Letter: Full employment, slumps and other questions (1964)

Letter to the Editors from the October 1964 issue of the Socialist Standard

Full employment, slumps and other questions

Dear Sir.

An article published in the Socialist Standard in January of this year posed a question with its title, namely "Are you better off?" Unfortunately, however, the article does not provide any definite conclusion.

The article does however concede that the average increase of the purchasing power of take-home pay is probably about 10 per cent.

"In the meantime, owing to more than proportionate increases of pay deductions from pay (national insurance and income tax), the average increase of the purchasing power of take-home pay is not the 18 per cent of the two indexes would show (wage rate index and retail price index) but something less, probably about 10 per cent Socialist Standard, page 9, January 1964.”

It might also be pointed out that.the present alleged standard of affluence that many of the working class are at present living at is dependent on their wives going to work in order to augment the family budget. But, notwithstanding, this and other factors such as the tremendous growth in hire purchase commitments, it is difficult to deny that the worker of today is better off if fully employed, as the vast majority are at present, than his counterpart was when unemployed in large numbers before the Second World War, particularly in the slump of 1929. In case it should be asked why one should compare the lot of a fully employed worker to that of an unemployed one in the pre-war period the answer is that millions were unemployed then, and relatively few are unemployed now. The article in question gave four columns of figures, one of which gave the number of unemployed of 1938 when it stood at 1,927,000. The column next to this gives unemployment as a percentage of 1938. this year being taken as 100 per cent. If these figures are accurate, then we may conclude that unemployment has not reached 50 per cent of this level since 1938.

On this aspect of the problem the article in your journal is significantly silent. In fact I think it would be true to say that the Socialist Standard has failed to account for this continuing full employment since the end of the war and does not even find the subject worthy of discussion in its columns.

May 1 therefore ask the following questions?

(a) Why in your opinion has the slump which you maintain is an essential feature of capitalism failed to appear in England?

(b) Why has there been no slump of the magnitude of 1929 since the war.

(c) Are the present conditions of full employment, increasing the membership of your organisation and the sales of the Socialist Standard.

(d) Do you think the orthodox economists using ideas of the late Maynard Keynes have found a way of preventing widespread and profound slumps of the pre 1938 variety and if not how do you account for this rather prolonged period of full employment?

I am, yours etc.

T. Lawlor

Reply:

Our correspondent comments on the fact that, compared with pre-war years, the position of the workers has been affected by the decline of unemployment and the increased number of married women who go out to work, as well as by the rise of average wages in relation to prices. This was referred to in the article, where it was pointed out that total wages are about five times what they were in 1938, “mainly because of the decline of unemployment and the fact that far more married women are now out at work".

Whether this last factor can be regarded simply as a gain is another matter. In the nineteenth century the need of married women to work was commonly regarded as a disadvantage by those who studied its consequences.

If however it is a fact that most workers now are rather better off than before the war, this kind of development is not a new thing. Frederick Engels noted in 1885 that since 1844, when he wrote his The Condition of the Working Class in England, the factory workers had become “undoubtedly better off”, and the condition of engineers, carpenters, joiners and bricklayers, organised in the trade unions, “had remarkably improved". (See Preface to 1892 Edition).

In the same Preface and in the 1886 Preface to Capital Engels then went on to state a position which events proved to be wrong. He had concluded, because of the length and severity of the depression, that British Capitalism would never resume its expansion and that “either the country must go to pieces or capitalist production must ”. He thought unemployment was bound to increase year by year and that shortly, “ the unemployed . . . will take their fate into their own hands ”,

Profiting by Engels' mistakes the SPGB reached the conclusion (one indeed that Marx and Engels had themselves seen) that the achievement of Socialism calls for understanding on the part of the workers and cannot be the outcome of discontent and despair without understanding.

Our correspondent accepts rather too easily the claim that there has been “continuing full employment since the end of the war". In the column of figures to which he refers in the January Socialist Standard it is shown that since the war unemployment has ranged from 302,000 in January 1956 to 861,000 in January 1963. This latter figure may not be high by pre-war standards but it certainly cannot be described as “full employment”. Allowance ought also to be made for the fact that unemployment will have been increased in the nineteen thirties by the big flow of migration into this country. In post-war years up to about 1960 the net flow was outwards.

Against that background we can answer the specific questions.

(a) For this question it is necessary to take care about the use of words. If by “slump” our correspondent means only a “heavy slump” like that of the thirties, the answer is that such heavy slumps are not an essential feature following each capitalist crisis.

What we had as an essential feature o! capitalism is, to quote the words used by Marx in Capital, Volume I, Chapter XV, Section 8: —

The life of modern industry becomes a series of periods of moderate activity, prosperity, overproduction, crisis and stagnation.

The crises, that is the sharp interruptions of booms, have continued to happen in the post-war years. For example, the index of production in January 1963 was down to 108, after having reached 120 in January 1961. If in post-war years, the ensuing “stagnations" have not been heavy and prolonged this is in line with the experience of crises in the nineteenth century. Most of these crises were not followed by heavy prolonged slumps. The outstanding big ones were in the eighteen forties, the eighteen eighties (the one that threw Engels off-balance) and the nineteen thirties, and in between there were depressions that were not heavy or prolonged.

(b) Among the reasons why heavy depression existed in the nineteen thirties and not in post-war years in this country (experience of some other countries has been markedly different) is the absence of a very important factor which existed then. This is the pre-war feature of crisis-dislocation superimposed on the long-term decline of some very big industries, agriculture, coal and cotton without the counter effect of strongly expanding new industries. In post-war years, along with a much larger Civil Service, large armed forces and armaments industry, there has been expansion of building (helped by war-time destruction and stoppage of building), man-made fibres, electricity and electrical engineering, motor car and aircraft manufacture, television, chemicals and oil, electronics and nuclear power.

(c) If this question means has low unemployment since the end of the war been accompanied by a continuous increase of membership, etc., the answer is no; but we would not expect increase of membership to be determined by low unemployment any more than the heavy unemployment of the thirties had that effect. Other factors also come into it.

(d) This question relates to the supposed ability of governments to prevent widespread and profound slumps by means of the techniques associated with the late Lord Keynes. It will put the matter into perspective to point out that also before 1935 (the year Keyne's major work appeared) there were, between the heavy slump, long periods without heavy slumps.

If it is claimed that Keynesian techniques give Governments effective control over capitalism why did unemployment rise to 861,000 in 1963? As all governments have at their disposal these same techniques, and numerous economists who approve of them, why have many countries had heavy unemployment for prolonged periods since the war. among them U.S.A.. Canada. Germany, Italy, Belgium and Denmark? In Italy unemployment ranged between 1½ and 2 million for 10 years after the war. During this year unemployment has been at the 6 per cent level in Canada and U.S.A.

How have the techniques supposed to have worked? The Keynesians claim that the Government can, when it likes, stimulate capital investment and consumption and at other times damp down over-expansion. When the present motor car boom slackens off as it certainly will, what can the government do, if the world market for cars is temporality saturated, except wait for demand to recover? Theoretically the government could have prevented the industry from expanding so rapidly—and left the market to be filled with the cars of other producers—but the car manufacturers, the trade unions and the Tory and Opposition M.P.'s would all have protested.

Now that the Southern Rhodesian tobacco industry has been hit by falling prices following a bumper crop, how can Keynes help them? The producers are in fact turning to another and older technique, that of restricting production.

Of course it long ago ceased to he true that Keynesian doctrines were held only by the unorthodox minority. They had become the orthodoxy of large numbers of economists and members of governments. Now fashion is changing again and Keynes comes under increasing criticism. It would seem that his theories have not proved, even to his admirers, to be the panacea they were claimed to be.

Editorial Committee.

The Schuman Plan and the International Control of Basic Industries (1950)

From the July 1950 issue of the Socialist Standard

The French government has announced that six European countries would go ahead with negotiations on the Schuman plan to pool coal and steel resources—without Britain.

The British Government wanted a preliminary conference of Ministers on procedure. France turned this down.

The daily press in the last few months have given the Schuman plan a great deal of publicity. The British government has been reluctant to commit itself, and by requesting that discussions be held in order to clarify the practical application of the French proposals, hoped to avoid friction with the French government without having to either commit itself or give a complete rejection of the plan.

The chief point of the Schuman plan is the scheme to pool the coal and steel resources of western Europe.

The British Labour Party in April, 1950, published a pamphlet on behalf of the so-called International Socialist Conference which met at Witten, Ruhr, Germany, in March, 1950. The pamphlet, an individual work by W. Fienburgh, is entitled “International Control of Basic Industries.”

On page 2 he states under the heading “ The present position in the basic industries” the following:—

“Europe is nearing the end of a period during which, as far as the basic raw materials are concerned, demand has outstripped supply." On the same page he states “ . . . there is ample evidence that the main producing nations are expanding towards export targets which, in sum, exceed the import programmes of the importing nations of Western Europe and may exceed also the effective demand anticipated from the rest of the world. This raises the possibility of a restriction of expansion and production accompanied by a price war in European and world markets.”

He goes on “. . . To avoid these consequences it is essential, before the event is upon us, to make some approach to inter-European organisation in the basic industries.”

After stating that today, supply and demand in coal and steel at least are almost in balance, and talking about the possibility of a restriction of expansion and production he states on page 3, under the heading “The Aims of International Control,”—“International control should be designed to ensure that the basic industries were expanding fast enough and efficiently enough to meet the maximum demand for the product in the whole area, plus whatever export volume is needed to meet the over-all Western European balance of payments problem. Assessment of demand should be based upon the maintenance of full employment.”

If the supply has caught up or nearly caught up with the demand on the market, why all the plans for International control to ensure that the basic industries were expanding fast enough? One of the ideas as explained later in the pamphlet is “To gain the advantages of Rationalisation,” that is the most economical use of resources leading to greater over-all efficiency and lower costs.

This is the real reason of the plan. Talk of ensuring that the basic industries are expanding fast enough is put in to make the scheme attractive to workers seeking employment or who are fearing losing their jobs. For on page 4 he writes: —

“International control should ensure that basic industries do not expand production faster than the ability of the rest of the industry to consume the product.”

Like most members of the Labour Party he believes that by state control the government can run the economic life of the country according to plan.

Despite their failures they still draft new plans as fast as the old ones prove their bankruptcy. W. Fienburgh puts the cart before the horse when he states “The full employment economy is expansionist. The unemployment economy is restrictive.”

In actual fact the expansionist economy tends to lead to full employment, but when after a war the shortages are made up by the expansionist economy, capitalism reverts to the restrictive economy which leads to large scale unemployment.

The conclusions given by W. Fienburgh at the end of the first half of the pamphlet are interesting. Firstly he states:—

“It should be firmly noted that we cannot hope, through international control of basic industries, to impose socialism on countries which have not accepted it at the moment.” The fact that Socialism cannot be imposed on countries which have not accepted it is correct. However when a member of the Labour Party speaks of socialism he means state capitalism. Secondly he states ”. . . that each country should run its economy with the objective of maintaining full employment . . .”

It should be apparent that the economy of the country is not run with the objective of maintaining full employment, but is run with the idea of making a profit for the members of the capitalist class.

The competitive nature of the capitalist system, the economic rivalry between the national states for raw materials and markets for the commodities they produce, foredoom all the plans for international control of the basic industries to failure.

To sum up the scheme by an understatement, we quote the final sentence on page 8 of the pamphlet. “On balance the prospects of immediate internationalisation seem dim.”

D.L.

Editorial: Lord Keynes – Economist of Capitalism in Decline (1946)

Editorial from the June 1946 issue of the Socialist Standard

In the sickness of its declining years capitalism is being nursed by the Labour Party. Lord Keynes, who died on April 21st, was the doctor who prescribed the treatment. His theories, on which rest the belief in the possibility of “full employment” under capitalism, have come to the widely accepted not because of intrinsic merit or originality, but because capitalists and the Labour politicians alike have dire need of a panacea that will, they hope, make capitalism work or at least persuade workers that it will. Faced with mounting unemployment and the political discontent that it causes, many Tory and Liberal politicians had lost confidence in their ability to save capitalism. Lord Keynes promised them another lease of life. The Labour Party, new to power, never had much confidence in its own ability, and the “economic blizzard” of 1931 that wrecked the  Labour Government destroyed even what it had; so Keynes was their hope, too.

He believed that investment and price trends could be made subject to governmental control and thereby booms and slumps could be ironed out and approximately full employment secured. His views found expression in the National Government’s “White Paper on Unemployment Policy” (1944), in which the Government accepted “as one of their primary aims and responsibilities the maintenance of a high and stable level of employment after the war”. The Labour Government has endorsed this White Paper. Keynes directly influenced the Liberal and Labour programmes.

“It was mainly through his personal influence”, says the Times (April 22nd), “that the Liberal Party adopted as their platform in the election of 1929 the proposal to conquer unemployment by a policy of public works and monetary expansion”. The section of the Labour Party that opposed the MacDonald-Snowden economy cuts in 1931 quoted Keynes in support of their view. The Labour Party’s report on “Full Employment and Financial Policy” (1944) largely rests on Keynes’s theories. It declares that “the best cure for bad trade is to increase purchasing power and to speed up development”. It looks to loans, “compulsory if necessary”, from the Banks to “help the Chancellor to find the purchasing power required for full employment . . .” “If bad trade and general unemployment threaten, this means that total purchasing power is falling too low . . . We should give the people more money, and not less, to spend.”

Socialists have no hesitation is saying that if the Labour Government attempts anything of the kind – it may, of course, get cold feet and scurry to the safety of “orthodox” financial policies, as did Snowden and MacDonald-it will not succeed in avoiding unemployment and crises. Capitalism depends for its relatively smooth functioning on the capitalists’ confidence in their prospect of selling their goods at a profit. By the time that bad trade threatens the capitalists will already be apprehensive and the proposed government policy would sap their confidence still more. It is one thing to propose to increase the workers’ purchasing power but the capitalists (including the Government itself in State industries) are at all times forced by competition to seek to reduce the purchasing power of the working  class in relation to the mass of goods produced for the market. This they do, if not directly, by wage cuts, then indirectly by installing labour-displacing machinery to increase output and lower costs of production.

Always the workers can buy only part of the commodities they produce (but which belong to the owners of the means of production), the part represented by their wages. Keynes and the Labour Party ignored these basic facts of private ownership and the wages system and looked to financial schemes to relieve the disequilibrium when, periodically, it had produced a crisis of bad trade and unemployment. Events will show that unemployment cannot be abolished under capitalism, even though its growth may for a time be masked by war, war preparations and totalitarian controls.

The extent and nature of the dependence of capitalists and the Labour Party on Keynes’s theories was shown by the estimates of his work published by the Herald and the Times on April 22nd. The Herald,  under the heading “The Great Lord Keynes”, by a Labour MP, Mr. Evan Durbin, said that Keynes “more than anyone else .  . . bridged the gap between Liberalism and Socialism”. The Times developed the same idea at length:-

“The Keynesian approach offered a bridge between the academic economists on the side and ‘the brave army of heretics’—Mandeville, Malthus, Marx, Gesell and Hobson (to name only a few)—on the other. This may yet prove to have been Lord Keynes’s most valuable achievement”.

Marx is here put in curious company, but the Times‘ inclusion of him had a reason. The Times thinks that Keynes had found the way to cure unemployment and thus save capitalism from the challenge of Socialists. It quotes him as defending his policy of full employment through State control of investment “both as the only practicable means of avoiding the destruction of existing economic forms in their entirety and as the condition for the successful functioning of individual initiative”.

The Times went on to claim that Keynes had shown how to bring about reconciliation between the orthodox political parties and the “growing army of deeply discontented reformers and revolutionaries”. The claim is certainly true of the Labour Party, but woe betide that Party when Keynes’s full employment policy fails them and the bridge he built collapses. Let it therefore be clearly understood that neither Keynes nor anyone else has reconciled the Socialist demand for the abolition of capitalism with the despairing attempt to make the system tolerable by trying to cure unemployment within its framework.

Applying Marx (1983)

From the March 1983 issue of the Socialist Standard

We are now in the heaviest trade depression since World War II, with little expectation that recovery will take place in the near future. This has caused dismay and confusion among the economists, dividing them into half a dozen groups each with its own remedy and denouncing their rivals. Not only did they not foresee the depression but nearly all of them denied that it could happen. They had accepted the belief that it is possible for a government to prevent unemployment if it wishes to do so.

First in the field was the Labour Party. In its Election Programme. 1918. Labour and the New Social Order, it stated: "It is now known that the Government . . . can arrange the public works and the orders of National Departments and Local Authorities in such a way as to maintain the aggregate demand for labour in the whole kingdom”. (While they were the Government, 1929-1931, unemployment rose by 1½ million.)

By 1944. under the influence of J.M. Keynes, the three parties. Tory, Labour and Liberal (and the TUC), had all accepted the commitment to maintain "full employment”. It was set out in a document Employment Policy issued by the three parties represented in the war-time national government. Confidence in the policy was confirmed by the Committee on the Working of the Monetary System in a Report in 1958. In Paragraph 484 they said: "When discussing with witnesses the impact of restrictive monetary measures we have been constantly reminded that, as compared with earlier decades, restrictive developments have a much less frightening aspect now that Governments are always committed to full employment policies”.

Commenting on this. Professor F.W. Paish wrote: “This belief springs directly from the expectation that no government will in future allow any really substantial amount of unemployment to appear, even temporarily”. (The Banker, October 1959.) Actually, at the time the Committee published their report, unemployment was already on an upward trend after the very low levels of the ten years after the war. Unemployment rose again while the Labour Party was in office from 1964-1970, though they declared they would not let this happen, and it more than doubled under the Labour government of 1974-1979.

Towards the end of that government's office Prime Minister Callaghan and Chancellor of the Exchequer Denis Healey began to question the validity of the Keynesian “full employment” doctrine. Later, for the first time since the war. a government — under Thatcher — formally repudiated it. But they still claimed to be able to deal with unemployment, firstly by curbing inflation and secondly by reducing taxation: “The State takes too much of the nation's income; its share will be steadily reduced. When it spends and borrows too much, taxes, interest rates, prices and unemployment rise”. (The Conservative Manifesto — 1979.) After four years of office unemployment has risen from 1,300,000 to over 3 million.

The one economist who comes well out of this confusion is Marx. He showed that, in competition with each other to gain a larger market share, capitalists are always seeking to reduce prices by means of labour-displacing machinery and that inevitably depressions occur from time to time: "Capitalist production moves through certain periodical cycles. It moves through a state of quiescence, growing animation, prosperity, overtrade, crisis and stagnation". He never accepted that unemployment and depression could be avoided by some change of government monetary, taxation or investment policy. Nor did he accept the validity of the argument that unemployment would fall and depression be avoided by putting up wages. (The policy which the Independent Labour Party sought to popularise in the 1920s.) Marx showed that not only do wages rise in every boom, but at that time the working class “actually get a larger share of the annual product intended for consumption”. (Capital Vol. Ill. Kerr Edition, p. 474.) Far from remedying the situation this is, said Marx, "always . . . a harbinger of the social crisis".

Marx showed the limitations of the trade union struggle for higher wages. The aim of the capitalist in carrying on business is "the augmentation of his capital”. Wages can therefore go on rising only as long as the rise “does not interfere with the progress of accumulation". (Capital Vol. 1, p. 678 in the Kerr edition). Beyond this, accumulation slackens, "because the stimulus of gain is blunted", in other words, the employer does not for long employ workers out of whom he cannot make profit. Marx saw as inevitable a fall of the workers’ standard of living in depressions when, owing to heavy unemployment, the supply of workers overshoots the demand. Though he did suggest that “it might in such circumstances be necessary to test the real state of demand and supply by a strike, for example, or other method". (Value Price and Profit).

After Marx's death, Frederick Engels put forward the idea that Marx's cycle no longer applied, and had given way to "permanent and chronic depression”, but events soon showed that he was wrong and he returned to Marx's “cycle” theory. In the depressions of the 1880s and between the wars, a considerable number of workers and even some economists became convinced that Marx was right about unemployment and depressions. Then Marxist theory was pushed into the background by Keynes. John Strachey, who had claimed to be a Marxist, told how reading Keynes’ book General Theory of Employment, Interest and Money made him change his views. (He became a Minister in the Attlee Labour government). Richard Crossman. Minister of Housing in the 1964 Labour government, said that Keynes demonstrated that capitalism is not "an inherently unworkable system” and, by so doing, undermined “the old economic case for socialism". (The Times, 24 February 1956)

Even before Keynes dominated the scene most economists rejected Marx's labour theory of value, including the few who looked favourably on other parts of Marx's writings. It is interesting to notice the irrelevance of some of the more common objections to the labour theory, clearly the result of not troubling to understand it.

Marx explained carefully that he was dealing with commodities, articles regularly produced for sale and capable of reproduction. Because Marx showed that commodities have a value and a price the critics assumed, without any justification, that Marx must also be saying that everything which has a price had to be a commodity and have value. They have instanced the enormous prices paid for old master paintings, forgetting that these are incapable of reproduction and are therefore not commodities.

Marx answered the critics:

Objects that in themselves are not commodities. such as conscience, honour etc. are capable of being offered for sale by their holders and of thus acquiring, through their price, the form of commodities. Hence the object may have a price without having value. (Capital Vol. I p. 115. Kerr edition).

The late Harold Laski. who wrote quite sympathetically about Marx, gave an astonishing interpretation to the labour theory, in his book Communism (Home University Library 1927, p.95):

Thus we can measure the amount of labour-power in each man's effort, and so determine scientifically how he ought to be paid.

Laski borrowed this from A.D. Lindsay's book Karl Marx’s Capital (page 61). Lindsay wrote “The Labour Theory of Value is misleading. It is primarily interested in what a man ought to get in reward for his labour”. Both Lindsay and Laski were quite wrong. No such idea entered Marx's head and it is impossible even to guess what can have given Laski and Lindsay this strange notion.

Much has been made by critics of the allegation that in Volume I of Capital Marx put forward the theory that commodities exchange at value and then changed his mind and concluded in Volume III that some commodities permanently sell above their value and others below their value. The critics failed to notice Marx’s explanation in Volume I that he was first dealing with value and would later deal with its price form and that they were not identical. There was, for example, the footnote on page 244 of Volume I (Kerr edition):

The calculations in the text are intended merely as illustrations, and in them, therefore. it is assumed that prices are equal to value. In Book Three we shall learn that even in the case of average prices no such simple assumption can be made.

As for the critics' assumption that the alleged change of mind took place later, Louis Boudin pointed out that "most of the third volume, and particularly those portions of it which are supposed to modify the first Volume, were actually written down by Marx in its present form before the publication of the first Volume". (Theoretical System of Karl Marx, page 133.)

Cartoon by George Meddemmen.

Mention has already been made of the way in which the emergence of Keynes as the leading economist pushed into the background what Marx had written about unemployment and depression. The reason for this was obvious: if, as was almost universally believed, “full employment” was guaranteed for all time, theories about unemployment and depressions ceased to be of interest.

The almost total disregard of what Marx had to say about inflation is less easy to explain. That it should have been disregarded in this country in the period of nearly 100 years before 1914 when the gold standard operated is understandable, because there was no inflation. Why then has there been no interest in Marx’s explanation in the nearly forty years of continuous inflation since World War II? One reason is that, while much has been written about other aspects of Marx's writing, his economics have stayed out of favour even among many people who profess to be Marxists. A second reason is that many of the latter appear to be unaware that Marx had something to say about inflation. A third reason has been that when Keynesian doctrines began to fall into disrepute because of the failure of the “full employment" policy, attention went to the monetarists led by Professor Milton Friedman, who added to the confusion with his absurd remark that Marx, too, was a monetarist.

It is beyond dispute that the policies of Labour and Tory governments have led to the present price level being at least ten times what it was in 1945. (Prices have risen by over 50 per cent under the Thatcher government). It is also beyond dispute that all the governments up to 1979 have claimed to be following Keynesian policies; yet the Keynesian document, the 1944 Employment Policy endorsed by the Tory, Labour and Liberal parties in the national government, proclaimed the intention of seeking to maintain a “more or less stable price level". It is also true that while Keynes himself advocated short term use of inflation to reduce real wages in certain circumstances, his long-term aim was “allowing wages to rise slowly while keeping prices stable" (General Theory page 271). It is at least arguable that if Keynes had lived to see what was being done in his name he would have disowned it.

Why then have prices been rising continuously for over forty years? Marx’s answer would have been that it became a possibility with the abandonment of the gold standard in 1931, and became an actuality through the increase of the currency (notes and coin) in circulation with the public, from under £500 million in 1938 to nearly £11,000 million. The gold standard background is important. While the gold standard operated the pound sterling was. by law, a fixed weight of gold (about a quarter of an ounce). The effect was that the notes could never deviate, except marginally, from the value of the legally fixed equivalent weight of gold. As it was said at that time, "a Bank of England note is as good as gold", and it was everywhere accepted as such. Now the notes are “inconvertible" and their purchasing power steadily declines through excess issue.

Marx defined it as follows:

If the quantity of paper money issued were double what it ought to he, then, as a matter of fact. £1 would be the money-name not of a quarter of an ounce of gold but of one-eighth of an ounce of gold. The effect would be the same as if an alteration had taken place in the function of gold as a standard of prices. Those values that were previously expressed by the price of £1 would now be expressed by the price of £2. (Capital. Vol. I page 144 in the Kerr edition)

Several points have to be noted. What Marx meant by "what it ought to be" was the total quantity of gold that would circulate with a wholly gold coin currency. It was an application of his labour theory of value, gold having value like all other commodities. He was not saying (as did some quantity theorists) that any increase of inconvertible paper currency causes prices to rise. The rise occurs only to the extent that the quantity of notes is in excess of “what it ought to be". If, for example, production and population increase, the "necessary" amount of gold in circulation would increase. Other factors also affect this, including the tendency for the “necessary" amount of currency to decline with the development of transport and the banking system.

Marx also pointed out that there are other, "non-currency" factors, which affect prices, including changes in the value of commodities and the rise of prices in a boom and fall in a depression. (Also, while the gold standard operated, a fall in the value of gold would raise prices and a rise in the value of gold would reduce prices.) Marx made another valuable contribution to the whole issue of inflation and deflation. In accordance with his labour theory of value wages too are prices, the price of labour-power. So inflation which raises prices also raises wages. And deflation, which lowers prices, also lowers wages. Both situations are however affected by whatever ability the workers have to gain wage increases beyond the rise of other prices, or to prevent wages falling as much as other prices.

Some people have been misled by Milton Friedman's talk of controlling “money supply" into believing that he and Marx were thinking on similar lines. This is not so. Marx was talking about "currency", notes and coins, while Friedman’s doctrine is concerned with bank deposits, based on an old fallacy that the price level is related to the rise and fall of bank deposits. Keynes held the same view. In his Monetary Reform (1923 p. 128) he wrote: "The internal price level is mainly determined by the amount of credit created by the banks, chiefly the Big Five . . . The amount of credit, so created, is in its turn roughly measured by the volume of the banks’ deposits"

One last word about Keynes. Now that the Keynesians are in disarray perhaps some of them will look again at Keynes’ statement that Marx’s Capital was “an obsolete economic textbook which I know to be scientifically erroneous and without interest or application for the modern world".

Do they still find that convincing?

Edgar Hardcastle

Full Employment? Another Labour Party Fallacy (1946)

From the January 1946 issue of the Socialist Standard

Is full employment for the working class possible? What exactly does it mean? By whom is it desirable? Or is it a stunt to inspire the workers with hope and trust in our so-called Socialist Government?

 

These are not some of the questions asked in Parliament, or other public places. On the contrary, there seems to be general agreement, especially in the press, to keep up the fiction that full employment is possible, not merely for the repair of war damage, but indefinitely.

According to a leading article in the Daily Telegraph for November 16th, the Government's plan for full employment is much the same as that of the Coalition Government's in 1944. They say :—

“It differs little but in omissions and change of emphasis from the policy for maintaining 'a high and stable level of employment' which the Coalition Government set forth in 1944. That policy commanded general support as a well devised means of smoothing out booms and slumps, the main obstacles to full employment." 

Neither the Coalition Government, nor the present Labour Government, have so far explained how, by smoothing out the booms and slumps, fuller employment is obtained. Neither do they, or the Daily Telegraph, show how, when one dead level of employment has been reached, it is possible to achieve a condition of full employment. The plan is to spend on public works during the slump, leaving the booms to keep the workers busy during the few years—or months—they last. The Daily Telegraph, while hopeful of the results, is dubious of the ability of the Government and its experts to forecast the slumps, and adjust, their spending on public works accordingly.

Having once made the assertion that ''booms and slumps are the main obstacles to full employment," which is false, any deductions they make on that premise will undoubtedly be wrong. If, instead of eating all my cake to-day, I save a portion for to-morrow, obviously, nothing is added to the total.

In the same way, if a capitalist Government postpones its public works schemes to provide work during a slump, it creates no new employment. All it does is to arrange a levelling out, with little or no fluctuations.

If the unemployment figures during a boom are one million, and during a slump three million, cut out spending on public works during the boom and spread it over the slump and you get approximately two millions throughout both periods. The new arrangement is of no benefit to the workers. On the contrary, the advantage is on the side of Big Business, which has a well stocked labour market on which to draw at the very time world markets are expanding.

The Labour Government, in taking over the Capitalist bag of tricks, have taken with it its superstitions. Ever since the "South Sea bubble" there has been profound dread among capitalists of trade crises. "There's a slump on the way," or "a boom is just round the corner" were common expressions, generally spoken with superstitious awe, as though it were some great convulsion of nature. This dread impotence before the economic blizzard is still prevalent. According to the Daily Sketch (Nov. 23rd, 1945)), Mr. Dalton had said:—

"We must also arm ourselves with anti-slump powers, so that never again, as in past years, shall prices and productivity and employment all fall away through the failure of private enterprise."

The Daily Sketch leader commented as follows : —

"Even Mr. Dalton's Fabian audience must have caught their breath at the sheer ineptitude of that pronouncement, for there is no means within the capacity of man which would leave us an exception to the general experience in the event of a world slump. That will prove to be true Whether this country is run under state control or private enterprise."

For the last 30 years the workers have been unable to see much difference in the amount of unemployment during booms and slumps. They certainly do not become more prosperous during the booms. Big business, even when it gets really busy, cannot absorb more than part of the unemployed millions left over from the previous slump, Booms and slumps are no longer a mystery to all capitalists. This fact is made clear in a book by Roy Glenday, "Economic adviser to the Federation of British Industries," and entitled, "The Future of Economic Society" (Macmillan & Co., 1944).

Mr. Glenday gives facts and figures that shed much light on the subject of trade, both internal and international. In the production and marketing of motor cars, for instance, he says: The huge and complex plant necessary for standardisation and cheapness would be uneconomic without assurance of an ever expanding market. When saturation level has been reached with the ready money section, hire purchase methods are resorted to; which only puts off the evil day of partial, or even total collapse. When it is remembered that this is the normal process of big business in the production and sale of such things as radio sets, cycles and electric appliances of many kinds we can readily understand how this mad race for profits leads to crises.

Mr. Glenday has a convincing array of facts and evidence, from which he argues that Capitalism cannot survive its present crisis without some kind of adjustment in its environment. But contrary to what we should expect from an adviser to the Federation of British Industries, he envisages some form of “communism" the next step in human progress being what he calls the service state. Where, in return for security and a retiring pension, the individual will have to give up the right to choose his job, and must be prepared, not only to move from one locality to another, but also to change his job; undergoing a period of training, if necessary, to fit him for his new job. According to the Conservative press, something like this “service state” is contemplated for this country by the present Government, and already exists in Russia. They (the Conservatives) call it the servile state. But capitalism, whether British, Russian or American, means servility for the working-class always and everywhere. The right to choose his own job is of little value to the individual worker, the majority of whom consider themselves fortunate when they can find any sort of job and hold it down. Booms and slumps mean little to them.

Much depends on the point of view. From the capitalist viewpoint, it is eminently desirable that the workers should be kept busy; though not too busy in case they get independent. And not only because they are a source of profit; but also because many unemployed workers are a menace to a smoothly running system, and they have to be fed anyway.

The worker's point of view is different. He knows that the overstocked condition of the world's markets is the result of working-class energy. Of working-class efficiency combined with modern methods and machinery. The machinery itself being the result of working-class effort. In short, all the ingredients that go to make up overstocked markets are included in the phrase "human energy and the nature-given material," capitalists being excluded.

Under a rational system of society the machines would not belong to the capitalist, but to the people, and the people, while participating in the work of production and distribution, would arrange the conditions for themselves. They would do so through a real democracy worked out by themselves. The idea of finding or making work would be illogical and absurd. Under Socialism only the work necessary for the satisfaction of human needs according to an agreed standard of life and culture, would be performed. Booms and slumps would disappear along with the poverty and unemployment that spring from the wild scramble for profits.

F. E.

50 Years Ago: Whatever happened to ‘full employment’? (2024)

The 50 Years Ago column from the December 2024 issue of the Socialist Standard

In The ‘Queen’s Speech’ on 29th October Mr. Wilson included a pledge about unemployment. ‘My government’, it read, ‘in view of the gravity of the economic situation, will as its most urgent task seek the fulfilment of the social contract as an essential element in its strategy for curbing inflation, reducing the balance of payments deficit, encouraging industrial investment, maintaining employment, particularly in the older industrial areas, and promoting economic and social justice.’

Maybe Labour Party supporters are reassured by this mumbo-jumbo, but they ought to examine the small print very carefully. If they do they will notice how the form of the pledge about dealing with unemployment has been discreetly watered down. Now it is part of a ‘strategy’, along with other aims, all of them dependent on the nebulous ‘social contract’, and the word ‘full’ has been dropped. And all of it stems from the grave economic situation — their euphemistic way of describing a normal crisis of capitalism, aggravated by the inflation that Tory and Labour governments alike have brought about and are still promoting.

When the first post-war Labour government came into office in 1945, buoyed up with the fatuous belief that they had mastered capitalism and abolished crises for ever, their committal to deal with unemployment was in very different words. Then it was ‘Jobs for All’ and ‘Full Employment’. In the early post-war years (due among other things to making good wartime destruction) unemployment was exceptionally low. In several years average unemployment then was under 300,000, about 1.2 per cent., and of course the Labour and Tory governments claimed credit for it.

Since the mid-fifties unemployment has been moving to higher levels, but as late as 1966 in the Wilson Labour Government John Diamond MP, Chief Secretary to the Treasury, boasted that they had got unemployment down from 1.6 per cent, to 1.2 per cent, and ‘that is how we propose to continue doing it’ (Hansard, 6th March 1966). Capitalism, however, was not listening to Mr. Diamond and by the time they went out of office in June 1970 unemployment had gone up by about a quarter of a million to 579,000 (2.5 per cent.). In October 1974 it was 643,000 (2.8 per cent.), and with unemployment rising in most parts of the world the Government’s advisers are fearful that next year it may pass the million mark, as it did in 1972.

(Socialist Standard, December 1974)

A new social revolution (1945)

From the November 1945 issue of the Socialist Standard

Faulty reasoning and as a result faulty conclusions are very often due to the lack of consideration of vital factors involved. Proposals, for instance, are often made by various would-be-reformers to improve the lot of the workers whilst retaining the present economic set-up, that is the capitalist system. Bearing upon this it is worth while considering an article written by a reformer of longstanding, Mr. B. Seebohm Rowntree which appeared in the "Evening Standard,” (February 20th, 1945), headed, “A New Industrial Revolution.”

We are told that if the aim of the Government as regards “the maintenance of a high and stable level of employment after the War is achieved it will revolutionise the status of the workers.” May we quickly add that if the aforesaid does occur it will also revolutionise the ideas that Socialists hold on capitalism, but since we are aware of the fact that the only time our masters seem to be able to keep all of us busy is in the preparation or in the actual waging of war we are quite confident that Socialists will need to make no changes of their ideas now that the slaughter has abated. The fact of the matter is that the only way the status of the workers can be revolutionised is by the abolition of capitalism. No such proposition is made by Mr. Rowntree.

The proposals that are elaborated are based on the contingency that “if a state of full-employment is stabilised, authority, based on the ability to dismiss employees will largely disappear.” Mr. Rowntree need not have gone to the trouble of racking his brain as to how to deal with this question. The Socialist assures him that this ticklish problem will not arise in peacetime, and that our masters’ authority to employ or dismiss us at his beck and call will remain unaffected. On the contrary, all the things point to the strengthening of his hand. However, let us pause for a moment to consider how the above assertion of the employer's freedom to employ or dismiss is contradicted, in almost the next breath. Apparently, it seems, that now the owner is not the authority any more. “As a matter of fact all those employed in industry are SERVANTS OF THE CONSUMERS. It is the consumers who give the orders, and the greatest industrial magnates must obey them if he wants to stay in business. So the master and servant relationship within an industrial enterprise is unrealistic.” Following from this one is inclined to suggest that employers should now unite to resist the encroachments of their common enemy, the consumer! This childish argument is based on the fallacy of ignoring the fact that the producers, that is the working-class, are at the same time the vast majority of the consumers and secondly, that they have by no means that independence of choice which Mr. Rowntree is too hasty in crediting them with. How many of us for instance would consume our daily “sausage and mash” at the factory canteen or local cafe if we could but take a stroll down to Claridges or the Dorchester and there exercise a freer and far more welcome independence of choice? Further, has Mr. Rowntree forgotten the extent to which our own tastes are artificially formed for us, and therefore restricted, by constant plugging and advertisement. For the vast majority of consumers, i.e., the workers, the ability to pick and choose between one product and another is largely nonexistent. They have to buy what the big monopolies have decided to produce and have to like it, for the simple reason that they cannot afford to do anything else. Freedom of choice is restricted to the rich consumers and that invariably means luxuries which workers never can enjoy so long as capitalism lasts.

As a result of his fallacious idea that the consumers are the real masters in society, Mr. Rowntree comes to the conclusion that “employers should regard themselves and all their employees as being fellow-servants.” That says he, “is their true relationship.” We are told that some employers would resent this suggestion. May we inform Mr. Rowntree that there are quite a lot of workers who would resent this equally as much. The cold fact of reality is that the production and distribution services under capitalism are incidental to the making of profits. And since the making of profits involves the exploitation of the workers we should like to know how the receivers of profit, i.e., the employers can be the “fellow-servants” of those who produce it for them.

Further we discover that Mr. Rowntree wishes to introduce a greater degree of democracy into industry. He proposes that (a) arbitration boards be set up to deal with breaches of factory rule and (b) to establish Works Councils “on which members of the administrative staff and representatives elected by the workers should serve.” His reasons for desiring these proposals to be put into effect are not hard to discover. According to Mr. Rowntree it “would remove the chance of a strike occurring where the workers consider that a worker has been wrongfully punished.” Workers, so we are led to believe, would “feel that they are part of the show.” Employers could confidently expect a good and a growing response front the workers and of course it would mean “Prosperity for industry.” As regards the latter slogan let it be once again emphasized that prosperity for industry means the OWNERS of industry. We note too, that the workers will only be allowed to “feel” part of the show; they will only be “treated” as co-partners. This vague language is not a strange one to our apologists for capitalism. Even if the proposal mentioned were put into effect the enslaved position of the working class would not be altered in the slightest. It is extremely doubtful even that they could possibly serve the interests of the workers in their daily struggle against their profit-hunting masters, if we are to judge by the biased behaviour of the war time arbitration boards. Most likely they would prove a very effective instrument in the hands of the capitalist class to perpetuate their system of exploitation. Remember well that in the war despite “full-employment,” arbitration boards and factory committees, strikes and industrial unrest have been very prevalent and peace and harmony have not been produced in industry. This must necessarily be so because the conflict of interests between master and slave, in this case capitalist and wage-slave, is irreconcilable, in war or out of war. Since Mr Rowntree seems to be very concerned with actualities let the Socialist Party inform him that as long as industry is monopolised by a small section of the population who use it as a source for their profit and power so long will peace and harmony of effort be an unrealisable fantasy. May we further suggest that there was no need of him to dwell upon the desirability of a “new industrial revolution.” This revolution has already been accomplished in the course of the last 150 years. What is urgently required, however, is a new social revolution, the overthrow of capitalism and the establishment of Socialism. This would place into the hands of the whole community the ownership and control of the instruments of production and distribution. The degradation and humiliation of wage-slavery would then be a thing of the past.

Max Judd

A long, cool look at a hot potato (1963)

From the July 1963 issue of the Socialist Standard

Politically speaking, the issue of full employment has become a very hot potato. Ever since post-war capitalism pulled out the first of its many surprises by not going into the deep slumps which were such a feature before 1939, governments have trod carefully, thinking perhaps that a couple of million unemployed would mean the end of their term of power. (Although if they do think like this they may be over-pessimistic. Despite the heavy unemployment between the wars, the working class never got around to challenging capitalism ; indeed, in 1939 they were preparing for yet another slump under yet another Conservative government.) Inevitably, Chancellors of the Exchequer have churned out many soothing speeches on the theme that the jobs of the working class are safe in their hands. Then can even produce that old and faithful ally Statistics to prove their point. Yes, a hot potato.

And why? It is obvious that employment is important to the working class under capitalism for the simple reason (and we shall have more to say on this) that they depend on their jobs for their living. But the matter does not end there. For so many workers their employment is more than that. It is hardly an exaggeration to say that they almost deify the company they work for. Listen to them talk about it: “ My Job “ My Company.” You can almost hear the capitals. If employment is important to the working class, if it is a delicate political issue, it can be because a depressingly high proportion of workers ask for nothing much more from life than the chance to live in servitude.

In these circumstances it is only to be expected that there would be a lot of wrong thinking about employment. In the first place, about “ full ” employment. Recently, the newspapers, the novelists, film directors, TV men, and so on, have made the startling discovery that in many industries and in many parts of the country full employment is a sour joke. In the shipbuilding industry, for example, and in the towns where the shipyards are based. Day by day, gloomy reports come in from the yards. Employment is low. Orders are scarce. Some yards are completing what they fear may be their last work for a long time. A few small yards have had to shut down.

In the second place, a lot of nonsense is often talked when unemployment is in prospect, and it is not only the politicians who are to blame here. Consider again the shipbuilding industry and the recent decision of the Court Line to order a big tanker from a Japanese shipyard. Court Line is a British company, although the tanker is for a subsidiary of theirs in the Bahamas. Nobody needed to be a clairvoyant to forecast that the placing of this order abroad would provoke strong protests and sure enough that rumbustious fellow, Mr. Ted Hill, secretary of the Boilermakers' union, satisfied our expectations. This was, he said, a ”. . .  wrong to the British workers.” And more specifically: “Any British shipowner who places an order in Japan is un-British.”

Mr. Hill did not tell us, at the same time, what he thought of foreign shipowners who have their ships built in British yards. The Sunderland yard of Joseph L. Thompson & Son, Ltd., for example, recently completed the 24,500 ton bulk carrier Kolfinn for an Oslo firm. This was the fiftieth vessel built by the yard for Norwegian owners; their next launch will be an 80,000 ton tanker for Red Olsen & Co., Ltd., also of Oslo. Mr. Hill did not comment that it was un-Norwegian of Olsens to place their orders on the Wear instead of using them to develop their own shipbuilding industry. Neither did he say that it was un-Russian of the Soviet government, when they recently invited tenders from British yards among others—for six fishmeal factory ships.

Mr. Hill’s brand of nationalism is very much a have-your-cake-and-eat-it affair, with the added complication that he is not the only one to be after the cake. When the Russians put out the fishmeal ships for tender, there were signs that the British government were considering swapping an order for Russian oil for the contract to build the ships. This may have pleased the boilermakers, but it upset the miners, who regard every drop of oil as a threat to their jobs. Mr. Sidney Ford, president of the National Union of Mineworkers, described the oil-for-ships deal as “ridiculous.” “This cannot/' he said, “ be a good thing for the coal industry."

And while all this rumpus is going on, capitalism continues on its way, as serenely as it may. For capitalism, once we accept its basic, chaotic illogicality (and that is what trade union leaders have done) has its own orderly logic for its actions. Court Line did not give its order to Japan to cock a snook at British shipbuilding. They protested that they had made every effort to get their ship built in a United Kingdom yard. But:

It was found, with sincere regret, that British prices and credit terms for this type of vessel resulted in an uncompetitive unit when compared with the offers received from abroad. Had the order not been placed in Japan, no ship would have been contracted at all.

Court Line, in fact, are taking advantage of the low shipbuilding prices which are resulting from the current battle between Swedish and Japanese yards and are gambling that the recent rise in tanker freight rates will still be effective when they take delivery of their new tanker. From their point of view it was reasonable to place the order abroad; the economic requirements of capitalism saw to that. In the same way it was reasonable for the Soviet government to put Mir. Ford's mind at rest by ordering their fishmeal ships from Sweden. They got a good price, a promise of quick delivery and generous credit terms. What more does any Capitalist concern ask for?

Capitalism, because of its insistence on the profitability of an enterprise, is often bound to make life difficult for anyone who preaches economic nationalism, whether they do so in the board room or a trade union conference hall. For the working class, it goes even deeper. Last May, an American trade union leader on a visit to this country uncovered an example of the use which the employers can make of working class nationalism. He was Mr. Ben Segal, the director of international affairs in the International Union of Electrical, Radio and Machine Workers. This is how The Guardian of May 17th reported him:

. . . General Electric, the American company, had pointed out to their own unions the dangers of lower standards in Japan, but . . . it was found that their own international company was the largest stockholder in Toshiba, one of the principal manufacturers of electronic products in Japan.

Nobody need get indignant about this. A nationalistic working class are wide open to the smooth operator.

The big point in this is that capitalism has split its population into two and of these two it is the working class who need to get a job to live. But merely finding employment does not mean that a worker has solved his problems; indeed, so often it is the people with the better jobs who suffer the most strain. And even when he is earning a steady wage, the worker always finds that he lives under restrictions and that the cloth available to him allows only the skimpiest of coats to be cut.

Let us pile it on a bit more. A worker only gets a job when his employer can make a profit from his labours. If, for any one of a number of reasons, the profit is not there then very often neither is the job. This is why workers are so often interested in their employers finding markets for their goods. It is why shipyard workers agree with Ted Hill raving about “ un-British ” shipbuilders on one side, and on the other miners agree with Sidney Ford snapping about “ridiculous” international trading deals. In another way, it is why workers in the North want industry diverted to them from other areas. It never seems to strike them that this is the most futile tinkering with the problem and that the very best that they can hope for is to keep themselves in a job while another worker somewhere else gets the sack. Employment, of course, is the great dream of the working class; to many of them a regular job is the sun and the moon. What a measly outlook! For the only difference between employment and unemployment is often that between one degree of poverty and another.

Until the working class have grasped this fact, capitalism will continue, and so will its anomalies and stupidities. Industries will continue to boom and to slump and if they are industries like shipbuilding the slumps will cause some concentrated suffering in the areas which live off the industry. For capitalism makes its wealth in order to sell it, and this applies to ships just as it does to anything else. When conditions look good for selling cargo space, the tendency is for a lot of ships to be built. This in itself can mean that the market becomes restricted, helped perhaps by something like a decline in general international trade. This is what defeats gambles like that which Court Line are making over their new tanker. Too many ships compete for a limited market. Ships are laid up (there are over 500 like that at the moment). Shipyards slump and whatever help they may get from their governments (a £30 million fund was recently announced by the British government to aid shipbuilding) can have little effect on the problem.

This is something like the situation today. The chairman of the Houlder Brothers shipping line described it like this in his last report to the shareholders:

. . . instead of reaping the benefit of the expansion in world trade, the shipowners of the world have robbed themselves of that benefit by excessive building of new ships.

This excessive building has been stimulated by. . . over optimism generated by the prosperity of previous years. . . unhealthy encouragement imparted by tax considerations in some foreign countries and . . . the building up of national fleets based on policy unrelated to commercial considerations.

There speaks an authentic voice of capitalism, unconsciously displaying the system's crass anarchy. For no economist, no managing director, no minister, has yet been able accurately to predict the course of capitalism's markets. But all of them must go out on some sort of a limb and take their chance on beating their rivals into a market. British shipbuilding may be groggy on the ropes but it is still in there punching, even if rather weaker than before. Camell Laird's chairman said in his last report: “. . . we have intensified our efforts to attract business from overseas. We shall pursue relentlessly and vigorously all potential business at home and overseas . . ."

Cheers, almost certainly, from the Cammell Laird workers. Cheers, for sure, from their shareholders. Employment may be a tricky issue for capitalism and there may be a lot of nonsense talked about it. But the worst thing of all is that the nonsense usually persuades the workers that their interests are hand in glove with those of their employers and this delays the day when the world can take a long, cool look at itself. And come up with the right answers.

Ivan

So They Say: Imaginary Differences (1976)

The So They Say Column from the June 1976 issue of the Socialist Standard

Imaginary Differences

Cartoons have been appearing in the press suggesting that the policies of the Conservative Party have become a mystery—that they offer no alternative to the Labour Party. In an attempt to dispel this view, cartoon characters in the shape of Conservative MPs and their attendants have been hurriedly pounding tables proclaiming that there is a clear distinction between “Conservative philosophy with Socialist [Labour Party] dogma” (letter to the Daily Telegraph, 12th May 1976).

What the Conservatives had to do was point out to the country that the Labour Party was under the control of the left wing and the Michael Foots of the world and then point out that the Tories were a party who took a different view and line for the future.

Daily Telegraph, 28th April 76

If that was not a tall enough order to begin with, the Labour Party is not making things any easier for them. Maurice MacMillan (Conservative MP), attempting to “make clear our own constructive alternatives”, pointed to the basic problem as he saw it:

Conservatives must be bold enough to say that businesses and investors must be given a real incentive by allowing them additional profits from their investments.

Times, 10th May 76

While MacMillan and his fellow drones have been plucking up their courage to say such a thing, they appear to have missed Callaghan who found his nerve some days earlier:

The first thing to concentrate on is to ensure that there is sufficient incentive to provide a proper level of investment in these firms so that productive jobs can be created. That is what I would like to focus on. But I don’t believe you can force a large private sector to invest. You can lead a horse to water, but you can’t make it drink, and you have to apply the incentives necessary which compel it to drink.

Guardian, 5th May 76

Conservative philosophy or Labour Party dogma— after the froth, they bow to the profit motive.

An Acceptable Face

We have heard of the blind leading the blind. Now we have William Whitelaw, deputy leader of the Conservative Party, lecturing his cohorts on public relations. At a meeting held in a pub on 27th April he informed members of the Reform Group that at the next election Conservatives would “break from the party political tradition of making manifesto promises.” Other things were to change too—“we have to be scrupulously honest.” Good grief! What are they going to put in it? Whitelaw had an answer for that as well; they would announce “decreased public spending.” But before his audience could choke on their beer and sandwiches, he quickly pointed out that appearances could be deceptive: The Tories must not

turn into a hard-faced party. We must not be seen as the party looking all the time on the money side and not being interested in the various social problems that are certain to come up, and certain to be increased as our country is short of money. We must act with an economic head but also be seen to have a heart at the same time.

Daily Telegraph, 28th April 76

There goes the “scrupulously honest” facade. If this body politic of fair face, economic head, bulging pockets and kindly heart requires soft brain-matter, Whitelaw will no doubt become a donor.

You'll Never Walk Alone

It was hard to imagine that the announcements had not been made to the accompaniment of tambourines, the Joystrings and the Hallelujah Chorus: “We’re next for the economic miracle, says Healey” read the headline in the Daily Telegraph of 11th May.

Providing we can make this incomes policy stick to the end of the next wage round, I believe we have got the inflation problem under control. Now we must concentrate on the problem of unemployment. We want to get back to full employment within three years from now.

But "full employment” has become a loosely interpreted phrase, and before the “believers” acclaim the “miracle worker” too hastily, we draw attention to the specific statements made by Healey in the previous week.

The best we can hope for is to reduce unemployment to 3 per cent. or about 700,000 in 1979 . . . The TUC have expressed the hope that unemployment can be reduced to 600,000 in 1978. But I have already explained to them that this is too ambitious.

Guardian, 5th May 76

So the “miracle” becomes a mirage, and not a particularly distinguished one at that. The working class can take cold comfort from what Healey described as:

The tributes [which] are pouring in to the patriotism, the far-sightedness, common sense and maturity of our trade union movement as the full magnitude of this achievement sinks in.

The “achievement” of course, being the incomes policy agreement, not the aforementioned “miracle" which is only “hoped for.” Surely the TUC, who could by no stretch of the imagination be described either as far-sighted, or of mature judgement, must have noted the incongruity when Healey gushed forth:

Even the central bankers of the United States and Germany have added their tribute to the British trade union movement in the last few days — and believe me that is something.

Praise indeed, when the capitalists give tribute to the workers. Such praise is normally reserved for those occasions when members of the working class are encouraged to kill and maim one another on the battlefields.

What a Lovely Miracle

The chancellor expanded elsewhere on what he described as “the full magnitude of this achievement” —there were to be many sides to the miracle. Not only would there be the (hoped-for) 700,000 unemployed, but “The deal guaranteed that from August, wage rises in Britain would be the lowest in the world.” But how low an increase does he mean? Again we find some rather loose interpretation. An increase can usually be taken to mean an addition, but not apparently to Healey:

In fact wages will be coming down while our competitors will be going up . . . That is the best possible news for exports and employment.

Times, 11th May 76

In the light of the foregoing, and as the Chancellor is calling for “an 8.5 per cent annual increase in manufacturing output” and claims that “If we could get as much output out of our existing equipment as most of our competitors, we could increase our national income even without new investment by anything up to 50 per cent”, members of the working class would do well to consider their rôle in the “miracle.” It will be what it has always been—that of the wealth-producing class which owns nothing but the chance to work (literally) for the benefit of the owners. When workers see this division, they will have recognized exactly those whom the Labour Party represents.

Buy Me and Stop One

The ruthless examination of all aspects of social requirement from the point of view Can money be made from meeting such requirements? is one of the hallmarks of capitalist society. Marx put the view that when Socialism is established man will look back on his previous forms of society, including present-day society, and will describe them as pre-historic. We take a clipping from the London Evening Standard of 13th May which serves to underline the extent of our “civilisation.”

A price war is raging among private abortion clinics, it was claimed today. Mrs. Helene Grahame, of the Pregnancy Advisory Service, a London based charity, said the days of the get-rich quick abortionist look to be fading fast . . . Advertised prices of £50 and £60 are now quite common, against £70 to £80 a year or so ago . . . Clinics are advertising much more widely and extravagantly, and a free pregnancy-testing is being used as a come-on. All the indications are that they arc getting pretty desperate for patients — which is why they are getting into this kind of price war.

The Daily Express of 14th May reported the phenomenon in an even more matter-of-fact manner. The first line of their piece told us: “Women can now shop around for an abortion at the right price.” Hats off to capitalism: If the thing runs true to form we can next expect the equivalent of supermarkets giving special offers and Green Shield stamps.

Alan D'Arcy

Growing pains of capitalism (1996)

From the June 1996 issue of the Socialist Standard

How far the present Tory — or a future Labour — government is
 willing, or able, to spend money is a question which is at the heart
of every other issue — from education to the NHS. No government,
regardless of which economic guru it paid lip service to, has ever
 intervened to make the capitalist economy run smoothly. As even a
cursory look at its own history reveals, the idea that the Labour 
Party will succeed where every other party in the history of
 capitalism has failed is an insult to the intelligence of the working 
class on whose votes the fate of the Labour Party's
 bid for power depends.

Once upon a time governments believed that they could intervene in the economy to ensure its smooth operation without economic crises, slumps and unemployment. The seminal 1944 White Paper on Employment, issued under the National government of Churchill and Attlee, affirmed that governments should intervene to maintain adequate levels of employment and growth in the post-war period. It was inspired by the doctrines of John Maynard Keynes, the economist who claimed that capitalism could operate without the existence of slumps given correct government intervention and appropriate state expenditure. The Keynesian doctrine led the labour Party to famously state that “if bad trade and general unemployment threatens, this means that total purchasing power has fallen too low. Therefore we should at once increase expenditure, both on consumption and on development, i.e. on both consumer goods and capital goods. We should give people more money and not less, to spend” (Full Employment and Financial Policy). The view that full employment and economic growth were the overriding considerations of government was repeated in the Radcliffe Report of 1959 and publicly by ministers. Today, in the wake of the return of seemingly permanent mass unemployment and severe economic crises, no major political party in Britain (or elsewhere for that matter) still holds to what was termed the‘‘past-war consensus” on government spending, growth and employment.

It was Jim Callaghan, when Prime Minister in the late 1970s, who told the Labour Party conference that the option of governments spending their way out of an economic crisis ‘‘no longer existed” after years of Keynesian intervention failed to stop the reappearance of slump. This was a view enthusiastically endorsed by Mrs Thatcher and her successor, whose aim has been to reduce government expenditure as a way of assisting the economy, instead of selectively increasing it as a stimulus to trade. The current government aim is to reduce government spending to under 40 percent of GNP, a target which they do not look like achieving in the near future or anything like it. In actual fact, despite protestation to the contrary over the last twenty years or so, government spending has been rising as rapidly as ever.

That this is so is not because of any systematic attempt to boost spending to avert unemployment and economic disaster on Keynesian lines, but is precisely because these factors (unemployment, etc.) have been in operation due to the normal workings of the capitalist economy, and the governments of the world have all but given up trying to do anything about them. No government or major party pledges itself to a swift return to what used to be called "full employment" and none is likely to because they realise, implicitly if not explicitly, that the capitalist trade cycle is beyond their control. Furthermore, government expenditure has been rising fast without any conscious reformist action by governments to avert the problems. All governments now do is attempt to clean up the mess left by innumerable market failures and this alone costs them an increasing amount.

Spend, spend, spend

Economics correspondent David Smith has claimed that “public spending, once lifted, is virtually impossible to lower” (Sunday Times, 24 March) and this seems to be confirmed by recent history of the ongoing costs of the inefficient capitalist system and the failures of the market economy keep building up. During the last Labour government, for instance, real government spending rose by 9.4 percent, which was matched by a 9.4 percent rise during the first Thatcher parliament, excluding proceeds from privatisations which are a one-off bonus. Thatcher’s second term, aided by signs of economic recovery, saw the increase in expenditure slow to 7 percent. Between the 1987 General Election and 1992 the increase slowed further to 5.9 percent, but since then with the return of slump government spending has risen by a colossal 11.3 percent in real terms, the biggest rise since the onset of economic crisis under Ted Heath in the early 1970s. The 1992 Conservative Election Manifesto claimed “Our policy is . . . to reduce the share of national income taken by the public sector”, but this has not happened.

This increase in state expenditure in recent decades has caused a massive burden to be placed on the surplus value extracted by the capitalists from the workers, which ,as we have explained on many previous occasions, is in the last analysis the sole source of state finance, whether through taxation or borrowing. As everyone should by now know, the tax burden has continued to rise under the Conservative and government indebtedness is heavy, the Public Sector Borrowing Requirement being £32 billion at present even though the slump “officially” ended three years ago (this in turn is one of the factors behind the still historically high real rates of interest being charged in the financial system).

The only conceivable way this huge burden of government expenditure is going to be cut back, easing the pressure on surplus value, is for there to be an unusually strong period of economic growth. This what all the parties — especially Labour — are banking on after the next general election. But is it a realistic prospect?

Road to nowhere

It seems that even many of the capitalists and their representatives doubt this. A recent report from the Directorate-General of Economic and Social Affairs of the European Commission is a good example. It suggests that even on an optimistic basis, a growth rate of 3.3 percent annually across the European Union is needed if there is to be “a serious contribution” to reducing unemployment and reliance on state benefits, the biggest factor in state expenditure rises. But over the past five years the growth rate has been only 1.6 percent. The average annual growth rate since 1973 has actually been little more than 2 percent, rising in booms and falling in slumps, with a general downward trend since the previous period.

The plans of the European Union for “an optimal growth path” were last met at times during the period 1950-73 after which there was a break in growth and labour productivity, rises in real interest rates and soaring unemployment as the crisis began to bite. And yet the report accounts for this by suggesting that “in secular terms the 1950-60 period was an exceptionally favourable period of reconstruction and catching up in Europe and was thus not likely to last forever . . . " That the EU growth and employment plans were last met during, and in the aftermath of, an “exceptional period” characterised by post-war reconstruction really says all there needs to be said on the matter.

The European Union still intends, however, to implement measures at the bloc level to attract employment and stimulate growth. These include reforms in the hours of working (notoriously difficult to implement and likely to be successfully resisted for their own good reasons by the capitalist class), minor changes in tax laws relating to the labour supply, and what the Commission calls “the widening of wage-cost distribution”, encouraging workers to take lower-paid jobs, if necessary subsidising them do so. This latter proposal would, as the report admits, “have a high budget cost” and could not be guaranteed to solve the problem. Interestingly, the report also adds that any measures taken should also act “to safeguard the existing human capital of the unemployed in order to prevent social exclusion and to maintain social cohesion”.

Afraid of the consequences should they not, it is quite clear that the EU, its member states and capitalist political parties are incapable of restoring the levels of growth characterised by the post-war reconstruction. The situation in Britain is typical. Labour and the Conservatives are vacuous political entities now even by reformist standards. In the face of mass unemployment, burgeoning debt, rising taxation, expenditure and burdens on profit, they have nowhere to run. They have no solutions other than to pray that the miracle of economic growth may somehow descend from the heavens to save them. All the indications, even from their own economists, is that it is a pious hope indeed barring capitalism’s own particular solution, the barbarism of world war and “reconstruction”.

Dave Perrin