That will be Socialism—so, speed the day!

Comradely Yours,

Chris Walsh.

Press Cuttings (1947)

From the October 1947 issue of the Socialist Standard

Strikes in Nationalised Industries

"The Grimethorpe strike has raised, in an acute from, the question of discipline in a nationalised industry.
  Trade union theory has never surrendered the right to strike, after due notice given.
   It has been held to be the last sacred sanction of organised labour against injustice.
  But it is against private employers that this right has been so sturdily maintained.
  Is the situation the same when, as in the coal industry, the employer is the nation?
 And can the State run industry effectively if the right of the workers to defy its authority with impunity is to be recognised ?
  "No” would seem to be the answer to both these questions. And, unless agreement can be reached on this basis, nationalised industries run grave risks of coming to grief."

(Mr. Ernest Thurtle, Labour M.P., writing in Sunday Express, 14/9/47.)

Mr. Thurtle now wants the right to strike to be withdrawn from workers in nationalised industries. Long ago, before the Labour Party came to power, the Labour Daily Herald admitted that if the price of nationalisation is that the workers lose their only weapon, the strike, then, “under capitalism a nationalised industry would actually be worse off than those left in private hands." (13/9/22.)


New Russian Imperialism in Persia

Moscow radio last night disclosed that the draft Soviet-Persian oil agreement which the Persian Premier, Qavam es Salteneh, declined to submit to Parliament, contains a special article granting concessions to the proposed Soviet-Persian oil company, in addition to the agreement signed in 1946 for the company’s creation.
The new article provides “preferential rights for the Soviet Union regarding the purchase of oil products exported by the company” in which Russia is to hold 51 per cent, of stock, the broadcast said.
It also provides for the company to import duty free and without licence “equipment necessary for its work” of exploiting oilfields in North Persia.

(News Chronicle, 25/9/47)

Party News Briefs (1947)

Party News from the October 1947 issue of the Socialist Standard

The winter series of Sunday evening lectures at the Trade Union Club, Great Newport' Street, London, W.C., commences on October 5th. There will be weekly lectures throughout the winter timed to commence at 7 p.m. On October 5th A. Turner will make a “ Call to London's workers.” On October 12th C. Lestor will open a short series of historical lectures with “Primitive Communism,” followed by further historical lectures on the 19th and 26th, F. Evans speaking on "Feudalism” on the latter date. D. Fenwick's subject for October 19th is not yet to hand.

The Party meeting on September 14th called to discuss international contacts with parties and groups abroad was lively, interesting and fruitful. The discussion centred round the desirability of sending party representatives to conferences of parties and groups abroad who are not associated with us with a view to making our position known to workers seeking a way out of the present chaos. After the whole question had been thoroughly thrashed out the meeting expressed itself in agreement with the view of the Executive Committee that we are willing to send a party representative to national or international gatherings of our political opponents to state the Party’s case provided that the party representative is admitted on the clear understanding that he is there to state our case in opposition and not to be in any way associated with joint decisions arrived at. We should not therefore be prepared to send a representative as a delegate. The meeting endorsed the action of the E.C. in not sending a member to the Brussels conference convened by the Spartacus Group of Holland at Whitsun, but recommended that a representative should be sent to a further congress in Brussels which we learn is to be held at Christmas.

The Autumn Delegate meeting took place on September 28th, but we go to print before this date, and will give a report of it in our next issue.

The Propaganda Committee are not receiving Forms ‘‘E” (Reports of Propaganda meetings) early enough from some branches. Please send these to Head Office as quickly os possible after the meetings are held.

The Centenary Edition of the “Communist Manifesto” with our own Introduction is now being considered by the Executive Committee. It will be a valuable part of revolutionary literature when published.

A debate with the Independent Labour Party (represented by T. Colyer) has been arranged for Friday, October 17th, at the Co-operative Society’s Hall, Lakedale Road, Plumstead. Our representative will be C. May.

Party Badges are now available in brooch or stud fittings. They are 1s. 6d. each post free and money should be sent with order to Head Office.

The Party Funds Committee is now at work trying to swell the flow of money into the party. They have sent an individual appeal to each subscriber to the Socialist Standard which is bearing fruit, but much more money is needed to enable us to maintain and extend our activities. Send as much as you can to the Party—we need it.

A scheme of education classes at Head Office was approved by the Executive Committee towards the end of August. In the first instance there will be a series of twelve weekly classes at Head Office up to Christmas. This will be attended by 15 members chosen from last year’s economics class with a view to preparing them to act as tutors after Christmas. The syllabus will include, in addition to history and economics, instruction in how to study, and the history of the working-class movement with special reference to the origin of the party and its attitude to the Internationals, other political parties and reformism. After Christmas it is proposed to limit the class again to 15 members. The Executive Committee recognise that many more members than 15 will wish to attend, but to begin with we wish to build up a solid core of members thoroughly grounded in all aspects of the party’s position, and this can only be done with an intensive course of study in which the students submit written work on questions set, and are generally under the close supervision of the tutors. For this, comparatively small classes are essential. It is proposed to hold two separate sessions of twelve weeks each from January to September. Apart from providing the basic knowledge which party members should possess, the aim is to seed students for speaking, writing or teaching, and to pass them on to specialised classes for these purposes as and when they are formed. The tutors who form the first class before Christmas will take the subsequent classes in selected portions of the syllabus of which they have made a special study. The work of the tutors will be supervised by the Education Committee which the Executive Committee have set up to run the scheme. The Education Committee will be writing to branches asking them to nominate members to attend the class after Christmas, and they ask for the co-operation of members in running a scheme which, while in the beginning cannot cater for the requirements of all members, has the objective of providing sufficient tutors for a greater number of educational classes both at Head Office and in branches than we have ever had in the experience of the party.

Paddington Branch are asking Head Office Propaganda Committee to co-operate with them with a view to running a mass meeting at the Metropolitan Theatre, Edgware Road, London, on Sunday, November 2nd.

Glasgow Branch are on the threshold of another winter season of indoor lectures, propaganda meetings and debates. Their speakers will be in action every Sunday evening from the first Sunday in October at the Central Halls, 25, Bath Street. The meetings commence at 7.30 p.m. Halls have been booked right up to May, 1948, to accommodate the hundreds of workers in Glasgow interested in socialism. Glasgow branch aims to develop this interest into actively organised participation in the party’s effort. The branch is considering running classes in logic and economics during the winter. Further announcements about these classes will be made later. Other propaganda plans are visits to Edinburgh and other places in Scotland, and if funds permit speakers will be sent to Dublin and Belfast. The branch is very active, and right throughout the summer outdoor propagandists were at work. A considerable number of the party’s "Work and Want” posters are now showing in Glasgow. Workers are rallying to the support of the branch both financially and politically and members are going ahead enthusiastically.

C. C. Groves,

General Secretary.

What Next for South Africa? (1990)

From the April 1990 issue of the Socialist Standard

We may never know what discussions took place between President de Klerk and Nelson Mandela before the famous prisoner’s release, but it is evident they did a deal. It is possible they agreed on a detailed programme of reform. Economic forces have been pressing in on the deadlocked conflict for decades but movement has been slow. It has been thirty years since Harold Macmillan spoke of “a wind of change blowing through Africa”, but in South Africa this has been a gentle breeze which disturbed little, leaving the white monopoly of power intact. Delayed change results in greater pressure and now it seems the deadlock is about to be broken. What will this mean for our fellow workers in South Africa, both black and white?

An ideal model of capitalism would rest on a simple division between capitalists and workers with the latter voting in governments to administer their own exploitation in a “liberal democracy”. Capital would be free to invest most profitably and train workers to achieve maximum output without skin colour or ethnic background being an issue. This would tend to secure the most efficient use of labour resources, with political stability and without excessive expenditure on forces of repression.

Tortured history
In practice capitalism rarely confirms to this model. In South Africa the legal classifications of “European”, “Bantu”, “Coloureds” and “Asians” complicate the economic and political structure in ways which inhibit efficiency. They result from the tortured history through which these groups took root in the country.

Even within these groups there was never a common identity. For over two centuries the Europeans were bitterly divided between British and Dutch. Cape Town was established as a supply station by the Dutch East India Company. During the Napoleonic Wars the British pre-empted a French take-over by seizing it themselves after which it was kept as a British colony. In the 1830s a large number of the Dutch trekked north to found the Transvaal and Orange Free State but again they came into conflict with the British when gold, diamonds, coal and other materials were discovered in the Boer republics. To gain control of these materials colonial adventurers like Cecil Rhodes conspired with the British government to instigate the Boer War. Following the defeat of the Boers, and the sufferings of their families in concentration camps in which thousands died from disease and starvation, British imperialism gained control over the entire land area of what is now South Africa.

But it was not only the people of European origin who were in conflict. Tribal differences also divided the African peoples who in the seventeenth century had migrated south from East Africa. These divisions are still a potent force, further complicating the politics of South Africa. The Zulus are mainly concentrated in Natal under Chief Buthelezi and it is interesting that he controls his power base, Inkatha, as its unelected leader. Despite their demand for it, there is no “one person, one vote” amongst the Zulus. Nelson Mandela is a Chieftain of the Xhosa people and is acclaimed as being more representative of black South Africans through the African National Congress.

During the past seven years more than 2,500 people have died in violence between different black groups and Mandela has appealed passionately for an end to the fratricidal strife. “Throw your arms into the sea”, he recently implored a vast crowd of Zulus. The response of Inkatha was positive but also tempered with a warning:

  Only the enemies of peace and black unity would wish otherwise. However, we shall not succeed to achieve this by protracted attempts to demonise, vilify and marginalise Dr. Buthelezi. To do this is tantamount to planting the seeds of future civil war in our country.

This threat of possible civil war, presumably in circumstances in which the Afrikaner Nationalist government may have collapsed, is indeed ominous.

Those called the “Cape Coloureds” were originally descended from the offspring of early Dutch male settlers and their female servants brought to the Cape Province from the Dutch East Indies. The temptations of sexual relations between the “races” were more than the Calvinist citizens could resist and, in any case, pre-dated the ideology of “apartness”.

The indigenous inhabitants of South Africa were the defenceless Hottentots who suffered genocide at the hands of every invader, Dutch, British and Bantu. These three groups, very different in their origins and outlook, were pitched into the same land area and now form the main elements in today’s political strife.

Capitalists’ political frustration
One of the ironies of this history is that Rhodes instigated war with the Boer Republics under the slogan of “democratic rights for all white citizens” with the object of gaining control of diamonds, precious metals and vital raw materials. In this he succeeded but as the mining industry developed under mainly British investment together with manufacturing, the white working class of the urban areas eventually formed a political alliance with the rural Afrikaners to elect an Afrikaner Nationalist government in 1948 which has held power ever since. The various National Party governments under Malan, Strijdom, Verwoerd, Vorster and Botha (the names alone speak of the return of the Afrikaners to power) have never been the “natural” or direct representatives of capitalist class interests. The more liberal-minded United Party disappeared and its current replacement, the Democratic Party, has little chance of gaining majority white support.

Capitalist interests would have best been served by a reform programme aimed at integrating the black population within a non-racial system of exploitation. This could have been introduced through a gradually-widening franchise based, for example, on property or education qualifications, arriving eventually at “one person, one vote”. This was not to be. It is to the eternal discredit of white workers in South Africa that in the majority they have pursued what they saw as their interests through racist trade unions and by voting for the National Party.

But if all this has been frustrating for capitalist class interests neither has it advanced the hopes of the Afrikaner nationalists. Their ideal of apartheid, or separate development, was always an illusion. Whether we see it as, at best, a nostalgic yearning for an independent “volk” or, at worst, a cynical euphemism for racial oppression does not matter. Either way, apartheid was against the tide of history.

When the more fanatical Conservative Party accuses de Klerk of “betrayal” and “sell-out” the greater truth is that the National Party has been overwhelmed by the economic forces of capitalism. The seeds of this were planted when the Afrikaners won political control. As a government they had no choice but to depend on taxes from mining, industry and manufacture to run their state machine. From this moment on, they were tied to capitalism. It costs a lot of money to pay for the repression of 20 million black people and, inevitably, the bills increase. Where once the Afrikaners eschewed the idolatry of gold, diamonds and profit, their heirs speak the universal language of trade and commerce. De Klerk is a capitalist politician.

In his recent important speech to the South African Parliament on 2 February he said:

  A new South Africa is possible only if it is bolstered by a sound and growing economy, with particular emphasis on the creation of employment.

At times he sounded like a Thatcherite:

  By means of restricting capital expenditure in state institutions, privatisation, deregulation and curtailing government expenditure, substantial progress has been made already towards reducing the role of the authorities in the economy.

At other times he also sounds like Gorbachev:

  The government’s policy is to reduce the role of the public sector in the economy and to give the private sector maximum opportunity for optimal performance. In this process, preference has to be given to allowing the market forces and a sound competitive structure to bring about the necessary adjustments.

We might ask how it comes about that politicians as different in their backgrounds as de Klerk, Thatcher and Gorbachev are committed to the same policies. They each share a common role as functionaries of capital; the economies of South Africa, Britain and Russia are locked into the same system – world capitalism. As a result their respective governments are compelled to react to the same economic pressures to achieve efficiency and profitability and to pursue strategies which best protect their long-term interests. These are the same forces which are driving politicians in South Africa, despite their own very different origins into a common outlook.

An added reason why de Klerk can sometimes sound like Gorbachev is that both face problems of restructuring, or perestroika. According to the Independent (27 February):

 British businessmen and bankers are unlikely to return to South Africa in droves as a result of the lifting of the ban on new business investment . . . They left because of rising commercial and political risks, poor investment returns, difficulties in repatriating profits and higher returns available in other countries.

In his speech to the South African Parliament de Klerk complained of “a serious weakening in the productivity of capital and stagnation in the economy’s ability to generate income and employment opportunities”.

It is evident that de Klerk, through his negotiations with Mandela and the ANC, hopes that he will be the man to restructure the South African economy on the basis of political stability achieved through extended democratic rights, but it is likely that the National Party has left it too late. Surely the party and the man for the task is the ANC under Nelson Mandela? Is it not more likely that it will be they who emerge as the new functionaries of capital best suited to achieving a more efficient exploitation of workers in South Africa without distinction of “race”, as capital demands?

Not afraid of black government
Certainly a number of leading capitalists assume that the future lies with a black government. For some years, Gavin Relly, the chairman of Anglo-American, South Africa’s largest business corporation which controls gold, platinum and coal production, has been in close contact with the ANC. In 1985, together with the chairman of the South African Foundation, which represents general business interests, he met with Oliver Tambo and a negotiating team from the ANC. He said then:

  What we are concerned with is not so much whether the following generation will be governed by black or white people, but that it will be a viable country and that it will not be destroyed by violence and strife.

He added that he and the ANC “shared a common interest in maintaining the profitability of the South African State”.

Since Mandela’s release there has been some concern in capitalist circles over the ANC’s apparent commitment to nationalisation, including the mines. However, on 26 February Gavin Relly, continuing his personal contacts with the ANC, met Mandela and afterwards urged investors to calm their fears. He said it was premature now to get agitated about the ANC’s economic programmes:

  The community and international community should not get into a flurry over nationalisation. These are issues for sensible men to discuss. Issues of nationalisation will have to be subjected to the tests of debate and the tests of what is practical to make the modern economy work.

In his own comments on the meeting, Mandela said nationalisation remained, in certain areas, a basic policy of the ANC, but the economy at large would still be based on private enterprise. “The entire economy will remain intact” (Independent, 27 February). Again, we shall never know the details of their discussions but it is clear that Gavin Relly, a leading representative of capitalist interests, emerged a happy man from his meeting with Mandela.

Where does all this leave our fellow workers in South Africa? Our interests are directly linked with theirs and if democratic freedoms are now to be extended to that country it is in all our interests. Perhaps now the Directorate of Publications in Cape Town will release our pamphlets and the copies of the Socialist Standard which have been kept under lock and key in the cell where banned literature is stored.

In the short-term it appears that workers in South Africa may well continue to support those reformist organisations which they see as representing their interests in a “racially” divided society. However, it is also likely that the increasing pressure of the economic forces of capitalism and the reforms which are in prospect will simplify the issue into a straightforward confrontation between capitalist and working class interests. This will leave the fundamental problems of the workers still to be solved. Even now the vital work must be to ensure that a growing world socialist movement is extended to South Africa.

Pieter Lawrence

Russia and Private Property (1990)

From the April 1990 issue of the Socialist Standard

The decision by the Central Committee of the CPSU at its February meeting to abandon its guaranteed, constitutional monopoly on power really could prove to be as momentous as the media claimed at the time. However this will not be for the reasons they gave – that it will open up a new era of freedom, prosperity and progress for Russia – but because it could lead to a change in the way that the means of production are monopolised by the minority owning class there.

Except for some of those that can be operated by individuals or by a family unit, all means of production in Russia are vested in the state which also has a monopoly in the hiring of wage-labour. This has meant that the group that has controlled the state has also controlled the means of production, has in effect owned them. However, the members of this group have not done so as individuals possessing legal property deeds in their own names, but collectively as a group. It is this group – as a group – that has been the collective owner of the means of production and the collective employer of the working class in Russia, in short the collective capitalist there.

So who are they? Who are those who make up this group that monopolises the means of production in Russia in this way? As Russia has been a one-party dictatorship since Lenin introduced this in 1921, they have been the leading members of the ruling party plus those appointed by them to key posts carrying with them a life-style based on privileged access to the best consumer goods, housing, health care, education for their children, holidays and officially known as the nomenklatura. Not possessing legal property titles in their own names, they have not been able to bequeath their privileged position to their children. So the group that has constituted the collective capitalist class in Russia has been recruited by other means than inheritance, in fact by rising up the bureaucratic hierarchy of the single party.

It is this party that has been the mechanism by which the collective capitalist class in Russia has monopolised the state and so the means of production and by which they have renewed themselves and recruited new members. This is why the political and ideological representatives of this class have proclaimed the “leading role of the party” to be a pillar of the Russian system. It is also why the decision by the Party’s Central Committee at its February meeting to abandon it could prove to be of immense importance.

Gorbachev wants a mandate
Of course abandoning a constitutional right to be the only governing party, indeed the only party allowed to exist – the notorious Article Six of the 1977 Russian constitution – is not the same thing as actually abandoning power. The leaders of the “Communist” Party still want, like Mrs Thatcher, to go on ruling for ever but from now on they hope to do so with a democratic mandate from the electorate.

There is a short-term reason for this: they feel they need popular endorsement to be able to push through the tough anti-working class measures perestroika involves. For although glasnost (openness) has progressed quite far, perestroika has not. Enterprises have been given legal independence from the government ministries that used to control them, but price reform – the key measure of perestroika and what it is all about, designed to bring prices into line with what the law of value demands – has not yet been implemented.

Price reform will involve ending government subsidies on basic consumer goods such as food, housing and transport and allowing their prices, along with those of industrial goods, to be fixed by the free play of market forces. Although the object is to get the stagnant Russian economy moving again, it is bound to mean for at least the short-term falling living standards and rising unemployment. Learning the lesson of the events in Poland, Gorbachev is clearly not prepared to launch into this attack on the working class without a mandate to do so. His conservative opponents in the Party hierarchy might not like his political reforms, but they don’t want him to go since they know that they would have even less chance of controlling the potentially explosive situation in Russia.

It is the longer-term implications of the decision to abandon the Leninist principle of one-party dictatorship that could prove to be the most significant though, as this could herald a change in the way the means of production are monopolised in Russia with the ruling class there changing itself from a class of collective owners into a class of individual owners as in the West.

Such a change has always been a possibility but until now only a rather remote one. It is a measure of the historic importance of events in Eastern Europe – which will surely have led to the liquidation of the nomenklatura system there by the end of the year – that they have forced what once seemed to be the immovable Russian Party-elite to reconsider its position.

The transformation of the Russian ruling class from a collectively-owning state bureaucracy into a class of private capitalists with private property rights vested in them as individuals certainly won’t take the form of the present members of the nomenklatura abdicating and handing over their power and privileges to the small group of privately-owning capitalists who have always led a precarious existence on the margins of the Russian state-capitalist economy. Nor would it need to take the crude form of them simply dividing up the presently state-owned industries amongst themselves. It would be more likely to take the form of the Russian government gradually introducing more and more opportunities for private capitalist investment – which only those who have already accumulated wealth would be able to take advantage of. Most of these will inevitably be individual members of the nomenklatura as the group which for years has enjoyed bloated salaries, cash prizes and opportunities to speculate on the black market.

Although there have been periodic drives against corruption, the wealth accumulated by the members of the nomenklatura has largely survived intact. Up to now, however, they have not been allowed to use their accumulated wealth as capital – as wealth invested in production with a view to profit – but have been obliged to hold it as non-productive assets such as works of art, vintage cars and cash held in low-interest bank accounts. That Gorbachev wants to remove this restriction and channel such funds towards investment in production can be seen from the reference in the new Party Platform to “the distribution of state loan bonds on advantageous terms” and to “the selling of stocks and other securities”.

Ligachev’s Fears
High-denomination state bonds were issued for the individually wealthy to purchase right up until the 1940s (when their holders were virtually expropriated when Stalin reformed the currency in 1947), but this time rich Russians are to be allowed to purchase not just government bonds but also to invest directly in particular enterprises by purchasing bonds issued by them too. It is not difficult to see how this could evolve into a system of shareholding. In addition, private enterprise in the form of “co-operatives” is to be encouraged. Such co-operatives are supposed to be collectives of self-employed workers but once again, over time, pressure to allow them to employ wage-labour and for some of their members to become sleeping partners, or non-working investors, can be expected to grow.

This whole issue of “private property” is still a subject of controversy within the Russian Party. It ought to be understood, however, that the issue at stake is not whether individuals should be allowed to own non-productive assets, sometimes considerable amounts, as private property which they can bequeath and inherit. This has long existed and all sides agree it should continue. Nor – yet – is the issue about whether individuals should be allowed to employ other individuals. It is about whether “co-operatives” of the self-employed should be allowed to own means of production and compete with state enterprises for sales and profits.

On the one side, there are the supporters of Igor Ligachev who was reported as saying at the February Central Committee meeting that “he opposed the introduction of private property with his whole soul”, adding: “I am also against turning our party into an amorphous organisation, a political club” (Independent 7 February 1990). On the other side, are those who agree with Boris Yeltsin when he says: “I am for private property, including the means of production. The limits are that it should not be sold, and not inherited” (Vancouver Sun, 21 December 1989).

The new Party Platform shows that it is the partisans of “private property” who are winning. Ligachev is nevertheless probably right when he sees “co-operative private property” as the thin end of a wedge that will open the way, despite what Yeltsin says, both to private property rights in means of production being sold and inherited and to the private employment of wage-labour. This latter is still regarded in Russia as a case of “the exploitation of man by man” – as indeed it is, though Ligachev is being inconsistent when he denounces the employment of hired labour by private individuals while accepting it by the state. Clearly, what he favours is the nomenklatura continuing to monopolise the means of production collectively as a group dictatorially controlling the state where the means of production are state-owned.

Gorbachev, on the other hand, realises that it is now no longer possible for the nomenklatura to role in the old way and that some sort of flexibility is called for, if only to be able to push through perestroika without provoking a workers’ revolt. He probably isn’t consciously working towards ushering in a Russia where the nomenklatura has disappeared as such and has succeeding in converting itself into a class of Western-type privately-owning capitalists, but it is in this direction that his reforms can now be seen to be leading.

Adam Buick

Socialism on Tape (1990)

From the April 1990 issue of the Socialist Standard

The Socialist Party Tapes Library has again been fully updated. and the list below replaces all previous lists Each cassette can be purchased for £3. including postage and packing. There is a discount on larger purchases: any six tapes can be bought for the price of five. Allow up to four weeks for delivery. Socialist Party branches and groups may wish to purchase a range of tapes for re-sale at meetings. Further tapes will be added to this list in due course.

1. Is Britain Worth Dying for? DEBATE between the Socialist Party and Lady Olga Maitland (Women and Families for Defence) (1984).

2. After the Miners' Strike—Which Way Forward for Socialists? DEBATE between the Socialist Party and Socialist Workers Party (Colin Tipton) (1985).

4. Did Lenin Distort Marx? DEBATE between the Socialist Party and Monty Johnstone (Communist Party. Marxism Today) (1982).

5. Terrorism versus Socialist Action. Richard Montague. World Socialist Party (Ireland) (1985).

6. What is the Next Step for Socialists? DEBATE between the Socialist Party and Revolutionary Communist Party (Sean Mullen) (1987).

7. Why You Should Be A Socialist. E. Hardy. Dick Donnelly (1988). 

8. Fear of Freedom: The Development of the Personality in Capitalist Society. Steve Coleman (1983).

10. DEBATE between the Socialist Party and Militant Tendency (Bill Sheppard ) (1982).

13. Should You Join The Socialist Party? DEBATE between the Socialist Party and Andrew Broadhurst (Greater London Conservative Association) (1988).

14. The Crisis in Capitalism—What is the Next Step? DEBATE between the Socialist Party (Clifford Slapper) and Bill Etherington (General Secretary, NUM Durham Mechanics) (1987).

15. Is there a Free Press in Britain? DEBATE between the Socialist Party and Lady Olga Maitland (Daily Express) (1987).

17. Is Equality Just A Socialist Myth? DEBATE between the Socialist Party and Professor Antony Flew (1981).

18. Conservation versus Democratic Revolution. DEBATE between the Socialist Party (Pieter Lawrence) and the Ecology Party (Tony Jones) (1983).

19. Can We Change the World Through Music? Forum with Clifford Slapper (Socialist Party) and Annajoy David (Political Co-ordinator. Red Wedge) (1988).

21. Conservatism versus Socialism. DEBATE between the Socialist Party (Dick Donnelly. Clifford Slapper) and Monday Club (Harry Phibbs. A. V. R. Smith) (1984).

22. Should We Return To Victorian Values? DEBATE between the Socialist Party and G. Webster Gardiner (Conservative Families Campaign) (1986).

23. Two LBC Radio Debates on one tape: Can The Profit System Benefit Most People? between Pieter Lawrence (Socialist Party) and Ian Picton (Conservative councillor) (1982) and Is Britain Worth Defending? between Dick Donnelly (Socialist Party) and Paul Backhouse (Peace Through NATO) (1985).

24. LBC Radio Debate: The Royal Wedding was a Complete Waste of Time and Money, between Clifford Slapper (Socialist Party) and Simon Kinnersley (Woman's Own) (1986) and LBC Radio "Futures" phone-in on What Would A Socialist Society Be Like? Speaker Steve Coleman (1986).

27. Religion and Historical Materialism. Forum with Dick Donnelly (Socialist Party) and David McLellan (1984).

30. The Social Origins of Music. Kerima Mohideen (1987).

Education Series: The Thatcher Government, 1979-85 (1985):

32. From Churchill To Thatcher: Your Elders and Betters? Ralph Critchfield.

33. The Economics of the Thatcher Government. Clifford Slapper.

34. A Guided Tour of the Conservative Mind. Steve Coleman.

Education Series: Socialist Thinkers — People Who History Made.

Speaker Steve Coleman (1982).

39 Plekhanov And Historical Materialism. (Part 1) (Part 2)

40. Dietzgen And Dialectical Thought. (Part 1) (Part 2)

41. Kautsky's Critique Of Religion. (Part 1) (Part 2)

42. Bronterre O’Brien And Working Class Radicalism. (Part 1) 

43. Belfort Bax And The "Ethics" Of Socialism.

44. William Morris' Vision Of Socialism.

45. Martov And The Anti-Bolshevik Approach To Revolution. 

Why hasn't a Socialist Revolution happened yet?

46. Reformism: What it has achieved and where it has failed. Howard Moss (1986).

47 Are Workers Capable of Co-operating. Pieter Lawrence (1986).

48. What is Capitalist Ideology? Steve Coleman and Brian Montague (1986).

Socialist Women (1988)

49. Women Under Capitalism. Kerima Mohideen.

50. Men in a Sexist Society. Steve Coleman.

51. What Socialists Can Learn from Feminist Ideas. Janie Percy- Smith.

52. Women For Change: Why You Should Join the Socialist Party.

Left-Wing Capitalism versus Revolutionary Socialism (1984)

53. Trotskyism. Wally Preston.

54. Anarchism. Brian Rubin.

55. Labourism versus Socialism. Howard Moss.

56. The Politics of Rosa Luxemburg. Victor Vanni (1983).

57. Useful Work Versus Useless Toil. Victor Vanni (1983).

58. Schools—Who Needs Them? Clifford Slapper (1987).

59. The Myths of Racism Exposed. Gary Jay (1989).

61. Ten Years of Thatcher—Should the Workers be Grateful? DEBATE between Conservative Party (Leslie Winter) and Socialist Party (Steve Coleman) (1988).

62. Controlled Market Economy versus the Abolition of the Wages System. DEBATE between Paul Hirst (Sociology Lecturer) and Socialist Party (E. Hardy) (1983).

63. Should Workers Vote Labour? DEBATE between Labour Party (Kelvin Hopkins) and Socialist Party (E. Hardy) (1988).
64. Marx's Conception of Socialism. E. Hardy (1983)

Party News (1990)

Party News from the April 1990 issue of the Socialist Standard

Eccles branch are putting up a candidate in the Winton ward, Eccles, for the elections to Salford Borough Council on 3 May.

Those in the ward who want to indicate a preference for socialism can do so by voting for the socialist candidate Jimmy Rushton.

Further details, offers of help, donations to: Andy Pitts, Election Agent, Erne Court, 146, Slade Lane, Levenshulme, Manchester M19 2AQ. (Tel: (061) 225 ****).

#    #    #    #

West London branch are putting up three candidates in the Southfield ward for the elections to Ealing Borough Council on 3 May.

The socialist candidates will be Adam Buick, Ralph Critchfield and Kevin Cronin.

Further details, offers of help, donations to: Adam Buick, Election Agent, 40 Granville Gardens, London W5 3PA. (Tel: (01) 992 ****).

#    #    #    #

Socialist Teachers Group

A meeting will be held at the Socialist Party Head Office, 52 Clapham High St, London SW4 7UN (nearest tube: Clapham North) at 2pm on Sunday 20 May to discuss setting up such a group. Further information: Kerima Mohideen, c/o Head Office.

Inflation: the Endless Farce (1990)

From the April 1990 issue of the Socialist Standard

Every Prime Minister since the War has pledged himself or herself to tackle inflation as a top priority but rising prices have been with us continuously for half a century. Every year since 1938 prices have gone up and are still going up. The price level on average is about 24 times what it was before the war.

It was not always so. From 1850 to 1914 prices were stable; there were moderate fluctuations but the price level in 1914 was almost exactly the same as it had been 64 years earlier. And in 1919 the government decided to bring prices down and there was a fall of over 30 per cent between 1920 and 1925.

One of the rules of the game is that the party in opposition blames the government; that is, until it becomes the government itself, when it blames someone else, the greedy workers or the greedy shopkeepers and manufacturers; or the lenders of money not being greedy enough (according to the Chancellor of the Exchequer it is low interest rates that cause inflation).

There is a short answer to these glib excuses. Between 1850 and 1914 average wage rates went up by nearly 90 per cent, more than keeping up with the steadily rising productivity in industry – but no inflation.

If shop-keepers and manufacturers have the power, as well as the will to push up prices, why no inflation before 1914? And how come they allowed prices to fall heavily between 1920 and 1925?

As for interest rates, compared with the present 15 per cent bank minimum lending rate, the rates before 1914 were mostly between 3 per cent and 5 per cent – but no inflation.

Control of currency issue the key

It was not an accident that governments before 1914 and in the year 1919 knew how to stabilise prices, how to raise them and how to lower them. They, or their advisers, knew that the key to the situation is the amount of currency (notes and coins) in circulation. If this is kept in line with the needs of the growth of production, population, etc. prices will be stabilised. If currency is arbitrarily increased prices will go up. If arbitrarily reduced, prices will go down.

Before 1914 stability was maintained through the gold standard which closely controlled the issue of currency by the Bank of England. In 1920-25, on government instructions, the currency in circulation was cut. (The Bank burned £66 millions worth of notes).

Since 1938 there has been no control. Additional notes and coin have been issued in a continuous stream. The amount of currency in circulation with the public in 1938 was £442 million. It is now more than thirty times as much, at £14,388 million, and is still steadily increasing. The bath has been slopping over for fifty years and one dotty thing the Labour and Tory plumbers have been agreed about is that they need not turn off the tap. So why couldn’t they ask their professional advisers what to do? They did, but those advisers had all picked up the same dotty notion from the same original source. As early as 1923, in his Monetary Reform, the economist J. M. Keynes had argued that it is not necessary to have direct control of the amount of notes and coin.

Degeneration of Monetary theory

How monetary theory degenerated was told by Edwin Cannan, at that time Emeritus Professor of Political Economy at the University of London, in his Modern Currency and the Regulation of its Value [1931). Referring to what he called “the bank-deposit theory of prices”, he wrote (p.88):

  Within, I think, the last forty years a practice has grown up among the people who talk and write on such subjects, of regarding the amount which bankers are bound to pay to their customers on demand or at short notice as a mass of ‘bank-money’ or of ‘credit’ which must be added to the total of the currency (of notes and coin ) whenever variations in the quantity of money are being thought of as influencing prices. This is one of the most obstructive of all modern monetary delusions.

Cannan went on to show that this alleged mass of “bank-money” does not exist:

  with the exception of a small amount of currency which they keep ready to meet any likely demands on the part of their customers, the banks have . . . paid away money as they receive it, buying land and buildings for the conduct of their business with some of it, and investing or lending all the rest.

Cannan’s warning was not listened to. In the same year, 1931, the bank-deposit theory of prices received official endorsement from the MacMillan Committee (Report of the Committee of Finance and Industry, p.34). In its report the Committee rejected the idea that deposits in banks are cash deposited by customers, and argued that:

  the bulk of the deposits arise out of the action of the banks themselves, for by granting loans, allowing money to be drawn on overdraft … a bank creates a credit in its books which is the equivalent of a deposit.

Keynes was a member of the Committee and was credited with having drafted that section of the Report.

The Committee “proved” that, on a deposit of only £1,000 cash, a bank could lend £9,000. Their method of proof was a masterpiece of rigged argument. They assumed that only one bank existed. This, they argued, really made no material difference. But also, and without saying that they were doing so, they assumed a prolonged series of lending operations which would take several months and in all that time no-one ever withdrew cash from the bank. Cash was assumed to go into the bank but no depositor or borrower took any cash out. It was a kind of bank that never existed in the real world.

If the doctrine had been based on reality its significance in relation to prices would be obvious. If an individual with £1,000 spent it or lent it the measure of its influence on prices would be just £1,000. If lent to a bank which re-lent it, its influence on prices would be multiplied by nine. What is more the MacMillan Committee’s arithmetic was related to the 10 per cent cash reserve banks ordinarily maintained at that time. As the bank cash reserve is now only about 1 per cent of total deposits the multiplier now would be not nine, but ninety-nine.

In recent years there has been a seeming conflict of views on inflation between the followers of Keynes and their rivals, the so-called monetarists. It is a phoney war. The high-priest of Monetarism, Professor Milton Friedman, suffers from the same delusion about the mystical powers of the banks as did Keynes, as will be seen in Free to Choose (by Milton and Rose Friedman, p.298).

Unlike the politicians and many economists, the professional bankers ridiculed the Keynes-MacMillan Committee monetary doctrine. They knew that banks do not have this fanciful power to “create deposits”. One banker, Walter Leaf, Chairman of the Westminster Bank, had this to say:

 The banks can lend no more than they can borrow – in fact not nearly so much. If anyone in the deposit banking system can be called a ‘creator of credit’ it is the depositor; for the banks are strictly limited in their operations by the amount which the depositor thinks fit to leave with them. (Banking, Home University Library, p.102).

Walter Leaf’s Westminster Bank is now the National Westminster. In the Financial Times (9 April 1984) it published as an advertisement a survey of its operations during 1983. Under the heading “Financial Highlights 1983” the following item appeared:

Money Lodged £55,200 Million
Money Lent £45,200 Million

No nonsense about receiving £55,000 million from depositors and lending 9 or 99 times as much.

Confusion about money supply

Government monetary policies have gone through several phases. From 1945 to the 1970s the Labour and Tory Parties both believed, with Keynes, that the cure for unemployment is for the government to run a budget surplus. (The present Tory government policy of using a big budget surplus to pay off the national debt is what the former Labour Prime Minister Lord Wilson specified in 1957 as the cure for inflation).

In 1977 the Callaghan Labour government, faced with prices and unemployment both rising fast, and the obvious impossibility of running a budget deficit and a budget surplus at the same time, threw overboard the Keynesian doctrine and adopted as their price policy studying the movements of what they call “money supply”.

The favourite for several years was the index called M3 which is made up predominantly of bank deposits though it also included the relatively minor element of the currency. The latest M3 figures are:

Bank Deposits £225,260 millions
Currency              14,384 millions
Total                 £239,644 millions

Eventually the Thatcher government lost confidence in the usefulness of M3 and the Treasury has just decided to stop publication. The Thatcher government’s interest was then transferred to M0, which, unlike M3, is predominantly made up of the currency. But the government and its advisers have quite failed to see the point of the achievement of stable prices by the gold standard, and the reduction of prices in 1920-1925. It is not a question of just “watching” M0 but of actually restricting the issue of notes and coin, something the government is not doing and has not indicated the intention of doing. The amount of currency in circulation is still going up.

The politician who has for years taken an active interest in inflation is Enoch Powell. His line has been to criticise governments for their refusal to recognise that they and they alone are responsible for inflation. He argues that the prime cause of inflation is that government expenditure is too high:

  Nobody knows so well as the Bank of England … that the expenditure of Government itself is the prime factor in causing mounting inflation” (from a speech on 11 November 1966).

He resigned from the Tory government in 1958 over that issue, though he served as a Minister again from 1960 to 1963. And during all the period 1955-1963 the government was pumping out more and more currency, pushing up prices. So Powell was just as much responsible for inflation as any other Minister. He has never understood the real cause of inflation. He shares the same delusion about banks’ supposed power to create deposits as Keynes and Professor Milton Friedman. He claims to see a difference between the government borrowing from “the public” and borrowing from the banks. In an article in Intercity (July/August 1989) he wrote:

  Only the banking system can provide purchasing power to one section of the public without the equivalent purchasing power having been transferred to it by another section.

This is nonsense. The banks can’t create purchasing power. As Walter Leaf rightly pointed out, the only way the banks can be enabled to lend is to persuade “the public” to lend to the banks, in the form of deposits.

Why inflation started

The question arises why do governments go in for inflation. In this country the three big inflations have started in wars, the Napoleonic wars and the two world wars.

It is a mistake to think that the British government’s interest in inflation is to provide revenue by printing notes, though this could happen as it has in some other countries. What happened in the three wars was that the government had to call in all the gold in circulation and in bank vaults to pay for desperately needed imports of food and war materials, which made continuation of a gold-backed currency impossible. The amounts of revenue the government actually gets from increasing the note issue is too trivial to count in relation to government expenditure. In the current year the £800 million from additional notes in circulation is less than one half of one per cent of Government expenditure of £181,000 millions.

Another issue of interest is who gains by inflation and who loses. Long experience supports the view that borrowers, including the industrial capitalists, gain under inflation by repaying loans in depreciating currency, and lenders do well from deflation. Bankers being both borrowers and lenders, generally prefer stable prices. Some property-owners to whom inflation has been disastrous are those who bought and held certain government and local government stocks the market price for which is now only £30 for each £100 nominal.

It is an error to suppose that inflation is bad for the workers. It is no harder (and no easier) for organised workers to raise their standard of living when prices are rising than when they are falling or stable: it all depends on the varying conditions in the labour market. In the great majority of years in the half-century of inflation wage rates have risen more than prices. And it happened when prices were falling sharply between 1920 and 1925 that wages fell more than prices. The workers were worse off.

One last word about the supposed evils or benefits that will flow from ending inflation. It will not have the effect either of causing unemployment and trade depression or of preventing them. Capitalism goes its own way irrespective of governments’ monetary policies.

Edgar Hardcastle

These Foolish Things: Who will be next? (1996)

The Scavenger column from the March 1996 issue of the Socialist Standard

Who will be next?

The government’s controversial decision to deport Saudi Arabian dissident Dr Mohammed al-Masari has paid its first dividend. As a direct consequence of the deportation, British Aerospace has won a £160 million aviation contract. 

Financial Mail on Sunday, January 14.

Brain power

Several recent studies have found a link between education and dementia. One published in the British Medical Journal last April reported a fourfold risk of Alzheimer’s disease amongst people with the lowest education status. Another study by Bonaiutu and colleagues found that Alzheimer's disease occurred in 7.2 percent of illiterate people, in 2.8 percent of those whose education had ceased at fifth grade and in 0.5 percent of those whose education had studied in the fifth grade or over.

Not every study has found a link between education and dementia however, and the link between low social status and dementia may arise from poorer physical health and a higher rate of vascular dementia (failing mental powers due to hardening of the arteries, including those which supply the brain with oxygen). 

Alzheimer’s Disease Society Newsletter, December 1995/January 1996.

The Land of Rising Debt

Japan’s budget deficit is now worse than that of the USA. Masayoshi Takemura, the Minister for Finance, proposes to increase government borrowings to Y21,000 billion (nearly £135 billion) in his April budget.

This will raise Japan’s total debt to 96 percent of its gross domestic product.

The old, old story

Exhausted pilots who made basic errors caused the air crash near Coventry just over a year ago, which killed five people including two Britons, a report disclosed yesterday.

The 21-year-old Air Algerie Boeing 737, which had carried veal calves to Holland and France, crashed in fog as it approached the city’s airport—its fifth flight during a 10-hour shift. 

Guardian, 11 January.

That’s the point of it

MONEY—you can’t have enough of it. Do you agree or disagree? I agree. If you’ve known the taste of hard-up days, you'll never forget it was money that gave you the mouthwash. The more I work, the more money I can earn, the more secure I feel. 

Jim Dale, Financial Mail on Sunday, 14 January.

Failing health

A recent survey produced by the Labour Party has analysed the changes in the structure of the National Health Service in the five years between 1989 and 1994. It says there has been a loss of 50,000 nurses and midwives (a cut of 13 percent) but an increase of 18,340 managers (400 percent). In addition, there has been a cut of 31 percent (19,020) in the number of nurses going through training.

Each of the five years saw a reduction of 10,000 nurses and an increase of 3,670 senior managers. The pattern differed strongly across the country: in North West Thames management numbers increased by 1,100 percent; in South Western by 180 percent. Nurses and midwives were reduced by 22 percent in Mersey and North West Thames; in South Western by 5 percent.

The Scavenger