Cooking the Books: Manchesterism (2026)

The Cooking The Books column from the August 2026 issue of the Socialist Standard

Until Andy Burnham, as Mayor of Greater Manchester, re-coined the word, ‘Manchesterism’ meant the economic doctrine of the Manchester and district cotton mill owners who favoured a policy of complete tariff-free trade and opposed state interference in industry, as expressed by Richard Cobden, one of the leaders of the Anti-Corn Law League of the 1840s. In England they were known as the Manchester School. On the continent their doctrine was called manchesterisme in French and Manchesterismus in German. It wasn’t that popular there as the local factory owners realised what was behind it — that their British rivals wanted wider access to continental markets for their cheaper goods.

Engels lived and worked in Manchester for over twenty years and was well aware of the views of the Manchester School, if only from socialising with them. Writing in English he used ‘Manchester School’, but in German he used the word ‘Manchesterismus’ as in a note he wrote about a May Day meeting in London in 1890 where he refers to new trade union members wanting ‘no more to do with the Manchesterism of the old Trade Unions’ (‘4 May’, Marx-Engels Collected Works, Volume 27).

When he re-coined the term, Burnham may not have been aware of its previous use and meaning, but others were and asked him if there was any connection. PoliticsHome (15 April) recorded:

‘Asked whether he identifies more with Richard Cobden or Friedrich Engels, he chooses Cobden, the Mancunian Radical and free-trader.’

There is not in fact that much in common between Burnham’s and Cobden’s Manchesterism. Cobden was a free marketeer while Burnham has defined it as ‘business-friendly socialism’. It is, however, revealing that when asked to choose between a capitalist free-marketeer and an opponent of capitalism in all its forms, Burnham identified more with the former.

What Cobden and Burnham have in common is that they both support capitalism. ‘Business-friendly socialism’ is an oxymoron but if you understand ‘socialism’ to mean Labourism then it becomes, like a ‘round circle’, a pleonasm. Starmer and Reeves expressed it more directly when they said that Labour was ‘the party of business’.

Insofar as Burnham’s Manchesterism is more than a populist slogan which sets workers in the North against workers in London and the South East, it seems to mean giving regional authorities more freedom to raise money locally and to attract capitalist investment to their region. In other words, a mere change in the political superstructure in the hope that it will stimulate ‘growth’. But what drives growth is the pursuit, and accumulation as new capital, of profits. If the prospect of a profit is not good, then investment won’t take place, whatever the political arrangements.

But what sort of investment? These days British capitalism lives not so much by producing surplus value directly in industry as by capturing, through selling financial and legal services, surplus value produced elsewhere in the world. Under Burnham, Manchester has been able to divert some of this from London to Manchester, but not everywhere will be able to do this.

The other type of capitalist investment that regional authorities can seek is ‘property development’. In fact the two businesspeople that the Times’s Economics Editor, Meerhen Khan, interviewed (25 June) who had found Burnham ‘business friendly’ were both in the property business. One said that ‘all the evidence suggests that he’s incredibly pro-business’ and that ‘his comments on the excesses of neo-liberalism were also a critique of its social impact on communities in post-industrial cities like Manchester rather than an outright rejection of market capitalism’.

So says a Labour-friendly capitalist.

Editorial: The Budget (1948)

Editorial from the May 1948 issue of the Socialist Standard

At Budget time there is always a certain amount of excitement among the workers, rather like that about the result of the Oxford and Cambridge boat race—and with about as much justification. Always there is that mixture of hopes and fears—will beer and cigarettes go down? Will overtime be freed from income tax? Will purchase tax be reduced? Sir Stafford Cripps managed to please and displease nearly everyone, a bit on here, a bit off there. Beer and tobacco up a little, income tax down a little, purchase tax up on some things and down on others. The other principal features of the Budget were the capital levy which will raise about £100 millions from 140,000 of the very rich, the reiteration of the policy of freezing wages at their present level except where special factors justify an increase, and a refusal to freeze profits or to tax them more heavily. On this last point Cripps contented himself with a warning that if companies do increase their dividends to shareholders this year he will consider imposing a limit next year.

Speaking for the. Conservative opposition, Sir John Anderson, a former Chancellor of the Exchequer, criticised certain features of the Budget, particularly the special levy, but otherwise be welcomed Sir Stafford Cripps’ “realistic and honest approach.” The Manchester Guardian (April 7th, 1948) praised it as “a strong, honest, and radical Budget,” and remarked of the capital levy that it is “in fact a stiff individual profits tax winch falls where it should, on the large personal capital.” That newspaper’s City Editor (April 7th, 1948) went further and showed that it is not even very stiff:–

”The levy on capital will not be severe even for those holding very large amounts of capital. Assuming an investment yield of 5 per cent. the tax would amount to 2½ per cent. on a capital of over £100.000.”

We may sum up by saying that if the workers find that the Budget makes little difference to their position so do the capitalists, and this is true of all Budgets no matter whether the Government is Conservative, or Labour. It explains why the Socialist refuses to get excited about Budget prospects.

What the working class get out of the capitalist system is the wage or salary they receive for selling their energies to the employers (including the Government and the administrative Boards which are Ihe employers in nationalised undertakings), and wages follow fairly closely the rises and falls of the cost of living. This is not an automatic process of adjustment, but takes place through the pressure and counter pressure exerted by the employing class and the workers in strikes and lockouts. When prices are falling unemployment is usually heavy enough to enable the employers to force down wages. When unemployment is at a very low point, as at present, it is easier for the workers to struggle for higher wages and thus try to maintain their standard of living in face of recently rising prices. Those who urge the workers not to take advantage of the present low unemployment to press for higher wages may discover at no very distant date that the opportunity will have passed. Unemployment will be the order of the day; or, as the City Editor of the News Chronicle puts it (April 10th, 1948), ”with the country probably over the inflationary hump and perhaps set on the, road to deflation with the help of the recent Budget.” Mr. Arthur Horner, Communist secretary of the Miners’ Union, apparently is among the short-sighted. According to the Daily Worker (April 6th, 1948) he said at Leicester, “The miners had not taken full advantage of the law of supply and demand of labour. If they had wages would have been much higher.”

When Cabinet spokesmen oppose higher wages they do so because their immediate and predominant responsibility, by virtue of being the Government, is to keep the capitalist system functioning in the only way that capitalism can function, that is by enabling the capitalists to make profits. The Labour Party grew up on the mistaken belief that under Labour Government there would be great possibilities to raise wages by cutting into profits. Rather late in the day some of them, certainly Sir Stafford Cripps, have come up against the, harsh truth that those who administer the capitalist system have very limited freedom of action—on all important issues they can depart little from the practice of their Conservative predecessors. Official figures on the proportion of the national income which goes as salaries, wages and rent and profits, etc., bring this out clearly. In 1938 wages accounted for 39 per cent., salaries for 24 per cent., and profits, rent and interest for 37 per cent. In 1947 wages accounted for 44 per cent., salaries 20 per cent., and rent, profits, etc., 36 per cent. (See Economist, April 10th, 1948, p. 596.) In each case the figures are after meeting income tax.) It will be observed that the percentage going to wages and salaries together, i.e., 63 per cent. in 1938 and 64 per cent. in 1947 has hardly changed at all, likewise the percentage to rent, profit, etc.—37 per cent. in 1938 and 36 per cent. in 1947.

This is the dilemma of all Labour Governments, but no such dilemma faces Socialists. Socialism is not a scheme for redistributing wealth and income inside capitalism, but a system of society to replace the capitalist system

Labour, Tory . . . Same Old Story (1994)

From the November 1994 issue of the Socialist Standard

Can you spot the difference? Which is the party of Law and Order, Family Values, Prudent Public Spending, the Market Economy: Labour or the Tories? Such is the public confusion over this that even the Tories have thought of exploiting it:

“Kenneth Clarke, the Chancellor, and other key members of the Cabinet favoured attacking Mr Blair as a pale copy of the Tory party. This is called ‘the Coke option’ by researchers who say the Tories represent ‘the real thing'” (Independent, 26 July).

Since Blair became Leader in July Labour’s strategy has been to criticise the Tories on their terms –as incompetent managers of the economy and unable to implement tough policies against criminals, single mothers and other scroungers. Guided by their marketing advisers, Labour politicians don’t attack the Tories’ policies but only the incompetent and ineffective way in which they are carried out. Vote for us, Blair is saying, and we’ll carry out these policies better than the Tories. The aim is to attract enough ex-Tory voters for him to be able to enter Number Ten as Britain’s next prime minister.

Labour being the vote-catching party it always has been, it had to come to this sooner or later: the end of Labour as a party of radical reform of capitalism. Labour never was a socialist party but it did once see its role as trying to shift the balance of power and wealth under capitalism in favour of working people. They never did do this of course nor, given the nature of capitalism, could they have done so. But this was what they said and this at least showed that they thought capitalism was far from being the acceptable economic system they now think it is.

Incredible as it might seem today, Denis (now Lord, of course) Healey told a cheering Labour Conference in 1973 that he was going to squeeze the rich till the pips squeaked:

“Our job is to get power, and we join battle armed with the most radical and comprehensive programme we have had since 1945. Its aim is honestly stated, to bring about a fundamental and irreversible shift in the balance of power and wealth in favour of working people and their families . . . We are going to introduce a tax on wealth. We are going to turn the estate duty into a real tax… I warn you, there are going to be howls of anguish from the 80,000 rich people. “

Labour got to power, but it was working people who ended up getting squeezed till the pips squeaked. The result was a massive wave of strikes in the public sector over the winter of 1978/9 – and the election of the Tories under Thatcher pledged, as she openly boasted, to undo everything Labour claimed to champion. Which, as demanded by capitalism’s worsened economic conditions, she did and, spiteful woman that she was, with glee. State industries were privatised, council houses sold off, local services axed, welfare payments slashed and the health service subjected to market forces.

Power for what?

Today all that Labour has retained of Healey’s rhetoric are the first six words: “our job is to get power”. Since radical phrases, indeed any definite policies, are now perceived to be a drag on this drive to get power they have been ruthlessly abandoned. Just attack the Tories as incompetent and clapped out, the marketing team advise, and, anxious for power, the Labour politicians oblige.

But power for what? In the end, since they are only projecting themselves as better and more competent managers of the status quo, it amounts to power for its own sake. The Labour leaders want power because they are professional politicians and the ambition of every professional politician is to become a government minister.

Is this being too cynical? Can they be that bad? Perhaps not, but it doesn’t really matter since even if they were sincere (and, on the law of averages, some of them must be) they still wouldn’t be able to make the capitalist market economy work other than as a system that puts profits first and so as a problem-ridden system incapable of meeting human needs properly.

In so far as they might have a theory of what they would do if they get power it will be no different from that behind the failed policies of ail previous Labour governments : trying to redistribute profits towards socially desirable projects such as a better health service, better education and better housing.

This involves accepting the profit system – not a problem of course for Blair and company – and allowing firms to make the maximum profits, justified on the grounds that this also supposedly maximises the resources available for social spending.

The trouble is this makes what a reformist government can do depend on the profitability of capitalist industry. As Richard Crossman, a Labour politician who was to become a senior Cabinet Minister in the 1964 Wilson Labour government, wrote following Labour’s defeat in the 1959 election on such a classic reformist programme:

“A Socialist Government, it is often argued, would be able to finance the huge extension of welfare, education and other pubic services by encouraging a much faster rate of development in the private sector of industry and then taxing away a sufficient amount of the profits. This was the policy put forward by the Labour Party at the last election and in the short run any Labour Government would to attempt it. But experience should have taught us that the run might be very short indeed. In the Affluent Society no Government is able to give orders to Big Business. After one budget a Labour Chancellor who tried to squeeze private industry too hard would soon discover that he was not master in his own house and that there is a relatively low level above which taxation rates, whether on the individual or the company, are only raised at the cost of provoking tax evasion and avoidance so widespread that revenue is actually reduced. If the motive of your economy is the profit-making of large-scale modem private enterprise, a Labour Government must be prepared to allow very large profits indeed and to admit that the number of golden eggs he can remove is extremely limited. ” (Labour in the Affluent Society, 1960)

His answer was that Labour should therefore seek to establish an enlarged state sector so as to give a Labour government more room to manoeuvre. The present Labour leaders would recoil in horror at such as suggestion, not that anyway it would have worked to protect a Labour government from the economic pressures of capitalism to keep costs down and profits up. Nor that the Labour governments of which Crossman was subsequently a member made any real attempt to do it.

Profits first

In fact Labour ministers ended up making speeches accepting that profits should be encouraged. Here is how one of them (Harold Lever who, like Healey was later ennobled) put it:

“Labour’s economic plans are not in any way geared to more nationalisation; they are directed towards increased production on the basis of the continued existence of a large private sector. Within the terms of the profit system it is not possible, in the long run, to achieve sustained increases in output without an adequate flow of profit to promote and finance them. The Labour leadership know as well as any businessman that an engine which runs on profit cannot be made to move faster without extra fuel.” (Observer, 3 April 1966).

This could be Blair or Gordon Brown or any of the other Labour leaders speaking and well sums up what will be the only economic policy that a future Labour government will be able to pursue. Profits First, that’s the economic law of the capitalist system, which all governments of capitalism have to accept and apply.

If you accept the profit system, then you have to accept that profits have to be made and all that this implies, including opposing strikes, restraining wages and keeping taxes on Big Business low. Labour does accept the profit system, much more openly than they have done in the past, to the extent that today they are even prepared to advocate these things while still in opposition.

Nobody who is against the profit system has any place in Tony Blair’s bland new Labour Party. If you want more Law and Order, more Family Values, more blurred nothingness you might as well join Labour as the Tories or Liberals. But if you are a Socialist and want to get rid of the profit system you should be in a democratically-organised socialist party campaigning for socialism and nothing else.

Adam Buick

Cooking the Books: The best laid schemes (2026)

The Cooking the Books column from the January 2026 issue of the Socialist Standard

Before the budget on 26 November speculation was rife as to what might be in it. In opposition Rachel Reeves, as Shadow Chancellor, had promised that the priority of a future Labour government would be growth, growth, growth.

But what is ‘growth’? She seems to mean a growth in Gross Domestic Product which is a measure of the inflation-adjusted price of all the goods and services produced in a year. The trouble is that this is not something that a government can bring about. As she herself pointed out in her budget speech, ‘private investment is the lifeblood of economic growth’. So, her plan is to create the best conditions for private investment for profit, one of which in her view is government investment in infrastructure projects. This, however, has to be paid for. As she doesn’t want to rely too much on borrowing she has had to increase taxes. Not that increased government investment will necessarily encourage more private investment; it might for a short while but in the end the only encouragement is the prospect of making a profit.

Capitalism is a system of production for profit where the aim is not growth as such but making profits which, when reinvested, bring about an increase in the production of wealth. It is a result of what Marx called ‘the accumulation of capital’.

Marx himself pointed out that, when it occurs, the more rapid the accumulation of capital, the more jobs there are and the higher are wages due to employers competing for workers. These days, it would also mean an increase in tax income for governments. Reeves seemed to be making the same point when she described ‘economic growth’ as ‘the best means to improve wages, create jobs, and support public services’.

But there is a difference. Marx never expected the accumulation of capital to be continuously onwards and upwards. He saw the process of capital accumulation as ‘a series of periods of moderate activity, prosperity, over-production, crisis and stagnation’ (Capital, vol 1, ch. 15, section 7). Despite all the evidence to the contrary, Reeves believes — and not only her but all the parties that aspire to manage capitalism — that, if the government gets it right, there can be a permanent boom.

A government might be lucky and be in office during the ‘prosperity’ phase of the cycle but not even the government’s own advisers at the Office for Budgetary Responsibility are predicting that. They are currently estimating that ‘growth’ over the next four or five years will be only 1.5 percent a year. Which is slow by previous capitalist standards and won’t bring about many more jobs or higher wages or enough tax revenue to honour Labour’s promises to improve public services.

In any event, the OBR forecasts are little more than a guess. The fact is that economic forecasts, especially over a longer period, are hardly worth the paper they are printed on as nobody can foretell how the capitalist economy will move. If they turn out to be correct, it will have been a lucky guess.

What will happen in practice over the next few years is that the government will merely react to whatever the workings of capitalism present it with. They will just be muddling through, or, to use the nautical language governments do when they seek to explain their failure by having to ‘face strong headwinds’ or being ‘blown off course’, they will just be navigating by sight.

Letter: Class interests (1977)

Letter to the Editors from the December 1977 issue of the Socialist Standard

Class interests

The party’s Seventh Principle states that “political parties are but the expression of class interests". Accepting that the Conservative, Liberal and Labour Parties all look after the interests of Capitalism, which particular section of the capitalist class benefits from which party?

Who does the Labour Party represent? Stockbrokers seem to believe in it, as the F.T. Share Index shows, but which businesses are actually supporting it. by donations etc? Could you name some businesses and types of business which stand to benefit from Labour policies as opposed to those of the Tories?

The Seventh Principle stands as a generalisation. There is no generalisation worthy of the name which does not apply in specific instances. Therefore, would you give some details?

F. S.

Newcastle

Reply:

All sections of the capitalist class, industrialists, mine-owners, bankers, ship-owners, newspaper proprietors, manufacturers and property-owners, and building consortiums, benefit from all the major political parties. After all, the political parties govern in their interests. There is no special group of capitalists who are preferred to others, but it is common knowledge that MPs of all parties lobby for particular business interests, and act as public relations men and consultants to large companies and industrial organizations. Historically, the Tory Party represented the interests of ship-owners, newspaper proprietors, bankers, mine-owners and landlords. The Liberal Party represented industrialists, manufacturers and small business men. The Labour Party look over the Liberal Party’s policy but was originally formed to represent trade-union interests. These distinctions no longer exist, and capitalists of all kinds will support any political group irrespective of its ideology, as long as it can keep order and advance their interests. Some sections, such as the landlords, claim that Labour governments legislate to their disadvantage, and cite the Rent Acts as an example. However, the Rent Acts were introduced by a Conservative government in 1915, and the Tories have extended these against the landlord at various times.

Without any doubt the Tory Party receives large donations from big manufacturers like Tate & Lyle and many others. McAlpine, the millionaire road-builder, is their Chairman. These donations used to be made in secret but now have to be declared on the firm’s accounts, and many rich individuals make donations through the “Old Boy” network. How else could they maintain the expensive electoral machinery, full-time agents, and professional propagandists and large head office premises. It is not possible to give specific details as these donations are not publicly announced or recorded.

Another type of support given by big business to the Tory Party is in the type of campaigns against certain Labour Party measures. In the recent campaign by the banks against nationalisation, hundreds of thousands of pounds were spent, and undoubtedly some of this money would have found its way into the Tory Party. The same thing would have applied in the case of the campaign run by a federation of ship-repairing interests against the nationalization of the aircraft and ship-repairing industries.

The Labour Party also has rich supporters, including a number of millionaires: the late Eric Miller, who hobnobbed with Harold Wilson, Jimmy Goldsmith, Cotton the Birmingham property millionaire, Charles Forte and many others. These rich people do not give their support unless they receive something in return; whether this be a subsidy, honours, export credit, a licence, a Government contract, or some other form of Government assistance will depend on the particular circumstances. The Labour Party receives the bulk of its funds from trade unions through the Political Levy, and the sponsorship of some of its MP’s, but it is a capitalist party which believes it can run capitalism in the interests of the working class. Occasionally it will make attacks on certain rich people or luxury industries, and the worst excesses of capitalism, but it will not attack the system.

The main issue between Tory and Labour government is on the question of state control of industry and nationalization. Here is a classic example of the interests of the capitalist class being represented in different ways, and this is precisely what Clause 7 refers to. The Tories want to cut down expensive government, reduce taxation, and state intervention. To the extent to which the state intervenes bureaucracy grows and inhibits the growth of capital. This is the main bone of contention. It would be impossible for governments to show partiality to certain sections of the capitalist class over a long period, as they are all watching one another and will take good care that nobody gains an advantage. This is where their parliamentary hacks come in. The fact that a party like the Labour Party is predominantly composed of workers does not prevent it from acting in the interests of capitalism, for the simple reason that the workers support capitalism.

Editors.

Editorial: Labourism Proposes – Capitalism Disposes (1946)

Editorial from the November 1946 issue of the Socialist Standard

The members of the Socialist Party of Great Britain are not among those short-sighted electors who, having helped to elect a Labour Government to power, are now turning in astonished resentment to rend their idol of a year ago. We never had any illusions about Labour government.

Socialism cannot be achieved until there is a majority of socialists and they gain control of the machinery of government for the purpose of abolishing capitalism. Until then, notwithstanding all the efforts of reformers to improve the existing system and administer it differently, the evils of class society, based on the exploitation of the workers, will remain to throttle the progress of the human race. The Labour Party rejected this conception and holds that a Labour government, backed by non-Socialist voters, can administer capitalism on non-capitalist principles and mould it gradually so that in the ultimate a different system will emerge. Outlining his Party’s point of view, Mr. Attlee wrote in "The Labour Party in Perspective" (Gollancz, 1937, p. 138) : “Some future historian will not be able to point to a particular date as that on which the Socialist State was established . . .” That is the Labour Party’s view, but it is wrong. Socialist society is not being gradually introduced by Labour government; it will start when, and only when, a socialist working class comes to power. That will be the end of an epoch and the beginning of a new one and later historians will not be in any doubt when it happened.

Sharing Mr. Attlee’s belief, millions of workers, who last year gloried in the Labour electoral triumph, thought that at last they would have a government able to control, improve and gradually to eliminate the capitalist system of society. Never did anyone cherish a more baseless illusion. Having no mandate to introduce Socialism, Mr. Attlee and his Cabinet colleagues have no alternative, even if they desired one, but to administer capitalism. They are riding the tiger and have to go where it takes them.

In the book quoted above Mr. Attlee said “The Labour Party is, of course, opposed to imperialism  . . .” (p.230); but opposed or not, the Labour Government is committed to the maintenance of the British Colonial Empire, to the policy of protecting British “spheres of influence,” to the policy of using military force to keep control over strategic bases, trade routes and foreign territories where vital raw materials are found. British Forces prop up the Greek Monarchy, stand in Egypt, Palestine, Iraq and elsewhere, and British capitalist interests clash in all quarters of the world with the like-minded imperialisms of Russia, U.S.A. and other powers. The Labour Party in opposition dreamed dreams of world brotherhood, but the Labour Government in power must willy-nilly pursue a policy suited to the needs of British capitalism. Thrusting a vastly increased flood of British exports into the markets of the world may look like a friendly act to the British exporter, but it has a more sinister aspect to the rival powers trying to keep or to conquer the same markets for their own exports.

Linked up with the export drive is the Labour Government’s pledge to provide “full employment.” Those who have eyes to see can already glimpse the shape of things to come. More and more workers are being employed on producing goods for export, and we are told there is an unlimited demand for these goods. But what will happen when capitalism lurches into its next inevitable crisis of “over-production ‘? Already we have seen the writing on the wall in the shape of the stock exchange depression in U.S.A. in September. The City editors of the London and New York papers were all at sixes and sevens about the immediate cause and likely duration of the depression but on one thing they nearly all agreed – that the crisis of “over-production ” is bound to come. A typical comment was that of the New York Correspondent of the Observer (8/9/46) —

“Americans generally . . . take it for granted that there will eventually be a crash of some kind to offset the present boom. Their hope is that the crash will be brief …”

Another appeared in the Daily Express (23/9/46) : 

“The Wall Street slump marks the end of the first post-war boom just as the similar break of November, 1919, signalled the world trade depression of 1920-21. That is the view of some of the best brains in the City.”

A world trade crisis is bound to come, and the more the Labour Government succeeds in increasing the dependence of British industry on selling goods abroad, the more certain it will be that the full effect of the crisis will be felt here immediately.

Another example of the way Labour Party policy has swerved away from its early preachings is in the forms taken by nationalisation. A book that was once very popular in Labour circles was "The Case for Socialism", by Mr. Fred Henderson. In it he frankly, faced up to the fact that Socialism involves dispossessing the capitalist class and that it is mere self-deception to suppose that you can both make over their property in the means of production to the community and at the same time give them full compensation for it. “If the nation gave them compensation, in the sense of giving them an equivalent for what it is proposed to take from them, we should fail in our purpose” (p. 20-21). A later, modified view, Mr. Attlee’s, for example, in his "Labour Party in Perspective", was that it would be unfair to expropriate the capitalists gradually, industry by industry, because the first to fall would have a legitimate grievance; also it would be better tactics to give them all “reasonable and just compensation” and then rely on taxation to eliminate the gulf between the capitalist class and the working class.

In practice the capitalists in the nationalised industries are being given what even Cabinet Ministers call “generous” compensation and at the same time Mr. Dalton’s first budget did not increase, but decreased taxation on companies in the form of the Excess Profits Tax. Taxing the rich out of existence may look all right in an election programme, but capitalism will only function if the capitalist has confidence in his ability to make a profit, so the Labour Government has had to safeguard profits and warn the workers against pressing too much for higher wages The rich are still with us in full force and nothing the Labour Government will do will alter it. Mr. Attlee may say “The abolition of classes is fundamental to the Socialist conception of society ” (p. 145) just as the Conservative Party can now give lip service to the same idea – “Mr. Churchill was telling them that England was moving towards a classless society and that the Conservative Party should not just accept the fact but actively promote this historic change” (Mr. D. Eccles, Conservative M.P., Times, 14/10/46) – but capitalism and classes are here to stay until Socialism ends them.

Also on nationalisation of industries, it used to be a Labour Party demand that the workers should be in control. Mr. Attlee ("Socialism for Trade Unionists", 1922) declared that “the general direction . . . will be in the hands of representatives of the workers in the industry in consultation with representatives of the users of the service.” Another Labour writer, Mr. E. E. Hunter, particularly warned against “the danger of national ownership being given over to committees of business experts.” “Democratic control,” he said, was an “essential part of any ideal scheme of nationalisation” ("Socialism at Work", I.L.P., 1921)

Nowhere in the nationalisation schemes now being put into operation will any vestige of these allegedly essential principles be found — they are incompatible with the functioning of capitalism and have had to go.

So one by one the Labour Party’s well-intentioned but ill-conceived schemes for bettering the capitalist system are sacrificed by the Labour Government in office. It could not be otherwise. The idea was that on taking office a Labour Government goes forward with the work of undermining capitalism and encroaching on the powers and wealth of the capitalists. The reality is that on the day a Labour Government takes office to administer capitalism it is forced to turn about arid begin the retreat from its beliefs so that capitalism may be kept running. The Labour voters believe that the Labour Government is in command of the situation. In truth — and doubtless by now even the most obtuse Labour minister begins to realise it — capitalism has the Labour Government in an iron grip. The Labour Government hoped to serve two masters, what they call the policy of serving the interests of all sections of the community. As time goes on and the working class become restive about the non-appearing fruits of labourism the Government will find itself more and more divorced from the workers and from its own pre-election promises.

Labour's failure (1986)

From the September 1986 issue of the Socialist Standard

The Labour Party assert that what makes them different from the Tories is their belief in government-directed planning for all aspects of production — which industries shall be encouraged to expand and which to contract and how much all of them shall produce. The aim of such planning is to secure maximum total production; wages as high as possible and. of course, "full employment". On the other hand, the Tories would leave it all to market forces with the managers of industries making their own decisions about how to react to market changes in demand. For the Tories, government intervention would be restricted to promoting competition, as the way to reduce costs and prices and enable British industry to be competitive in world markets.

The Labour Party's ideas were embodied in The National Plan, a volume of nearly 500 pages, adopted as official policy by the Wilson Labour government in 1965. The ineffectiveness of Tory policy has been shown by, for example, the increase from 1⅓ million when they entered office in 1979 to 3½ million seven years later. One of the factors in the increase in unemployment has been the long-term decline of British manufacturing industry. Some of present unemployment is due to world recession, the rest is due to the shrinkage of manufacture. In 1900 British exports of manufactured goods represented 33 per cent of the world total of such exports. In 1965 it was down to 14 per cent and is now about seven per cent. On balance Britain is now an importer of manufactures. It was noted in the 1965 National Plan that the British share which was a quarter of the world total in 1950. had declined by 1962 to less than one sixth. The extent of the decline can be seen in a comparison between Britain. Germany and France. In 1951 British total production was equal to that of Germany and France combined. In 1985 German production was three times what it was in Britain and French production nearly double that in Britain.

The problem had been considered in 1931 by the MacMillan Committee on Finance and Industry. The committee accepted that the decline had taken place but took comfort in the fact that British exports of manufactures were still the largest of any country in the world and that British wage levels were the highest in the world except the USA. British wage levels are now the lowest in Europe except for Italy and are far below those in the USA. Japan and many other countries. The MacMillan Committee also pointed out that. "The USA is unable to compete with us in world markets in our principal staple exports such as coal or textiles and many iron and steel products".

There are now many countries which can undersell British products in all these fields. Textile exports have been drastically reduced, coal can now be imported at prices below those of British coal and the exports of British coal, once enormous, have reduced almost to vanishing point. The MacMillan Committee were complacent about the future. They took the view that "the shortcomings in this country in technical efficiency" were exaggerated, though they also recognised that the high level of unemployment in Britain (1,290,000 in 1928, compared with 432,000 in 1913) had already come into existence before the depression which began in 1929. In the depression itself it rose to 23 per cent. not far short of double what it is in 1986.

The Labour Party's justification for the 1965 plan was that 13 years of Tory rule had made the problems of British industry much worse. A Labour Party pamphlet summarising the plan had this:

In 1964 the crisis was reached: the Balance of Payments deficit was about £756 million — the largest in Britain's peace-time history. Years of stagnation had taken their toll. Once more an emergency squeeze was needed; but this could not be the final remedy. This time we could not be content with the old "stop-go" cycle. A new plan of action was needed

(Target 1970)

The plan was drawn up after consultation with the trade unions, employers' organisations and big employers, who were asked what expansion of production was possible in the five years to 1970. The plan itself settled on a 25 per cent increase in total output, with a 20 per cent increase in wages. It planned to avoid inflation: prices were to remain stable. It included particular forecasts such as raising the annual rate of housebuilding to 500,000 a year. A remarkable feature of the plan was its assumption that unemployment was not a problem but that there was an absolute shortage of workers. The plan foresaw that 800,000 additional workers would be needed by 1970, 400,000 of which would come from the increase of population. The remaining deficiency of 400,000 workers would have to be met, as much as possible, by increasing the output of the workforce.

This showed an astonishing, but typical, failure of the Labour Party to understand capitalism. In effect it assumed that all that had to be done was to increase output and that the real problem, of selling the increased output at a profit, would look after itself. In particular it showed no awareness that unemployment in this country, after the abnormally low rates of early post-war years, was already on a long-term upward trend. In the event production increased between 1965 and 1970. by about half the planned 25 per cent forecast and the actual increase was less than the increase that had taken place in the previous five years under the Tories. Only half the 500,000 houses a year were built. The plan failed entirely to keep prices stable. They went up by 31 per cent and wages, after discounting the rise of prices, rose by about two-thirds of the planned 20 per cent. And contrary to the belief of the planners that there would still be a 200,000 shortage of workers, it was unemployment which went up by 200,000. from 376,000 to 579,000.

The plan accepted that there would be some industries in which more workers would find jobs and others in which the number of jobs would fall. They were right about an increase in the number of jobs in the Health Service, education and insurance, banking and finance but they got it badly wrong about manufacturing industries. Halting the decline of manufacture was one of their main concerns and they planned an increase in the number of jobs by 292,000. Instead the number of jobs in manufacture fell by 260,000. The plan had no effect at all in increasing total production but some boards of directors of companies, including some in the manufacturing industries, were encouraged by it to step up their output. What happened in manufacture was that profits, which had been steadily failing since 1951, fell further during the five years of the plan.

The method of preparing the plan had been to ask companies to forecast what types and designs of products they would be turning out in five years' time and in what quantities. Some companies regarded the whole thing as being unrealistic to the point of farce. What types and what quantities will be produced in five years' time depends on what demand there will be in the market, something no company can possibly know in the inherently unstable world of capitalism. How many of the many tens of thousands of companies which have gone bankrupt in the depression since 1979 could see it five years in advance?

The plan accepted that some industries were in decline and would need fewer workers. Among the industries in which jobs would decline were agriculture, coal mining and transport, the planned number of redundancies being 142,000, 179,000 and 99,000 respectively. Based on their assumption that there was an overall shortage of workers, the plan described redundancies as "releasing” workers for employment elsewhere. No doubt many of the redundant workers did find other jobs for a time at least. To ease the transfer, the Labour government passed the 1965 Redundancy Payments Act. Of particular interest is the coal industry One of the factors expected to reduce the number of coal miners' jobs was the expansion of nuclear power. Dungeness "B" nuclear plant was expected to "produce base load electricity more cheaply than a contemporary coal fired station. The number of coal miners who lost their jobs under the Labour government was 199,000, twenty thousand more than the government had planned. They lost their jobs because the pits in which they worked were running at a loss.

Here is the statement about loss making , pits made in the National Plan.

The aim of the industry will be to eliminate inefficient capacity, rather than to under-utilise efficient capacity, in order to keep costs down as far as possible and to match the falling level of demand. Pits where proceeds of sales fall short of mere running expenditure are being closed down as quickly as possible, unless there is a prospect of their moving out of this category, e.g. after a reconstruction is complete. These measures should lead to a compact and competitive industry still supplying more than half the nation's energy and offering attractive jobs.

It will be observed that this is almost identical with Ian MacGregor's pit closing formula for getting rid of 40,000 miners which led to the year long strike in 1985.

There was no strike against pit closures in 1965. Indeed the minister in charge of the plan, the late George Brown, when introducing it at the Labour Party Conference received a standing ovation. Evidently the Labour Party and trade union delegates, and the workers they represented, all shared the illusion of their leaders, that "full employment" was a reality and that they would never have to fear the dole queue.

Edgar Hardcastle

Chrysler and the Cabinet: How the Deal was Done (1976)

Pamphlet Review from the September 1976 issue of the Socialist Standard 

Chrysler and the Cabinet: How the Deal was Done. Granada Television, 35p.

This is the transcript of a TV programme shown on 9th February 1976, in which the Cabinet discussions of the Chrysler UK motor company were simulated. The parts of Wilson, Healey, other Ministers and the Chrysler officials were played by political and financial journalists, and the programme was generally thought to have come close to the reality.

The Chrysler Corporation of USA proposed closing down its British subsidiary which had made losses in six of the last nine years, amounting to £60 millions, and was expected to lose another £40 millions in the next year. The Government’s concern was with the unemployment — 25,000 jobs or more — which would be created by the close-down. However, the Government’s newly agreed “industrial strategy” prohibited financing obviously unprofitable companies; at the outset of these discussions the only voice in favour of giving help is that of the Secretary of State for Scotland, where Chrysler is a major employer.

A report from the Central Policy Review Staff (the “Think Tank”) had said the British car industry had already 25 per cent, over-capacity. From the viewpoint of the British Leyland company, which the Government had recently bought for £1,300 millions, Chrysler was an undesired rival; nor, for the same commercial reasons, was there any case for merging Chrysler with Leyland. The loss of jobs was agreed to be a regrettable necessity, summed up thus by Healey’s impersonator: “There’s nothing socialist about preserving existing jobs for their own sake.”

The conclusion was foregone — and yet the Government did undertake to support Chrysler, to the extent of about £145 millions. Why, with everything apparently against it? First, political fear of losing votes, in Scotland particularly. Second, the existence of a Chrysler contract to export to Iran (Healey: “Persia is becoming an increasingly important trading partner with us and the Shah is a touchy fellow.”).

The third reason was not stated explicitly in the TV programme but emerges implicitly from it. This is the inability of governments to manage capitalism even on its own terms. The sapient Ministers talked of “the long term” and “the future”, meaning “if we can keep out of trouble this afternoon perhaps tomorrow’s mail will bring an unforeseen lucky break”. While the discussions with Chrysler went on, attempts were made (fruitlessly) to attract Japanese car manufacturers to Scotland. If unemployment was prevented by the Chrysler deal, how will its transfer to other companies be prevented? What sort of “strategy” is firmly agreed, then has to be abandoned at the first engagement?

This is an interesting booklet, more relevant to what goes on in capitalism than some expensive volumes of retired Ministers’ memoirs.

How Labour changed (2025)

From the September 2025 issue of the Socialist Standard

Originally formed in 1906 as a trade union pressure group in parliament, in 1918 the Labour Party adopted as its long-term aim a nationalised economy. This, together with a redistribution of wealth to create a less unequal society, was to be achieved gradually by measures taken by a succession of Labour governments.

This strategy — Labourism — failed, and how! Instead of Labour gradually changing capitalism, it was capitalism that gradually changed Labour. Learning from the experience of being in government, that the only way capitalism can run is as an economic system driven by profit-making and that this has to be given priority, Labour gradually evolved from an alleged labour party into an avowed capitalist party.

Here is how it happened.

1. 1906. 29 trade unionist MPs elected with Liberal support constitute themselves as the parliamentary Labour Party.
2. 1918. The party adopts a new constitution, Clause Four of which reads: ‘To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, and the best obtainable system of popular administration and control of each industry or service’.
3. 1929. An amendment added ‘distribution and exchange’, spelling out that nationalisation (state capitalism), not socialism, was what was envisaged. (Link)
4. 1935. ‘A Labour government, therefore, not only by the transference of industry from profit-making for the few to the service of the many, but also by taxation, will work to reduce the purchasing power of the wealthier classes, while by wage increases and by the provision of social services it will expand the purchasing power of the masses’ (Clement Attlee, Will and the Way to Socialism, p. 42).
5. 1945. General election manifesto: ‘The Labour Party is a Socialist Party, and proud of it. Its ultimate purpose at home is the establishment of the Socialist Commonwealth of Great Britain.’
6. 1956. Labour intellectual Anthony Crosland published The Future of Socialism in which he argued that the aim of a more equal distribution of wealth did not require the nationalisation of industry.
7. 1959. Labour leader Hugh Gaitskell proposes to abandon Clause Four but this is turned down by the Labour Party conference.
8. 1974. February general election manifesto: ‘It is indeed our intention to (a) bring about a fundamental and irreversible shift in the balance of wealth and power in favour of working people and their families’.
9. 1995. New Clause Four adopted: ‘A dynamic economy, serving the public interest, in which the enterprise of the market and the rigour of competition are joined with the forces of partnership and co-operation to produce the wealth the nation needs and the opportunity for all to work and prosper with a thriving private sector and high quality public services where those undertakings essential to the common good are either owned by the public or accountable to them’.
10. 2024. ‘Labour is the party of business’ (Starmer). ‘Be in no doubt, we will campaign as a pro-business party — and we will govern as a pro-business party.’ (Link )

The state of the state’s finances (2025)

From the August 2025 issue of the Socialist Standard

Politicians love talking big numbers: ‘We’re spending £5 million to stop The Thing.’ Or ‘We will spend an additional £20 million to increase The Pittance by a penny.’ When Starmer and his chums came into office they mummered and howled over discovering the astronomical £22 billion ‘fiscal black hole’ left in the public accounts by the Tories. Of course, for the majority of people living on pennies at a time, such figures represent unimaginable amounts. Eking out a few quid from week to week and making every pound work is the lot of most people, so such sums seem like an unforgivable profligacy.

Everyone in politics knew there was a gap in spending plans, and that Labour, despite all its promises not to increase taxation, would have to find a way to close this spending gap. The Tories had arguably laid a trap for Labour, in the form of the Office for Budget Responsibility (OBR), a supposedly apolitical authority that marks the UK government’s financial homework. The problem is, if politicians and press just ignore it, it doesn’t do much good.

It does provide useful data, though. Its Brief Guide to the Public Finances provides a lot of the clarity regarding government spending that is missing from much of the daily rhetoric. The key piece of data is the total spend by the government: ‘In 2024-25, we expect it to spend £1,278.6 billion, equivalent to around £45,000 per household or 44.4 per cent of national income.’ Against that background, £22 billion is a rounding error that could easily be sorted by knocking a few invoices into the next financial year.

The issue is that the income for the state is expected to be ‘£1,141.2 billion, equivalent to around £40,000 per household or 39.7 per cent of national income.’ This is the infamous deficit of £137.3 billion. This means adding to a rising national debt: ‘in 2024-25, we expect debt to be equivalent to 95.9 per cent of national income. It is equivalent to around £2.8 trillion or £98,000 per household’. This is significant, because the government has to pay interest on that debt: ‘Net interest payments on the national debt are expected to cost £105.2 billion in 2024-25’.

To put that in perspective: ‘The biggest items [of public spending] are health £193.3 billion, education £89.2 billion and defence £37.6 billion.’ Whilst, in theory, the state is immortal and need never pay back its total debts (when particular debts fall due, it can just roll them over and borrow more money to pay its creditors), servicing the interest bill can become expensive, especially if confidence in any particular government falls and creditors demand higher interest rates to cover their risks. This means the government has to manage the size of its debt: this is why deficits become such an all-consuming obsession.

Politicians, however, point to the difference between capital spending and current spending. The government invests ‘£146.1 billion – 11 per cent of the total – on capital investment such as roads and buildings and on loans to businesses and individuals’. This spending is backed by physical infrastructure and leads to ownership of assets. On top of that it spends ‘£450.7 billion on the day-to-day ‘current’ running costs of public services, grants and administration. This is 35 per cent of public spending’. Additionally, the government spends £313.0 billion on welfare payments (£150.7 billion of which is pensions).

The government thus prefers to look at the current deficit which: ‘counts all receipts and all current spending, but excludes spending on net investment’. The current deficit stands at £60.7 billion.

This accounts for why Labour made politically disastrous decisions, such as freezing winter fuel payments and cutting Personal Independence Payments (for a paltry £5 billion in savings, which is tiny compared to overall spending, but one twelfth of the current deficit).

They can, if they are lucky, rely on economic growth (which raises tax receipts, and lowers welfare costs) to cover much of the gap: but the plan is to have a current surplus, which gives the Chancellor of the Exchequer space to either cut taxes or increase spending in fresh areas. The expectation is to have £9.9 billion of such headroom by the next election: so the strategy is pain today and jam tomorrow.

As the OBR notes in its Economic and Fiscal Outlook – March 2025:: ‘The tax-to-GDP ratio is forecast to increase to a post-war high of 37.7 per cent of GDP in 2027-28. Part of this increase is driven by the policies announced at the previous Budget, including the increase in employer National Insurance Contributions and increases to capital taxes’. From the point of view of the capitalist class, in general, that money going to taxation comes from their available profits and lowers the amount of money available for their profitable capital investment. A record high tax rate, especially one fuelled by an effective employee tax (National Insurance employers’ contributions) will be concerning for them in terms of international competitiveness.

In their eyes, then, government indebtedness is preferable, as it forms a means of funding the state under the control and discretion of the rich, with interest rates being a kind of vote of confidence in the way a government handles the debt. The money from interest payments is also welcome to those of them who lend the government money.

The March report also notes that the government is committed to ‘increase defence spending to 3 per cent of GDP over the next Parliament, which would be equivalent to £17.3 billion in 2029-30’. This would in part be paid for by a £6.8 billion cut in overseas development spending (this simply represents a change from soft to hard power). This unplanned shift in spending priorities shows how the government’s carefully laid plans to generate a current surplus can easily be thrown off course.

All this wealth, though, was originally produced by the efforts of the working class. How much better and more efficient would it be if that effort was directly focused on human needs, instead of producing taxable money?

Pik Smeet

Fallacy of a National Incomes Policy (1965)

From the August 1965 issue of the Socialist Standard

The Prime Minister, Mr. Harold Wilson, has confessed that though he dipped into the writings of Karl Marx, he never got anywhere with it. If he had persevered he would have discovered that Marx knew about the problem which Mr. Wilson and his ministers are trying to solve with their Incomes Policy. Not that Mr. Wilson is an innovator in this endeavour, except that some of the descriptive names are different: “wage freeze”, “wage restraint”, “pay pause”, etc., have given place to “planned expansion” and the laying down of “criteria” for price reductions and avoidance of increases, and for keeping wage rises (with certain exceptions) within the rate of annual expansion of production—at present about 3½ per cent.

But before the present hopeful contestant, Mr. George Brown, entered the ring, there were others—Mr. Selwyn Lloyd in 1962, Mr. Thorneycroft in 1957, Mr. MacMillan in 1955. These were all Conservative Chancellors of the Exchequer. Earlier still there was the late Sir Stafford Cripps under the Labour government after the war, and both parties, and the Liberals, were sponsors in the War-time National government of the 1944 White Paper on Employment policy, which stated the problem and specified what they hoped were the lines on which it would be solved.

These separate income policies are divided by several years. Governments do not have to worry about a policy for prices and wages when unemployment is considerable.

What then is the problem? In the past 20 years it has come to be known as “Stop-go”. Each of the half-dozen Tory Prime Ministers has been chided by the Labour Party with so mismanaging affairs that periods of expansion and low unemployment have regularly been followed by a crisis, by falling or stagnant production, and a rise of unemployment. Each of the governments announced its intention of making expansion continuous and each time the Labour Party said that the government did not know its job and was doing the wrong thing. We are hearing this type of propaganda again now, from the Tories, who failed to control the situation when they were in office.

Marx described the situation briefly and pointedly just 100 years ago in a paper presented to an international Congress in September, 1865: —

“Capitalistic production moves through certain periodical cycles. It moves through a state of quiescence, growing animation, prosperity, overtrade, crisis and stagnation (Value Price and Profit Chapter XII).”

There were various reactions to Marx’s statement; that it wasn’t true; that it had happened but would not be allowed to happen again; that it was due to the greed and stupidity of the employers—and all these could be cured. The Labour Party, which first inclined to the view that the periodic crises were the fault of the employers has, since it became the government, veered to its present attitude—that a strong lead from the government to both employers and workers will put things right and keep them there. They are claiming to be able to do now what they and the Tories alike have failed to do and which nobody succeeded in doing in the past. Looking only at the period since the Second World War, annual average unemployment has been as high as 612,000 (1963) and as low as 287,000 (1956), with the monthly figures ranging from under 250,000 to over 900,000. Production has followed a similar course, with bursts of rapid growth followed by decline and periods of stagnation.

The question to be answered is “Why does this happen?” Why does expansion always get checked? Why do booms lead to crises? Basically it is because we live under capitalism. in which the great majority of people can get their living only by selling their mental and physical energies to an employer for wages or salaries. Under this system the propertied class—who live by profit, rent and interest—and the working class, are dependent on the market, on the ability of the owner of the products of industry to sell them at a profit. The mechanism through which all this goes on is that of money and prices.

Capitalism produces nothing directly and freely for the use of those who need it. If you are homeless or near starvation you will not get a house or food; you have to have money to pay for them. The manufacturer who cannot sell what his workers have produced, either because his competitors have produced more cheaply and have captured the market or because the product is no longer wanted (for example, coal being replaced by electricity or oil, or man-made fibres replacing cotton, silk or wool), or because his would-be customers have no money, has to sell at a loss and may end in bankruptcy and his workers join the unemployed.

But, say the “planners”, why cannot each line of production be accurately planned ahead so that nothing is produced in excess of the demand for it and nothing is produced for which there will turn out to be little or no demand? This is a deceptive hope. In a boom, when there are prospects of a big unfilled demand, capitalists (including the State industries)—not just in one country but internationally—hasten to expand and modernise their factories to capture as much of the market as they can. They simply have to do this; if they stand still they fall out of the competitive race. In some fields natural conditions defeat the planners anyway. Who can plan good harvests? or foresee and prevent the sudden discovery of vast and easily accessible supplies of oil or natural gas in the Sahara or the North Sea?

In a boom manufacturers are all competing to buy raw-materials, machinery, factory buildings—and to hire workers; collectively, they are trying to buy more materials and hire more workers than there are available. In these conditions, sellers—including the workers who are sellers of their labour-power—can put up prices, and do so: which brings us right back to Mr. George Brown and his predecessors, their policies for incomes and prices—and their problems. (Incidentally this is a universal capitalist problem not one in Britain alone. One same issue of the Times, April 28th, reported emergency measures including the attempted freezing of prices in Yugoslavia, and the American steel workers and employers arguing about a wage claim in the light of the Federal Government’s “Anti-inflationary guiding figure of 3.2 per cent”).

What then are the choices before Mr. Brown and other planners? If they let things take their course the boom runs into difficulties; in some fields through scarcities of materials (for example, the recent shortage of bricks) which hold up production, and in others, sooner or later, of overstocking of the market for certain products.

How logical it must look to Mr. Brown to try to prevent the collapse of the boom, by using persuasion and threats to damp down the rise of prices and wages. But is this a practicable policy? In conditions which enable sellers to push up prices and in which workers are favourably placed to push up wages, can government policy prevail? Past experience, the Stafford Cripps era, shows that it may have some effect for a time. But Wilson and Brown have to remember something else. Capitalism is a class society and the working class do not accept that any particular level of wages or profits is a proper and satisfactory one. Without clearly understanding that they are the producers of all the wealth which the capitalists own, they nevertheless always feel that they have a good case for getting a larger share of it. So before long their resentment turns against the government which is trying to induce them to go slow on wage claims: the national incomes policy of the Labour or Tory government finally breaks on the class nature of capitalism.

All of this Marx understood very well a century ago. It may be said that much of what he saw about the ups and downs of production in the market is now common knowledge among economists, but his insight was greater than theirs. Many of them, including those who toy with the idea of permanent and even expansion, think that expansion, because it is desirable is therefore “normal”, and that the interruption of expansion is a fault or failure, due to avoidable mismanagement or to the greed of some group or other. Marx, in his objective analysis of capitalism, viewed it differently. He saw that the expansion, the crisis and the stagnation are all “normal”, they are the way capitalism operates because of its own nature. Prices and wages rise in a boom because that is how capitalism with its prices system functions.

Marx did not share one error which is common to all his critics. They think that the problem is one of modern production; he saw that it is a problem of capitalist production—a very different proposition. Did he, because he understood it, have a solution to offer? A solution within capitalism? No! A solution without capitalism? Yes!

If Mr. Brown’s policy is bound to run up against the laws and the class nature of capitalism, Marx also saw that the opposite to Mr. Brown’s policy offers no way of avoiding a crisis. He dealt specifically with the notion that higher wages would solve the problem of unsaleable goods by enabling the workers to buy more. Apart from other inevitable disharmonies of capitalist production and selling as between the production of the means of production and the production of consumer goods he knew that a general rise of wages at the expense of profits would, while increasing the demand for working class necessities, at the same time reduce the demand for capitalist luxuries, and necessitate a curtailment of their production. He wrote: —

“It is purely a tautology to say that crises are caused by the scarcity of solvent consumers, or of a paying consumption. The capitalist system does not know any other modes of consumption but a paying one, except that of the pauper or the “thief”. If any commodities are unsaleable, it means that no solvent purchasers have been found for them, in other words, consumers (whether commodities are bought in the last instance for production or individual consumption). But if one were to clothe this tautology with a semblance of a profounder justification by saying that the working class receive too small a portion of their own productivity and the evil would be remedied by giving them a larger share of it, or raising their wages, we should reply that crises are precisely always preceded by a period in which wages rise generally and the working class actually get a larger share of the product intended for consumption. From the point of view of the advocates of “simple”(!) common sense, such a period should rather remove a crisis. It seems, then, that capitalist production comprises certain conditions which are independent of good or bad will and permit the working class to enjoy that relative prosperity only momentarily, and that always as a harbinger of a coming crisis.” (Capital Vol. II. P.475).

Fundamentally crises can happen only because of capitalism, under which the workers’ continued employment depends on each part of the productive apparatus (production of means of production, production of necessaries and production of luxuries) keeping in line with every other part. As Marx wrote elsewhere:

“The last cause of all real crises always remains the poverty and restricted consumption of the masses as compared with the tendency of capitalist production to develop the productive forces in such a way, that only the absolute power of consumption of the entire society would be their limit.” (Capital Vol. III. Page 568).

Marx’s critics do not believe this. They believe that by some means or other they can keep each industry in line with the others, and with the demand of the market at home and abroad, without overproduction in one part of underproduction in another, without the production of unsaleable goods, and without disturbance from rises of prices and wages and fluctuation of employment.

They have been trying, without success, for a century or more. Why do they not turn their attention to the way out, that of having Socialism instead of capitalism?

Edgar Hardcastle

The Crisis: Capitalism’s Stranglehold on the Labour Government (1975)

From the August 1975 issue of the Socialist Standard

There is of course nothing new in governments breaking pledges and turning policy somersaults, but latterly the occasions have become more frequent and more farcical. At every election since the second world war the Labour and Tory parties have undertaken to deal with inflation: to so little effect that prices have risen continuously for thirty years, with the rate of increase getting faster and faster.

It is not at all surprising that this should have happened because the governments have been running a policy of inflation in the belief that this was a way to prevent unemployment from increasing. A vain hope, because at each of the half-dozen recessions since 1950 unemployment has risen to a new higher peak—over a million in 1972 and now forecasts of a possible 1½ millions by early 1976. Instead of stopping inflation, it has been government policy first to promote it and then to try to suppress its symptoms by means of a “Prices and Incomes Policy”.

It started in 1947 under Attlee’s government and has been re-enacted half a dozen times. A long succession of failures as far as stopping inflation is concerned, but it would be churlish not to acknowledge its one happy achievement—the enrichment in the use of our vocabulary. We have had wage restraints, wage freezes, wage thaws, plateaus, pauses, ceilings, guiding lights, norms, standstills, early warnings, guide-lines, slow-downs, explosions, wage-stops, thresholds, curbs, social contracts, and a lot more.

The latest from Mr Wilson “the £6 limit on wage increases”, which he admits means a lower standard of living, has a novel refinement. For years the centrepiece of the Labour programme was the “national minimum”. The law was to be used to force “bad employers” to become “good employers” by making them put wages up. Now Mr Wilson threatens to use the law to prosecute employers who put wages up too much. They are, he says, “rogue employers”. The recipients, of course, could be workers whose wages are only a small fraction of Wilson’s own income.

Don't they understand capitalism?

Is it really possible for government ministers not to understand how capitalism operates? And to be unaware of the inevitable consequences of their own policies? Indeed it is possible. During the nineteenth century, although capitalism regularly went through the recurring cycle of expansion, boom, crisis and depression outlined by Marx as the economic law of the system, governments, capitalists and many economists were forever expecting booms to be permanent and being amazed as each crisis blew up. There are plenty of similar examples in our own times.

Any serious student of capitalism knows that the capitalist is in business to make a profit and therefore will not invest more to expand production at those times when there is no prospect of selling the product profitably. Yet in the last recession, in 1971-2, Heath and Barber complained bitterly that though for months on end they pleaded and threatened and offered inducements for increased investment, “nobody would listen”. Healey, Chancellor of the Exchequer in the present government, confesses to having been equally ignorant of the facts of economic life. “One thing I have learnt from my experience in the past seven months [as Chancellor]: there is no chance of investment if business expects a general and prolonged recession, however generous the tax incentives” (Report of speech, The Times, 5th October 1974).

Later in the same month he was again airing his ignorance, this time as guest speaker at the Lord Mayor’s banquet for bankers and merchants of the City of London:

I simply cannot understand how it can make economic sense . . . to keep a million active men and women idle when the nation needs the goods they could produce (Times, 18th October 1974).

Since when has capitalism been interested in meeting people’s needs? And, in a depression, who needs additional production of unsaleable cars, motor-cycles, supertankers, steel and so on?

In one respect nineteenth-century British governments were better informed than governments since 1945. They knew how to prevent inflation and decided that it was in the interest of capitalism to prevent it. There was no inflation for the hundred years before 1914. Prices rose and fell by moderate amounts in booms and depressions, but the level was lower in 1914 than in 1814. Now the price level is more than seven times the 1938 level and rising fast, by far the biggest cause being the depreciation of the currency consequent on government policy.

There were always some uninfluential groups advocating inflation to cure the ills of capitalism. One was dealt with in the Socialist Standard in August 1906. Using the Marxist analysis the writer of the article showed that it would cure nothing and would simply raise prices: “the workers, as is usual, being the first to suffer”. Another example is mentioned in The Life and Times of Ernest Bevin, by Alan Bullock (p. 17). Bevin, trade union leader and later a minister in the Attlee government, was present in 1908 at a conference to discuss remedies for unemployment. One proposal was “the issue of paper pounds”. A Liberal politician who was there thought that it was “very sensible” but politically impracticable.

After 1945 it was quite different. Influenced by Keynes (or by crude distortions of Keynes) the Labour and Tory Parties and the TUC adopted the doctrine that the government could “manage” the economy in a way that would prevent crises and depressions occurring again. By “maintaining demand” they believed they could always prevent unemployment. Maintaining demand meant in practice printing more money and putting up prices. Keynes, whether he intended it or not, had made inflation respectable.

Marx and others on inflation

A number of economists in the past have understood that if an inconvertible paper currency is issued in excess amounts it will correspondingly put up prices. Marx’s special contribution was to anchor it to his theory of value. In given circumstances a certain amount of currency will be required. If the currency consisted solely of gold coin it would represent a certain total weight of gold and therefore a certain total mass of value. If the gold is replaced by inconvertible paper money (not convertible into a fixed weight of gold) and is then issued in amounts exceeding the gold it represents, it will simply put up prices. This is the present situation. Currency in Britain in 1938 was under £500 millions. It is now over £6,000 millions. It went up £825 millions in the year to July 1975.

Those who reject this explanation of inflation can apply a test. Let them show when such excess issue took place without raising prices; or when such excess issue was halted and prices did not fall.

In December 1919, after a very fast rise in prices, a ceiling was placed on the note issue and within a year prices were falling fast and wages with them. Lord Rothschild (Times, 30th June 1975) recalls that German inflation was halted in 1923 by applying the recommendations of a Committee (two members of which were the banker Brand and the economist Keynes) which included the Reichsbank being “forbidden to print more notes”.

Some modern “monetarists” have confused the issue by trying to relate price movements to the total of currency plus some or all of bank deposits. Why should the act of lending by depositors to banks affect the price level? Historically there is no justification for the theory. The enormous growth of bank deposits in the last decades of the 19th century was accompanied by a fall of the price level, not a rise.

Harold Wilson used to be quite confident about how he would prevent inflation. In 1957 some of his articles in The Guardian were published as a pamphlet, Remedies for Inflation. In Section III “What Labour Would Do” he wrote:

Ever since the Coalition Government’s White Paper (Employment Policy, 1944) all major parties have been committed, on Keynesian lines, to using the Budget as a means of avoiding undue inflation or deflation. In inflationary times, therefore, all are agreed in theory on the need for public saving through a large Budget surplus, though we have felt that a number of Conservative Budgets have sacrificed financial stability to a desire for fiscal popularity.

In practice Wilson’s government in 1974-5, instead of running a Budget surplus, has shown the biggest deficit in British peace-time history. Wilson says that the Government’s latest measures have been forced on it by the threatened drastic fall of the pound under pressure from foreign holders of sterling, just like Labour Premier Ramsay MacDonald in 1931.

There is no sign that the bulk of the Labour ministers and the TUC have given up their delusion that unemployment can be prevented or reduced by a further round of “reflation” (their name for inflation). But at the moment Wilson, after years of promoting inflation because he thought it would prevent unemployment, is now declaring that inflation causes unemployment.

Some of his critics in the Labour Party and trade unions (including apparently Mr Scanlon, leaders of the engineers), think they have Marx’s backing for their view that the way to deal with crises is to raise wages further. They are quite wrong. Of course Marx favoured the attitude of workers getting as high wages as they can at any time, but he did not hold that crises could be averted by raising wages. He dealt with the higher wages argument in Capital (Vol II, p. 475) and showed how absurd it is. Depressions end when the capitalists see prospects of profit improving. Putting wages up further would reduce profit margins not increase them.

No Cure for Capitalism

Because Socialists view the thirty-year Labour-Tory experiment with Keynesian fallacies as a complete fiasco for the working class it must not be concluded that we are enamoured with the prospect of returning to capitalism without inflation. With or without inflation capitalism will go on producing unemployment, crises and depressions. With Labour government, or any other government, “managed” or left to market forces, with or without more nationalisation, capitalism has nothing to offer to the working class. The only course for the workers is to replace capitalism with Socialism.

Edgar Hardcastle

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.