The Passing Show: The Same Everywhere (1966)

The Passing Show Column from the October 1966 issue of the Socialist Standard

The Same Everywhere

The Balance of Payments. Four words which have meant a headache for every British government for umpteen years. “Our” gold and dollar reserves are too low. “Our” imports are too high. “We” are paying ourselves more than “we” are earning. “We” are heavily in debt. And so the moans go on and on. So much so that you could be forgiven for thinking that it is a peculiarly British situation, almost as if the rest of the world was flowing with milk and honey for the average inhabitant. Well, let’s take a look at it.

First of all, if you’re thinking that high exports and a favourable balance of trade mean that we could all sit back and relax, a little bit of history reading will do much to dispel that notion. Indeed, at a time when Britain was just about the most powerful nation in the world, ruling the waves militarily and commercially, working people lived under the most shocking conditions. But come a little more up-to-date if you like, and remember that only a few years ago West Germany had a gigantic balance of trade surplus (“embarrassingly large” one commentator once called it), yet her workers had to struggle just as hard for improvements in wages and conditions, and there have been some really bitter strikes there in recent times.

And today? The German capitalists have been getting jittery about the state of their economy. According to Chancellor Erhard, wages have been rising too fast (it’s always too fast—never too slow), since 1963 by 8½ per cent, while productivity has gone up by only four per cent. He has not been slow to threaten Wilson-like measures: —

. . .  we still have things under control. However, if we let them drift, then the same will have to happen to us, that is, a wages freeze, a prices freeze, a considerable rise in the cost of living, indeed even partial balance of payments control. (Guardian, 6/8/66)

It has been favourite with some people to recommend that British workers take a leaf out of their German brothers' book and work as hard. Doesn’t seem to have made much difference, does it? The cry for them, as for us, is still “work harder and pull your belts in!”

Just to show you that capitalism’s problems are similar, wherever you go, let us take another example, this time from one of the “poorer” countries—a rising power since the end of the war. India. There the government has published its fourth five-year plan, envisaging some £10,000 millions investment; yet even if it comes to fruition, the planners admit it will mean:—

. . . every Indian will have a bare two metres more of cloth each year, and three ounces more of food each day.

Not much to write home about? Ah, but even this miserable achievement has a backhanded slap to accompany it.

A massive export drive, if necessary by curbing consumption at home, and Additional taxation . . . are considered essential. (Guardian, 30/8/66)

This, by the way, is one of the countries figuring prominently in the Oxfam appeals, and there is no doubt about the poverty, squalor and starvation of many millions of its inhabitants. But developing Indian capitalism is interested in this only incidentally. Its prime concern is the sale of its goods on the world market. And if this means that the Indian workers have to make do with even less than they get now, the government and employers will not shed many tears—except a few crocodile ones.

Want to be a Postman?

There is a delightfully colourful set of brochures which you can get from any post office, listing the delights of a career with the G.P.O. Read it, and discover that when you work as a postman you “enjoy” such perks as “ a safe job” and “a steady wage”, to say nothing of “an easy mind” and “a friendly atmosphere”. Just think, at 23 and over, you can earn the princely sum of £15 11 s. a week, basic, if you work within four miles radius of Charing Cross, and the opportunity to work overtime.

Perhaps like me, you have your doubts about the adequacy of such a wage, especially if you have a wife and children to think about. But, of course, you can’t expect the Post Office to introduce such a discordant note into their literature, which reads like a song of self-praise from beginning to end. In fact, if everything in the postman’s garden is so lovely, why you may ask, does the G.P.O. have to try so hard to entice you into it with such garish and elaborately printed leaflets?

The answer lies not so much in what has been said as in what has been left out. Shift work in all weathers, for example. And the fact that even the present miserable rate of £15 11s. a week has been won only after a determined strike two or three years ago—the first in the Post Office for more than, half a century. The G.P.O. leaflet is typical of much of the stuff you will find in the Situations Vacant column of any newspaper. No employer, particularly in times of labour shortage, is going to lead off with a list of snags. They will become obvious only when you start working for him. Then, in the manner of Orwell “interesting” becomes “boring” and you find that those “gd. wages and conds” are not really enough after all.

But that’s the outcome of a wages system. No matter what honeyed words your employer uses, your wages are always a problem to him, and to you, too.

Thoughts on Crime

But not very deep ones. I’m afraid, from the Evening Standard leader writer of August 24. He was no doubt prompted by the recent outbreaks of violent crime, and gently chided Lord Butler and the present Home Secretary, Mr. Jenkins, for their “bafflement over the causes of crime in an affluent society”. Yet for all the contribution to our knowledge in this particular editorial, the writer might just as well have left his pen in his pocket.

He makes some sweeping and quite unsupported assertions in his attempts to cover this pressing problem in about 10 column inches, and ends up just as much without a real answer as when he started. “Man is a basically aggressive and pugnacious animal,” he writes, but gives no evidence for this, or for his quite startling suggestion that the object of wars, military training, etc., is to provide a safety valve for the pent-up feelings of bored youngsters.

This editorial caught my eye for its complete refusal to ask one simple question—why? If young people are bored, what is the reason, especially in a rapidly changing world? Isn’t the prospect of a lifetime of wage work enough to make anyone bored? And what do people fight about anyway? This is the question the writer should have begun by asking, but never did. We agree with him that poverty is not the cause of crime, though it may aggravate the situation at times. People fight and knock each other about for very material reasons, when you get down to the bottom of things. Over private property, in fact.

The outbreak of violence is just one aspect of the general competitive struggle which affects each one of us throughout his life. We are all jockeying for economic elbow room, and on the international field, this throws whole nations against each other in massive armed conflict. That, by The Evening Standard’s criteria, should be classified as the biggest and most violent crime of all, involving wholesale murder and robbery, yet the editorial never touched it. A crime, apparently, is a crime when it does not have the blessing of your own ruling class. Rob and murder on their behalf, and you might even get a medal for it. Under any other circumstances, a nice long stretch behind bars.

Gaspers

"The Treasury has received several hundred pounds in cash contributions from members of the public since the Prime Minister announced his measures to deal with the economic crisis.”

(Guardian, 12/8/66)

"I won't retire—I wouldn’t know what to do all day.” (Mr. H. Jennings, winner of over £92,000 in Vernons Pools. Daily Mail Advert, 18/8/66)

‘The pressure of events is remorselessly leading towards a major war, while efforts to reverse that trend are lagging disastrously behind.” (U Thant’s statement to the United Nations, 1/9/66)

“The government spent £3,600,000 in assisting the Potato Marketing Board to take potatoes off the market and push up prices for the remainder last year . . .

(Daily Telegraph, 26/8/66)

Eddie Critchfield

Balancing the books (1989)

From the January 1989 issue of the Socialist Standard

President Reagan came under continuous criticism from Mrs. Thatcher and the heads of governments in several other countries because, for some years, the American Federal Government has been running a large budget deficit; that is to say it nas been spending more each year than its ordinary revenue from taxation and other sources, and making up the deficit by borrowing and thus adding to the national debt.

A second criticism levelled at Reagan was that America has a huge adverse trade balance, exports being insufficient to pay for imports, the deficit being met by loans from abroad. It is not intended to deal with this except to point to a difference between the two kinds of deficit. While it is possible for all governments in the world to run a budget surplus at the same time, it is not possible for all governments simultaneously to run a favourable trade balance. World imports and world exports are the same, one country's exports being another country's imports. The relative position of countries constantly alters: Japan now leads in respect of the size of its favourable balance: some twenty years ago it was the United States, with Japan showing a big trade deficit.

As regards criticism of the American budget deficit by the British and other governments. Tim Congdon in an article "Do these debts really matter?" (Times, November 1988) showed that many of the critics are not in a position to object, in view of the state of their own budgets. The American budget deficit in 1988 was an amount equal to 2.3 per cent of annual national income (Gross Domestic Product), which is less than the deficit in France (2.5 per cent), Germany (2.6 per cent), Canada (3.3 per cent) and Italy (10.2 per cent). The British government, too, has been running a budget deficit for many years, although the amount is less then the American 2.3 per cent of GDP and there is now a commitment to run a balanced budget or even a surplus in future.

The new President, George Bush, turns a deaf ear to the criticisms and intends, it appears, simply to wait in the hope that increased government revenue will wipe out the deficit by 1993, without any increase of taxes. The American House of Representatives' Budget Committee does not believe this and forecasts that the deficit will continue to increase and reach 50 billion dollars by that date (Times, 22 November).

The attitude of governments and economists to budget deficits has undergone a big change since last century both in the United States and Britain, partly because of the different view taken of borrowing. In the nineteenth century and the first half of the present century workers were strongly urged never to get into debt. It is all different today. The workers are under ceaseless pressure to “borrow now, pay later”. This changed attitude has helped to weaken the earlier attachment to the idea that normally Government budgets should be balanced and recourse to borrowing exceptional, as during war or for some large, longer-term government expenditure like expanding the navy.

In recent years, before Reagan's presidency, the tradition of a balanced budget had been re-established in the United States but it was certainly not observed by President Roosevelt during the depression of the 1930s. His government ran a huge deficit from 1933 to 1939 and continued to do so during the war. The Roosevelt “New Deal” signalled the conversion of most economists to the doctrines of J.M. Keynes, involving as it did a new look at budget deficits.

Before Keynes the usual reaction of governments to the onset of a depression was to meet the fall of tax revenue due to reduced incomes from profits and wages by cutting government expenditure and increasing the rates of tax — the aim being to maintain a balance between government revenue and expenditure without borrowing. The Keynesian remedy in a depression was the reverse — cut taxes, increase government expenditure by borrowing and run a big budget deficit.

Under Reagan's presidency unemployment has fallen below 6 per cent, the lowest for 14 years, and there are more workers in work than ever before in American history. As might be expected the Keynesians claim that this is proof that if the government spends more by borrowing and runs a budget deficit this will create more jobs and maintain full employment. It is wrong in theory and is not supported by experience. If a government spends more, whether it gets the additional money by taxation or by borrowing from investors, the inevitable consequence is that the taxpayer and investor spend correspondingly less. The true picture is that capitalism goes through a continuing cycle of depression, expansion, overproduction and depression irrespective of the budget or other policies of different governments. The abnormally low unemployment under the Attlee Labour Government 1945-1951 could not have been due to a Keynesian budget deficit policy because the government was running a budget surplus.

The best example of the irrelevance of Keynesian doctrine is to compare the Roosevelt “New Deal” with the way the British government dealt with the depression in the same years. Roosevelt's policy was Keynesian. The British government's policy was the reverse, that of cutting government expenditure and increasing taxation to aim at a balanced budget. In spite of opposite financial policies unemployment took much the same course in both countries. In the United States it rose from 8.9 per cent in 1930 to a peak of 25 per cent in 1933, and in 1938 — five years after Roosevelt became President — was still 19 per cent. In Britain it reached a peak of 22 per cent in 1932, and in 1938 was still 13.5 per cent.

The Labour Party's view of budget deficits is particularly interesting. They are committed to a big increase of government expenditure and a budget deficit in the belief that it will wipe out unemployment. Yet the last Labour Government, 1974-79, ran a big deficit and saw unemployment go up from about 600,000 to 1,300,000. Labour Party policy, laid down in a Report to 1944 conference had this to say: “If trade is bad or even showing signs of turning bad, then is the time for a budget deficit". In 1976 the Callaghan Labour Government threw the Keynesian doctrine overboard because he said it would cause inflation:

Continued inflation in the UK would lead to further hardship and unemployment. Therefore the Government rejected the panacea of pumping more funds into the consumers' hands so that the internal economy could be expanded (Times, November 1976).

What caused this repudiation was that two different Keynesian policies presented the government with an inescapable dilemma. One Keynesian doctrine is that the cure for inflation is to run a large budget surplus (see Harold Wilson's Remedies for Inflation, 1957. page 11). The other is that the cure for unemployment is a large budget deficit. But under the Labour Government between 1974 and 1976 unemployment and prices were both shooting up rapidly and there is no way in which the budget can be in surplus and deficit at the same time.

While governments have no control over unemployment — it takes its own course — they do have control over the general price level and can stabilise prices if they so decide, as in the nineteenth century up to 1914; or reduce them as in 1920 —1925: or push them up as Labour and Tory governments have chosen to do in the last half century. Why they have chosen to do this (or have slipped into it out of total ignorance of the monetary theories known to governments in the nineteenth century and in 1920-1925) is something of a mystery.

Reverting to the criticism made by other governments about the American budget deficit, the Times (8 November) says that their specific accusation is that it is "the prime cause of continuing international financial instability". We have news for them. As Marx showed, capitalism is an inherently unstable economic system and there is nothing governments can do to make it stable.

Edgar Hardcastle

Cooking the Books: Towards an economic crash? (2006)

The Cooking the Books column from the June 2006 issue of the Socialist Standard

“Imbalances ‘pose risk of recession’” ran a headline in the Times on 28 April. The US has a “huge” balance of payments deficit “heading for 7 percent of national income this year”, explained another article. “In turn, Asia has built up vast current account surpluses and foreign exchange reserves”.

The balance of payments is basically the balance between payments coming into a country from the sale abroad of its exports (visible and invisible) and payments going out to pay for its imports (visible and invisible). A deficit exists when imports exceed exports. To pay for exports from the country, dealers in other countries have to acquire the country’s currency while importers into the country have to acquire foreign currency. If a country has a balance of payments deficit, the demand for its currency will be less than that for foreign currencies, so its currency will tend to fall in value (whether through formal devaluation or through floating downwards). The opposite will be the case for a country with a balance of payments surplus; the value of its currency will tend to rise.

Given the US payments deficit and the Asian countries’ surplus, what would normally happen is that the dollar would fall and the Asian currencies rise in value. That this has not happened yet to any great extent is because the countries involved find the present situation to be in their interest. The Asian countries, especially China, with their undervalued currencies benefit from being able to export more (because the price of their exports is lower than it would normally be, making them more competitive), while the US benefits from the Asian countries using part of their surpluses to fund the US government by lending it money (through purchasing its Treasury Bills).

There is a general recognition in international capitalist circles that this situation cannot continue indefinitely – that, sooner or later, in one way or another, the exchange rate adjustments must take place. The big question is how. The ideal solution of “a relatively stable adjustment”, according to Mervyn King, the Governor of the Bank of England appearing before the House of Commons Treasury Committee, would be for this to “happen gradually over ten years in fits and starts”.

But he went on to outline another possible scenario:

  “You can certainly imagine cases where the sharp fall in exchange rates could well lead to a fall-off in financial stability, and start to lead to a disorderly adjustment which could be very costly and might involve recessions in some countries”.

Some critics of capitalism are arguing that this is what is inevitably going to happen (for instance, Loren Goldner in an article predicting an “inflationary blow-out”). This is certainly a possibility, as King admits. But it is not inevitable. King’s other scenario for a “relatively stable adjustment” is also a possibility.

Monetary matters are the froth and bubbles on the real economy. Even so, mismanaging them can provoke an economic crash that might not otherwise occur. But mismanagement is not inevitable. Slumps are only inevitable when caused by movements in the real economy.

The Budget (1966)

From the June 1966 issue of the Socialist Standard

What Labour Party members would have thought in the old days when they were a movement of jolly cyclists and hiking clubs that they would one day have a Government which succeeded in making a lot of people feel guilty?

Ever since they came to power in October, 1964, the Labour Government have carried on a skilful publicity campaign which has drummed home two main ideas. The first is that we are living in the midst of a desperate economic crisis, caused by an unfavourable balance of payments. The second is that this situation is mainly our fault; we have been living too well; we have been earning too much money; we have been spending too many holidays abroad, and so on.

The effect of this campaign has been to make many people who did not realise before that there is such a thing as the balance of payments anxiously follow the monthly figures of imports and exports, almost like pools addicts grabbing the Saturday evening newspapers. The Labour Government have sworn to put the balance of payments into surplus and over the past 18 months they have taken many steps which they said would do just that.

One of the remedies which Mr. Callaghan has applied with a heavy hand has been enormous doses of taxation. His first Budget, in October, 1964, increased the tax on petrol by 6d. a gallon; this was just after the imposition of the 15 per cent import surcharge. His second Budget, in April, 1965, increased taxes on cigarettes and drink, and on vehicle licences; this Budget was designed to rake in an extra £217 million a year. These increases contributed their bit to the record figure of tax which was collected during the financial year 1964/5—according to the report of the Commissioners of Inland Revenue, £4,072 million.

The latest dose of taxation to be prescribed by Mr. Callaghan was the payroll tax, which made the headlines in this year’s Budget. This tax is expected to yield something like £240 million in a full year.

Heavy taxation, as anyone who remembers the days of Sir Stafford Cripps will agree, has been a favourite policy of post-war Labour Governments. What effect has it had on the problems which the Government said it would solve?

In October, 1964, the Government told us that the way to cure the economic troubles of British capitalism was for everyone to work harder, to keep their wage rises down to three per cent a year and for manufacturers, retailers and so on to hold their prices stable. This, they said, would solve the problems—helped, of course, with a bit of financial masterminding by Wilson, Callaghan, Brown and the rest.

And the result? The White Paper on National Income, published last April, stated that during 1965 there was an “effective rise” in personal income of some 5½ per cent. The same White Paper said that the gross national product went up by only 2½ per cent. Even when we have made allowance for the customary “adjustments” which these figures must be subject to (personal income, for example, is not made up exclusively of wages), it is apparent that the Government’s policies are not having the results they promised.

No matter what the Government say or do, wages are still rising faster than they would like and productivity is not going up at the rate they want. Inflation, which they promised to control—like the Tories before them—continues; the Financial Secretary to the Treasury said in the House of Commons last February that the purchasing power of the pound, taken as 20s. when Labour was returned to power in 1964, had declined to 18s. 11d.

This obvious failure of the Government’s policies does not stop most people thinking that the way to deal with an economic crisis is to impose some sort of similar measures. There may be some disagreement over the details of these measures, but generally the financial pundits and the economic experts stand united that there must be some sort of juggling about with taxes, Bank Rate, hire purchase controls and so on. Perhaps they all have a good reason for this unanimity; if the Government ever lost faith in such juggling that would be the end of a lot of City Editors, Treasury experts and the like.

All of these experts are very busy in the weeks leading up to Budget Day, offering their advice to the Chancellor. Few of them have the slightest doubt about the way to solve the crisis. The Government, it seems, is overlooking the obvious—until we remember that Whitehall also has its economic experts, whose job it is to examine the obvious, as well as the less obvious. This, of course, is the great difficulty; all the experts are rushing to give their advice but they are all contradicting each other.

This year the Government showed how much its own experts disagreed with the rest by upsetting all the pre-Budget predictions. Before Mr. Callaghan opened his box all the financial and economic tipsters were assuring us that there were to be increases in income tax, purchase tax, road licences and so on. The shops which sell taxable goods were cashing in by advising their customers to Beat the Budget—Buy Now! (This on the assumption that an increase in purchase tax automatically leads to an increase in prices, which is not true.) The Daily Telegraph on Budget Day reported “Stores and shops were crowded by a beat-the-Budget shopping rush yesterday, and post-offices and local taxation departments were busy with motorists anxious to renew road tax licences to beat a possible increase of the £17 10s. rate.”

Perhaps when he read this Mr. Callaghan permitted himself one of those famous jolly smiles. Or perhaps he didn’t; after all, he was once a financial expert himself.

What the experts have to explain is why so many efforts to control the economy come to grief, why so many variations of control are tried to deal with the same problem, and why the difficulties which are supposed to be eliminated by the juggling are still there.

Since the war one Chancellor after another has tackled the problems of wages, inflation, productivity and the balance of payments. All of them have failed. At times they have increased taxes, or Bank Rate or they have imposed stricter controls on things like hire-purchase; at other times they have reduced the severity of these measures. None of them has had any effect.

Mr. Callaghan is the latest in the line. And he, too, is failing. At this rate, and on precedent, he'll probably end up Prime Minister.

One thing which is obvious—and which explains to a large extent why they fail—is that Chancellors work in the dark. On Budget Day they may like to pretend that they can predict the effects their policies will have, but in fact they can do nothing of the kind. Mr. Callaghan came to office pledged to, as they say, “take the heat out of the economy,” which means that he would implement policies to ease off the boom in some industries, reduce the shortage of labour and hold wages in check.

But after all the restrictions, the economy stays obstinately “hot”. The labour market remains very tight, with the number of vacancies far exceeding the number of registered unemployed. And in this condition the rest of the Government’s policy—in particular its Incomes Policy—has little chance of success. One industrialist to recognise this is Sir Eric Mensforth, chairman of Westland Aircraft limited, who said last October:

  An incomes policy lo withstand bullying will have to be sincerely sought. . . . and . . . there will have to be the sanction of unemployment, I hope small, but enough to make a good job something to strive for.

What nobody has yet been able to explain, however, is how a Government can ignore the conditions in which it governs. No Government has yet been able, in a time of slump, to create markets to stimulate its industries. Nor, in a boom, has a Government been able lo destroy markets. Capitalist industry lives by making profit, and when there is a market which can be profitably exploited industries will rush to fill it, even if a Government puts difficulties in the way, or skims off a heavier dollop of profit in the shape of tax, or makes industry pay more for money loans. A boom economy will absorb these blows—and come back for more.

A Government cannot create unemployment when industry is clamouring for labour, and it cannot impose an incomes policy when employers are in general compelled by a labour shortage to comply with trade union demands. Of course, when there is a slump it is a different matter; then it is the unions who are crying for Government protection—as they did when they asked for the coal subsidy in 1926—and asking the Government to run counter to the current conditions of capitalism.

Mr. Callaghan’s troubles, then, do not come out of nothing, in the same way as the slump which the 1929 Labour Government had to face was no accident. That recession was world-wide, and so is the situation which now worries Mr. Callaghan. Germany is faced with inflation: France is in turmoil over trade union resistance to the Government’s attempts to impose a five per cent ceiling on rises in nationalised industries; Japan, Israel, India and the United States are other countries which are in similar difficulties.

This should suggest to the experts that, if there is a solution to the problem it is an international one. Indeed, they continue to advocate measures which concern only one country. Every country, for example, wants its international trade to be in surplus; but this is clearly impossible. Each surplus must be balanced, somewhere,, by a deficit: and it is equally impossible for international trade to be in precise balance, with every country exporting exactly as much as it imports.

When the experts are sounding off about how to run capitalism they assume that it is a social system which can be controlled by policies based on reason and sanity. But capitalism is not like that. It is a system in which competition between firms, between nations, makes nonsense of reason. It is a system whose priorities of profitability deny sanity. It is a system described recently by the Director- General of the Confederation of British Industry as one where “live and let live" is changing lo “compete or die”.

This system will defeat Mr. Callaghan's efforts to control it, just as it defeated those of his predecessors. Of course, the Chancellor tells us that his efforts are directed at solving our problems, but in fact nothing that he does, or can do, will have any effect on the basic restriction on the lives of

the working class, which is the poverty suffered by every member of that class.

That poverty is as real today as ever. The latest figures of income from the Board of Inland Revenue, covering the year 1963/4, stated that 80 per cent of the wealth of Britain was owned by some five million people, or nine per cent of the population. Poverty is not a problem of that section. But on the other hand there are the remaining 91 per cent who between them own 20 per cent of the wealth; the Board’s figures indicate that of these people, some two-thirds of the British population have no wealth worth recording. It is in this group that poverty is an ever-present problem, restricting and dragging them down into worry and illness and worse.

It is laughable that these people should feel guilty about the balance of payments crisis of the British capitalist class. Indeed, the only guilt they should feel—and this they should feel keenly—is that they have it in their power to end the society of poverty and privilege, yet they choose to do nothing about it.

Ivan

The Floating Pound (1972)

From the August 1972 issue of the Socialist Standard

The Government's decision to float the pound is yet another confirmation of the Marxian theory of inflation. Floating the pound means that the government is not using its gold and foreign currency reserves to maintain a fixed exchange rate between the pound and the dollar £1=($2.60 till 23 June). As a result the exchange rate of the £ (which is but its price on the foreign exchange market) can, depending on demand, float up or down — but in practice under present circumstances definitely down. The “Times" estimates that when, after a few months, a fixed exchange rate is restored it will be around £1=$2.40 (or its equivalent), an effective devaluation of between five and ten per cent.

Devaluation, according to the Marxian analysis, is an official recognition that due to the over-issue of a paper currency the amount of gold represented by a pound-note has been reduced. Acting on false Keynesian doctrines, successive British governments, Labour and Conservative, have denied that, given a certain level of production and trade, only a definite supply of inconvertible paper money (i.e. paper money not convertible into gold on demand) should be issued if prices were to be kept reasonably stable. And that, if more money than this amount was issued, the inevitable result would be a depreciation of the currency or, what is the same thing from another aspect, inflation (rising prices). Instead they have followed the advice of Keynes to “let the money supply look after itself* and via the Bank of England have provided government departments with the money needed to maintain their expenditure and to subsidize private capitalist industry.

In the last quarter of 1971, for instance, Britain’s money supply was expanded at an annual rate of 25 per cent! (The Times, 9 March, 1972). Only recently have a few academics come to realise what Marx, and indeed many of the bourgeois economists of his day, knew: that the inevitable result of oversupplying an inconvertible paper currency is depreciation and inflation.

For a trading State like Britain this can cause difficulties. For inflation (at least if it proceeds at a faster rate than in other exporting countries) raises the price of exports and makes them uncompetitive on the world market. At the same time imports increase because of the lower prices of foreign goods. The result is a balance of trade deficit, leading to a balance of payments crisis. Also, and this is partly what seems to have happened to Britain this time, export prices can be uncompetitive because of a lower-than-average productivity. The international bankers obviously know all this and have decided to express their lack of confidence in the official gold content of the £ by selling their holdings.

When this happened in 1967 the Labour government gave in (as it had to), devalued the £ and, at the insistence of the international bankers, abandoned their programme of social reforms and imposed a wage freeze. This time a Conservative government has given in, but in a roundabout way: floating the £ for a few months so that it can find its own exchange rate is in effect only a slow-motion devaluation.

What devaluation is supposed to do (as long as other countries don’t devalue as well, of course) is to bring the devaluing State’s internal price level in line with the world price level; its export prices fall and imports from abroad become more expensive; the deficit on the balance of trade disappears and the crisis is solved — until the next time.

For the capitalists devaluation is a policy aimed at restoring the profits they lost through their goods at home and abroad being uncompetitive. But what about the workers? In Britain, which imports much of the food consumed by the working class, it means a rise in the cost of living which can only be recouped by determined action to raise money-wages too. This will inevitably bring the workers into conflict with the government made even more determined to resist wage demands by a desire to regain the confidence of the international bankers. Could there be any more obvious proof that capitalism cannot work in the interest of the vast majority the class of wage and salary earners?

On the beach (1979)

From the June 1979 issue of the Socialist Standard

Everyone — that is, every City Editor, every investment analyst — loves a growth industry. It usually doesn’t matter what the growth is about; the firms which supplied the ovens and the gas to the Nazi concentration camps must have been a growth industry. What matters is growth — the vision of an ever-developing, ever-expanding and therefore, it is assumed, an ever more profitable business.

One of the great growth industries of recent times is the tourist trade; sometimes, as if it were a political theory, called tourism. Six per cent of total international trade is attributable to tourism — more than iron and steel and surpassed only by motor vehicles, chemicals and fuel oil. The World Tourism Organisation, who may be supposed to be not entirely impartial in the matter, claims, “Tourism is no longer a cottage industry . . . today [it] has developed into a major industry".

Britain, advertised as a place where the scenery varies from the simply pretty to the dramatic and where there are buildings dating back to the Roman occupation, is one of the world’s big tourist attractions. Last year 11.72 million tourists came here, to stare at the scenery, photograph the buildings and dazedly shell out their cash to the riotously charging barrow boys of London. During that same year, 12.86 million people travelled abroad from Britain. Those who came in here spent £857 million more than those who went out spent abroad a bias on the balance of payments such as to please any City Editor.

For a favourable balance of payments, like a growth industry, is everyone’s favourite. This (although there are arguments that even by the standards of capitalist accounting the advantages are often more apparent than real) is one of the inducements for the ‘developing’countries to build up a tourist trade. In these cases, the state takes a close interest in the trade; there is usually a Ministry of Tourism and some impressive government subsidies and investment as well as other help. Sometimes the capital for the development has other sources. One American travel firm planned to take over an entire African country, with “no economy, no nothing” and to “merchandise it . . .  so the entire country is run as a beautiful place’’. (The money was to come from Rothschilds.)

Lego
This drive to ravage some defenceless part of the world into a paradise for the tourist trade gives tourism a bad image. The industry has its apologists, whose efforts sometimes have a note of desperation:

  Anyone concerned with the motivation of travel has to realise first that he is reaching deep into one of the major conflicts of the human mind; a desire for sameness, the return to the womb, if you wish; conflicting with the motivation to reach out and discover the world. In a sublimated fashion, a trip is therefore a form of birth or rebirth. (Dr. Ernst Dichter, Address to the Department of Travel, Kashmir, October 1967.)

Rather closer to the reality of the balance sheet the trade says it aims to supply hopeful people, on their annual release from the job with a little money to spend, with the Four Esses — Sun, Sea, Sand. Sex. And in pursuit of the profits to be made from that, the tourist trade has invested millions into ships, aircraft, motor coaches, airports, roads, beaches. It has raised hotels which all appear as if they have been built from the same Lego set, where among the palms and the sunbrellas workers can lie roasting like fowls on the spit, hoping to take a sun tan back to the office.

Behind the illusions, tourism has had a dramatic, even drastic, effect on the social fabric of the places it has invaded. In 1955 Torremolinos was a tiny, poverty-stricken village on the south-east coast of Spain. Then the developers’ eye fell upon it and now the Lego is everywhere, the Thomas Cook brochure describes it as ". . . exuberant [with] all the essentials of a modern resort: bars, boutiques, restaurants, beer cellars, clubs, golf courses, yacht marinas . . . One observer has summed up this trend:

  Tourism . . . is no less an industry than steel manufacture and its introduction into Alpine valleys has been no less destructive of total population patterns and traditional culture than if each hotel had been a blast furnace. (The Geography of Recreation and Leisure, Cosgrove and Jackson.)

Pollution
This aspect is beginning to worry the tourist trade, and much of the writing on it is now concerned with a call for something called a Tourism Policy, by which is meant a controlled development of tourism. It also worries the ecology lobby. The summit of Mount Snowdon is literally being worn away by the millions of feet which trample over it. In the season, a city like London suffers exhaust fumes made even denser by the fleets of taxis, cars, buses, coaches needed to move the tourists from one box office to the next. Outside the city the big jets scream to and from the airport on their carpet of noise, a 707 at take-off generates the same sound level as all the world’s population shouting in unison — and this can happen every few minutes, nearly every hour of every day.

But for the present the pollution which it causes is a lesser worry for the tourist industry. Of more immediate concern, because it offers an imminent threat to profits, is the bogey of saturation. If too many people visit the same place and overwhelm the available facilities, they may have the kind of experience to persuade them not to buy that holiday again. London, which lies fourth in the league table of saturation, measured by tourist nights spent per 100 residents, is getting near that point. Moving around the city in the summer is difficult, almost impossible, as the visitors from abroad add their weight to the rush-hour miseries of the travelling workers. In Westminster Abbey the crush is so great that an admission charge has been imposed, and after paying to go in the visitors are channelled along roped-off routes with no waiting allowed to look at anything.

This illustrates a contradiction of tourism which (although it may not occur to the Ford worker inflicting his Spanish on some hapless English-speaking bartender on the Costa Brava) is typical of capitalist society. Tourism has grown from the pressures of industrial capitalism. It was the concentrations of urban life — factories, close-piled slums, relentless exploitation — which spawned the need to get away from it all as well as the faster and more efficient means of doing so.

It took some time for the workers to establish that a holiday is an essential part of the recreation of their labour power. As this need is now accepted, and as many workers now get three or even four weeks break each year, the tourist industry has grown to market that recreation. This can assume some startling forms but who cares, as long as it sells? So holiday camps marshall their millions into obedient queues and into nerve-wracking competitions to find the funniest face in the place. Package tours take care of everything except stomachs abruptly overfull of unusual food and booze. Jet planes pack in their economy passengers as tight as a bus, easing the discomforts with the plastic smile of a leg-weary hostess. Somewhere among all this gusty enjoyment, say the industry’s salesmen, batteries are recharged; the line at Ford’s flows freer for it.

So big business is interested in an efficient holiday industry and the tourist trade has answered this by itself becoming big business. It is becoming increasingly harder for the small firm to survive. The British hotel industry is dominated by companies like Trust House Forte (who try to promote a cosier image by advertising that all their employees wear unctuous smiles) and Grand Metropolitan (who also own Express Dairies, Watneys and the Express Newspapers). Behind them is some of the latest, most expensive technology, Holiday Inns has a central computer link-up which is said to be the world’s largest private communications network.

In package holidays, three firms — Clarksons (the largest in the world), Thomsons and Horizon account for over half the business originating in Britain, leaving the rest to seventy-odd smaller operators. Governments offer a wide range of subsidies (in Britain a grant of £1,000 was available for every hotel bedroom completed before 1973), tax allowances, low interest loans and so on. They also invest a lot of money directly in the trade; two-thirds of the airlines in the IATA are wholly or partly state owned. At the same time, governments impose laws on safety and consumer standards, many of which can be met only by the bigger operators. The 1971 Fire Precautions Act, which laid down regulations about fire safety in hotels, caused thousands of small hotels and guest houses to close or to change their use.

Jaws
These laws are designed to prevent the profit motive running riot to the point of being counter-productive and to encourage a more orderly investment of capital in the industry. A bad experience, caused by a rush to get a quick profit, can damage the industry overall; and that is the sort of thing governments are supposed to prevent. The film Jaws showed how tills operates, and there are many examples of it in real life. In 1962 the Swiss ski resort of Zermatt suffered an epidemic of typhoid caused by its neglect of the water supply in favour of building hotels, ski lifts and the like. In 1973 the typhoid bacteria was found in the water in Miami. The authorities could not ignore the problem, as had happened at Zermatt; they advised everyone to boil all their water but refused to use words like ‘contamination’ which, although accurate, might have damaged their holiday bookings.

Workers who spend their lives on the treadmill of exploitation need to buy a holiday once in a while, to restore themselves. The industry which sells these holidays is now big business and operates under all the contradictions of any capitalist enterprise. The rush to invest in tourism has proved environmentally damaging — although the ‘environment’ is usually an essential part of the commodity which the industry sells. In some ‘developing’ countries the tourist trade has been built up at the expense of other industries which, by the standards by which capitalism judges profits —might well prove to be more worthwhile. A mess which is typical in a society where wealth is turned out to make profits and not to satisfy human needs.

There is a final irony. Holidays are about illusions, about forgetting reality for a while. But the trade which markets those illusions is itself being forced up against its own reality. And it is not always having a lovely time.

Ivan

What Plan? (1968)

From the January 1968 issue of the Socialist Standard

The National Plan was dreamed up by the Department of Economic Affairs back in the palmy days of 1965. At the time Harold Wilson described it as a “national crusade for higher productivity” and George Brown wrote that its embodied “all our hopes for maintaining full employment and raising our standards of living.” Not surprisingly the Labour Party has since then done its best to give the Plan a quiet burial.

In its aims the National Plan was beautifully simple. The overall objective was to increase national production by 25 per cent (i.e. £8,210 million) by 1970. It pointed out that the balance of payments had been in the red by £750 million in 1964 and that this had resulted in heavy loans from the International Monetary Fund. As a solution, the Plan envisaged a steady improvement in these figures: “we shall need to get back into balance during 1966 and then into surplus; by 1970 we shall need a surplus of about £250 million.” This was to be achieved largely by boosting exports which, during I he barren years of Conservative rule, had been expanding at an average rate of only 3 per cent a year. Now they were to be stepped up by “over 5 per cent a year up to 1970. No one can say that this target is crying for the moon(!)” On the other hand, imports were to be effectively controlled and, “taking everything into consideration”, these would grow by no more than 4 per cent a year. The trade deficit was in this way destined to be cut dramatically, from £534 million in 1964 to about £50 million in 1970.

The Plan also gave prominence to its schemes for expanding the labour force. “On industry's present plans 800,000 more workers will be needed if the 25 per cent increase in output is to be achieved”. The hundreds of thousands of new jobs in the manufacturing and construction industries were to more than compensate for any shake-out in mining, the railways and other declining areas of employment. Prices were going to be magically frozen and, since wages would be creeping up steadily by 3-3½ per cent a year on average, “our personal consumption . . . should rise by one-fifth by 1970.” “This is not a policy of restriction. It is intended to increase the value of what our pay packets will actually buy and get away from purely paper increases cancelled out by higher prices.”

The future was going to be rosy in other ways as well. Expenditure on health and welfare services was to rise from £1,238 million in 1964/65 to £1,529 million in 1969/70. To meet the housing shortage, half a million new homes were to be built each year by 1970 (as compared to 383,000 in 1964). But these were only details when compared to the underlying ambition. Once and for all the crises and upsets of capitalism were to be abolished—by the stroke of a bureaucrat’s pen! “We have had too many crises in the last ten years . . .  Sometimes the only quick way of dealing with these crises was by cuts and squeezes at home . . . The whole point of the Plan is to break out of this vicious circle once and for all." (their emphasis)

Although the working class in general greeted the plan with a healthy indifference, it fired the imagination of many economists. By the end of 1965, after the Plan had been in force for a grand total of four months, some of them were becoming quite enthusiastic.

   The Chancellor has every reason to feel encouraged by this ending to a year in which exports rose by 7 per cent and the average monthly trade deficit was halved. Even if he did not quite hit his target of halving the total balance of payments deficit during 1965, it is now clear that he cannot have fallen far short of it . . .  Mr. Callaghan is running to time towards his objective of eliminating the payments deficit by the end of 1966.  (Financial Times, 13/1 /66)

But 1966 was a great year for wrecking illusions. The pundits had a variety of hypotheses to account for the sorry state of the economy but they were united on one issue—all was not going according to plan. Perhaps Victor Morgan, Professor of Economics at Manchester University, spoke for them all when he said:

   The year 1966 should stand as an awful warning to those of us, both in official circles and outside, who indulge in the black arts of economic forecasting. At the end of 1965, the government was confidently looking forward, on the basis of existing policies, to a rapid improvement in the balance of payments, and this view was generally shared by academic and business economists. In fact, we have been subjected to another massive dose of deflation, and the current account deficit for the first three quarters, at £234 m., was £87 m. more than in the corresponding period of 1965.
   . . . the rate of growth of national output [is down] to an average of a little more than 1 per cent a year.

(Financial Times, 31/12/66)

Callaghan, however, remained optimistic. Nothing had gone fundamentally wrong, he argued. There had been setbacks, for a time economic recovery had even been halted, but dramatic improvements were just round the corner. A sign of this, he claimed, was that the government had “made a good start in repaying (the) debt to the Central Banks. Our reserves have been rising and we have resumed repayment of capital and interest on our North American loans.”

Contrast this to what has actually taken place. The final figures for 1967 will not be available for some weeks yet but even so we can see that the Plan is completely on the rocks. Far from being able to repay their debts to the International Monetary Fund and Central Banks, the British capitalist class have applied for further loans of $300 million. Despite the confident prediction that first 1966, and then 1967, would produce a positive balance of payments Callaghan has ruefully admitted that the capitalists still “need an improvement in our balance of payments of at least £500 million a year . . .” 

The Plan emphasised the importance of boosting exports by means of rebates to exporters and the need for heavy investment in the nationalised industries to provide the basic growth in fuel, transport and communications which would allow industrial production as a whole to increase. Yet now the government finds itself sabotaging its own plan. Among the economic reforms which followed the devaluation of the pound, two of the most important measures were to abolish refunds to exporters to the tune of £100 million and to reduce public spending (which includes capital investment in nationalised industries) by another £100 million. Apart from all this over half a million unemployed workers know that Labour’s brash predictions about creating more jobs have not worked out. And of those workers with jobs, how many now feel confident that their ‘‘personal consumption . . .  should rise by one-fifth by 1970”?

The failure to date of the National Plan is a blow to the efforts of the ruling class to strengthen the world standing of British capital. But, in the end, they can afford to take a philosophical view of it all. After all they are still the bosses and, however persistent the difficulties that face them, they can rely on the working class to keep on churning out the profits.—Or can they?

John Crump