Is Another Slump on the Way? (1937)

Editorial from the April 1937 issue of the Socialist Standard

Professor D. H. MacGregor, in his “Enterprise, Progress and Profit,” has proved that there is a “trade cycle,” a regular succession of booms and slumps. The Economist (March 6th, 1937) is highly gratified that this question has been settled, but is reluctant to admit that the next slump cannot be very long delayed. According to MacGregor’s reckoning, the period between slumps in this country before the war averaged 8¼ years, though running sometimes to as much as 10, and sometimes to as little as 5, years.

What the Economist does not relate is that Fourier, Marx and Engels, Hyndman and others, had grasped the essentials of the trade cycle long before MacGregor was born.

Frederick Engels wrote the following in his “Socialism, Utopian and Scientific,” in 1877: — 

  We have now, since the year 1825, gone through this five times, and at the present moment (1877) we are going through it for the sixth time. And the character of these crises is so clearly defined that Fourier hit all of them off when he described the first as “ crise pléthorique,” a crisis from plethora.

Again, in an article in the London Commonweal, March 1st, 1885, Engels said: —

  Forty years ago England stood face to face with a crisis, solvable to all appearances by force only. The immense and rapid development of manufactures had outstripped the extension of foreign markets, and the increase of demand. Every ten years the march of industry was violently interrupted by a general commercial crash, followed, after a long period of chronic depression, by a few short years of prosperity, and always ending in feverish over-production and consequent renewed collapse.

It is, after all, rather funny that the people who all agree in regarding Marx out of date should be so far behind him in understanding their own capitalist system of society.

The Last Crisis

All the bankers, politicians and business men who have been pondering over the threatened next crisis are confident that it can and will be prevented. ”Something will be done,” they say. Unfortunately, they cannot make up their minds what that something is. The Economist's most helpful thought is that “since the War in fact suspended the working of the cycle, human action can plainly suspend it—if that action is sufficiently violent and sustained.” (Economist, March 6th, 1937). But even that blighted rose has a thorn, for the writer goes on to say that “suspension is not abolition.”

While we cannot place any hopes in the ability of these gentlemen to prevent the next crisis, because that can only be done by abolishing capitalism, we are entitled to ask whether they are even competent to recognise the nature of crises. Did they, for example, recognise the inevitable approach of the last one, or understand it when it happened ? The answer is an emphatic No!

Mr. Alexander, City Editor of the Evening Standard, who informs us (Evening Standard, January 22nd, 1937) that “we shall never have a slump like that again,” is one of the many experts (another was Mr. Francis Williams, formerly City Editor, now Editor of the Daily Herald), who believed that gold would lose its value entirely as a result of the so-called abandonment of the gold standard!

The Bank Chairmen, in their speeches at the annual meetings this year all advised a return to Free Trade as a means of avoiding the next slump, as if crises did not occur just as unfailingly under Free Trade as under Protection. What were these gentlemen saying before the last crisis, which was coming to a head in 1929? In their speeches in January, 1929, they were blandly ignorant of the precipice before them. The Economist at the time (February 2nd, 1929) could record that "the first thing to strike the reader of this year’s speeches is an air of quiet confidence in the country’s industrial future.”

More than that, Mr. McKenna, Chairman of the Midland Bank, could find that “considerable progress has been made towards a more ordered and prosperous world.” The Economist added, "while recovery was certain, it would be a slow process.”

In other words, in 1929, when they were at the top of a boom, following expansion after the former crisis of 1921-22, these experts did not know it, they thought they were in a depression! The financial mountaineers who were perched on the edge of a precipice thought they were climbing out of a valley!

In January, 1930, when the crisis had already shown its symptoms for all to observe, Mr. Goodenough, of Barclays Bank, cast his eyes over the previous year and could see “some improvement” in trade, and the depressed trades showing “substantially better figures." (Economist, January 25th, 1930.)

In January, 1931, just before the full force of the crisis had struck this country, the Bank Chairmen were arguing learnedly with each other as to whether high wages, maldistribution of gold, or other causes were mainly responsible. They were, says the Economist, “by no means wholly in agreement." (Economist, January 24th, 1931.)

These are the gentlemen who are going to ward off the next crisis!

What Hopes for the Next Crisis?

The bankers advice to trust to Free Trade and discouragement of speculation as means of preventing a crisis are merely fatuous. But most of their critics are in no better case. The Editor of the Daily Herald has for years banked on freedom from the gold standard as the surest means. But he based that view on the myth of a shortage of gold. We need only recall that gold production has been mounting all over the world to record heights in defiance of the learned report of the League of Nations “ experts," who predicted a steady decline.

Another Labour Party remedy is “high wages," but it is only a few years since these same people were assuring us that “high wages" in the U.S.A. had already done the trick, and brought permanent prosperity. Henry Ford, we were told, had proved Marx wrong! Mrs. Mary Agnes Hamilton, one of the influential members of the Labour Party and I.L.P., friend of MacDonald, wrote in the Daily Herald (January 20th, 1926) about this permanent prosperity. She had visited the U.S.A., and found

  prosperity so widespread and, since the temporary setback of 1921-22, so continuous, that unemployment, except in localised and special groups . . . has vanished.

But it all came to nothing. Mr. Ford hadn’t proved Marx wrong. The “temporary setback" of 1921-22 was duly followed by the year-long “temporary setback" of 1929-1933.

Now the Daily Herald (February 5th, 1937) has found new gods, in Mr. Keynes and President Roosevelt, and applauds their proposals.

  Our Government should be at work on the idea (of economic planning). It should appoint a central planning committee at once and tell it to prepare a plan of special anti-slump public works now.

Another piece of sticking-plaster for an earthquake.

There is a further useless idea Mr. Keynes and the Labour Party have in common, the transfer of wealth from capitalists to workers by means of taxation. It is based on a fallacious theory, but we need not worry about theory, since the facts are known over a long period of years. Those facts are that income tax, death duties, excess profits taxes, etc., have completely failed to stop the accumulation of still greater fortunes in the hands of the rich, and have left the poor as they were. That is capitalism.

In short, all who cherish the hope of keeping capitalism and avoiding crises are in for yet another disappointment.