Finance and Industry: The experts are fallible (1962)

The Finance and Industry Column from the July 1962 issue of the Socialist Standard

The experts are fallible

The economic experts of capitalism—the City Editors, the economists, the financial seers—sit on something of a pedestal. Whatever twists and turns the economy may take, they are never caught without a remedy. Their readers, political parties, even governments, hang upon their words.

Which makes it very embarrassing for everybody, if the experts are shown to be as fallible as the rest.

Mr. Samuel Brittan is the Economic Editor of The Observer and last year, like all men in his position, he was expected to comment on the Selwyn Lloyd “pay pause” Budget. This is what he wrote, on September 3rd last:

I have a feeling that Mr. Selwyn Lloyd is going to surprise many people by his success in carrying out his economic policies . . . many of the people who are now most vociferous in denouncing him may be loudest in his praise a year from now.

Mr. Brittan went on to point out that in some ways the Lloyd policy was following behind events and then gave his reasons for thinking that ". . . Mr. Lloyd has been so much luckier than his predecessors . . ." 

Now—almost a year after—what does Mr. Brittan think of the Lloyd policies? Is he loud in his praise? He is not. He has been doing his homework in The Economist and has been impressed by an article in the 12th May issue of that weekly which drew some striking comparisons between the Lloyd squeeze, and what has followed it, and the Butler squeeze of 1957 and what followed that. This is what Mr. Brittan wrote in The Observer of 10th June this year:

On both occasions the same kind of arguments have led to the same mistakes. Mr. Selwyn Lloyd too often gives the impression of believing that history began in July, 1961, and has not devoted enough time to studying the mistakes of his predecessors.

And later in the same article:

Government financial measures have in recent years actually accentuated the trade fluctuations that they were supposed to control. 

If Mr. Brittan was wrong, a year ago, when he expected the Lloyd policies would be lucky enough to succeed, he could of course equally be wrong now that he is criticising the Chancellor. Capitalism is a baffling system which can catch out the experts. But if that is going to happen, there is no point in basing experts, is there?

By a few shares

A new campaign is announced by the Wider Share Ownership Committee, aimed as its name suggests to encourage more people to buy shares. It would seem to have timed its effort rather badly. After the recent Wall Street debacle we would imagine that many a small investor has gone back to his account in the Savings Bank or the old sock under the bed.

The number of shareholders in the U.K. has apparently increased over the past ten years from about a million to 3½ million. Much of this increase is presumably accounted for by firms like ICI distributing shares to their workers and to lots of small men being persuaded on to the stock exchange band-wagon by tales that capitalist inflation and prosperity were here to stay.

It will be interesting to see what success the campaign has and we hope the Committee will oblige us in due course with details of the number of shareholders in say six or twelve months time. They should make interesting reading, especially if there have been a few more stock exchange shocks in the interim.

At the same time, an analysis of how many hold how much would be useful as well as instructive. We have an idea that the greater part of those 3½  millions hardly matter when it comes to working out who really own stocks and shares.

Do they know?

Our editorial this month deals with the recent stock exchange shake-ups and makes the point that they basically reflect the general unease amongst capitalists concerning present economic prospects.

This unease has spread to most sectors of the economy and is obviously causing our politicians and their advisers some real headaches. Nor, in spite of the long words they like to use and their knowing looks, do they seem to have much idea of what to do about it all.

For example, hardly had Mr. Selwyn Lloyd finished warning us that he might have to lake fresh steps to tighten up demand than he calmly goes and cuts the minimum H.P. deposit from 20 to 10 per cent. Only a little while before, he had eased some of the restrictions on the banks. When it is remembered that he was apparently worried only a few weeks ago about a hire purchase boom, it all seems rather strange.

Some cynics have tried to explain the quick turn round as a by-election gimmick to help the Tories in their present political troubles. Perhaps so. But we have the shrewd suspicion that it only requires capitalism to go into the faintest suggestion of a spin for all the politicians and their economic experts to lose their balance. To be quite frank, we don't think really they have a clue.

The Gold Rush

One further thing we have heard for several years past from our experts is that with the new theories about money, credit, and the general control over capitalism, the importance of gold has become a thing of the past. Some of them have even gone so far as to regard it as a myth, a hoax that has been shown for what it really is by the new economic theory.

Unfortunately, our capitalists only seem to think there may be something in these theories when there is little chance of their being put to the test. Immediately things begin to get uncertain, they forget all about the theories and rush us quickly as they can into gold. Which explains the present sudden interest in gold mining shares and the heavy buying of the metal itself.

This is the classic way the capitalists have always acted in times of stress. Not currency, not stocks and shares; but lovely, shiny, golden, gold. As for economic theory, they will come back to that after the crisis has blown over.

Karl Marx, over a hundred years ago, would have found it a quite natural thing for the capitalists to do. He for one was under no delusion about the importance of gold to the capitalist system. The universal equivalent he called it, and universal equivalent it still is.

Stan Hampson

Who is in Charge? (1962)

From the June 1962 issue of the Socialist Standard

The government is now well past its halfway mark and soon it must start thinking about the timing of the next general election. Whatever date it decides on, we may be sure that it will be the result of a careful calculation. A time like the present, with bye-elections running against it and with signs of internal strain, is not likely to be chosen. Mr. Macmillan—if he is still Prime Minister—will try to wait until he can feel surer of victory. This does not mean that he will leave it until the last minute, which would give him little room for manoeuvre. It does mean that, as in the past, the next election will almost certainly be held some time before the government’s term expires in October, 1964. This time next year, then, the decision may not be far off.

Whenever they are called upon to vote, the workers in this country will display all the bemused docility which we have grown accustomed to. They will concentrate on the wrong issues, at the wrong time. They will allow themselves to be misled by the government’s claim to have been a sage, responsible administration and by the clamour from the opposition parties that they are the men to put fire into the belly of British capitalism. The workers will not pause to consider the futility of it all and to compare the anomalies of Capitalism with the obvious impotence of the political parties to deal a with them. As a whole, they will not even toy with the idea that it might be a good thing to abolish Capitalism and to have Socialism instead.

We can say all this with some confidence, because experience has taught us that the working class prefer to take Capitalism on trust to what must be the painful business of thinking and remembering and comparing. The election policies of the Tories, the Labour Party and the others always amount to a claim that they are able to control Capitalism. As each of Capitalism’s crises blows up, there is no lack of political leaders to make speeches which state their solution to it. City Editors are prolific with schemes which put the politicians straight. Nobody seems to notice that some of the schemes are not very different from those which are being blamed for producing the crisis in the first place and that some of the bright ideas contradict others which have been offered before as the solution to our problems.

Let us, for example, consider the recent reversal of the government’s policies of last July, when Selwyn Lloyd pushed through his emergency Budget. The main provisions of that Budget were the increase of Bank Rate to seven per cent., the increase of some taxes by ten per cent. of the previous rate and the imposition of the pay pause. These policies were necessary, said the government, because we had all been living too well. The working class forgot to ask themselves when Capitalism had ever allowed them to live anywhere near as well as some of the people who make speeches about the Budget. They grumbled a little about it, but in the main meekly accepted it. The Budget was sold to them as essential to save British Capitalism—and there is no higher task to which a British worker can feel himself called.

Since then, apparently, British Capitalism has been saved, because the emergency Budget has gone. Bank Rate has come down steadily until now it is lower than it was last July. The pay pause, formally at any rate, is finished; workers who ask for higher wages have some other reason given to them for the employers' resistance to their claim. The ten per cent. increase in taxes has been dropped; some taxes, in fact, have been even further reduced. The entire tax structure has been somewhat simplified, which may be a clue to a new theory hatching in the Treasury—that British Capitalism would work better if it imposed a uniform sales tax upon its Capitalist class instead of the various purchase taxes which apply at present. There is, of course, no evidence to support this theory and in any case it has nothing to do with working class interests. But never mind; the experts at the Treasury must cultivate restless minds to keep up with Capitalism and it all makes good copy for the election programmes.

Perhaps the experts would feel more confident about the effectiveness of their remedies if they could all agree on them. But this they cannot do — is it any wonder then that mere inexpert Socialists should have so little confidence in them? Each time a Chancellor slaps restrictions on — or takes them off — the economy, there is a chorus of dissentients who assure us that he is too late or too early, too bold or too timid, or just plain wrong. In July, 1960, for example, the government reverted to the sort of credit restrictions which they have been imposing for years, on and off. This was met with anything but unanimous applause. The Guardian commented on July 5th, 1960:

  The past week has brought fresh support for those who questioned the need for the Chancellor's latest round of credit restrictions. The Board of Trade's admission that hire purchase sales in May dropped below last year's level simply confirms the view, expressed by many manufacturers and traders, that the boom in demand for consumer durable goods had already slackened off . . . the Government ought to have been congratulating itself on achieving a desirable new balance in the economy, rather than imposing new restrictions.

Newspapers, of course, need only comment upon the muddle which political parties get themselves into when they try to run Capitalism. Happily for the press, they do not have to involve themselves in trying to sort out the muddle. Even so, newspapers may sometimes hit upon the basic features of a crisis. There is an obvious question which is provoked by the continual upsets which Capitalism's economy is heir to, and by the contradictory policies which are put forward to settle these upsets. Do the politicians, the economists and the Chancellors control the economy? Or does the economy control them? As we have seen, The Guardian thought that the Chancellor in 1960 was trailing a long way behind events. And this is what Samuel Brittan, the Economic Editor of The Observer — who thought the pay pause was a good idea — wrote on September 3rd, 1961, about the effect of the Lloyd policy:

  The Government's hand will be enormously strengthened in the coming months by a marked change of trend in the labour market, which actually began as early as June . . . unemployment has since been creeping up and unfilled vacancies have been declining . . . labour should become a good deal easier to obtain in the coming months.
  At the same time manufacturers will find orders on the domestic market fewer and further between; and with profit margins under pressure they will offer fiercer resistance to wage claims . . . All this was without Selwyn Lloyd, who has administered a cold douche to an economy that was probably already coming off the boil even without his efforts.

Current Trends
What this means is that the Chancellor's policies are only a desperate attempt lo straighten some of the wilder zig-zags of Capitalism. They do not run counter to the current trends in the economy; they do not try to deflate a boom, nor to shake out a slump. They do not, in fact, have any considerable effect upon economic conditions, but only reflect those conditions, usually some time after they have passed by. Samuel Brittan's rival — Mr. Rees-Mogg, the Political and Economic Editor of The Sunday Times — summed it up for us all on July 30th, 1961: “. . . what Mr. Selwyn Lloyd has produced is not a policy, it is a reaction.”

We can now consider the conditions which make the Chancellor's policies for him. Two of the industries which The Guardian mentioned as being in difficulties were those making cars and domestic appliances. These were among the industries which cashed in on the post war boom; they built great factories, often in old depressed areas of the country. They invested tens of millions of pounds in their productive machine and up to a few years ago this all seemed to be paying off. They were riding high. Times have changed since then. The motor car firms have suffered violent ups and downs some of them have gone altogether and others are sickly plants.

Similar conditions have hit the domestic appliance trade. A. J. Flatley, a washing machine, drier and refrigerator firm which suddenly sprang up in Manchester a few years ago, to expand at great speed, has recently gone bankrupt. Hoovers are busily cutting their cloth to suit a severely restricted coat—last year they took a fifty per cent. cut in their profits. Hotpoint—part of the mighty Associated Electrical Industries—have recently reduced their washing machine prices to catch sales in a hardening market. We all know what has happened to the price of refrigerators over the past few years, and to some of the firms which make them.

Now why does this happen, to these industries and to others? In August, 1960, the Economic Review, published by the National Institute of Economic and Social Research, drew attention to what it called the “over capacity” of the durable consumer industries. This “over capacity” was largely the result of the enormous investment which was placed when consumer durables were booming. When the boom slackened the extra productive power became an embarrassment—stocks of machines accumulated, production had to be cut and workers laid off. That is the immediate, at any rate, explanation of a slump.

The fundamental explanation goes deeper. What could the consumer durable firms have done to avert the decline? Should they have held off their investment when the boom was going strong? Of course, they could not. At the time, intense investment was not merely a good idea, it was an absolute must for a company which wanted to get its share of the market. Could they then have correctly gauged the market, foreseen how long it would hold and so forecast the slump? This is something they have never been able to do, nor ever will be able to. The Capitalist class train up expensive experts and economists, but still they are caught napping by the disappearance of a market.

For Capitalism's slumps, like its booms, happen because its wealth — whether it is motor cars, washing machines or anything else — is made to be sold. This means that the market is the key to Capitalism's fortunes. And the market is a capricious, unpredictable, anarchic thing. It sums up Capitalism, that its fortunes should rest in such uncertainty.

So we know that as fast as one policy is knocked from under him, the Chancellor must come up with another. They all will be equally ineffective, but that will not stop him groping for another palliative, another stopgap, another lame horse to sell to the working class. Rees-Mogg put it bluntly in his article when he said, “The Chancellor is not in charge of the economic machine: it is in charge of him.”

Sadly, this will almost certainly pass the working class by, when the next election gets under way. Then there will be many lame horses on display at capitalism’s political market place. The voter, will prod them over, examine their mangy hides and finally plump for one or the other. A depressing prospect? For humanity, yes. But for those who pocket the proceeds, no.

Ivan

Finance and Industry: Trouble in Agriculture (1962)

The Finance and Industry Column from the November 1962 issue of the Socialist Standard

Trouble in Agriculture

One of the big question marks over the Common Market talks has to do with agriculture. British farmers are worried about what might happen to them if Britain is accepted by the Six, and Commonwealth countries like Australia, Canada, and New Zealand are afraid for their exports of wheat, meat, and dairy produce.

British fruit growers and market gardeners see a dire threat to their interests from efficient Dutch production and from cheap Italian output ripened under natural sunshine instead of in heated glasshouses. And if Denmark eventually joins there will also be intensified competition from Danish bacon and butter.

But looming over all of them, British or Common Market, is the shadow of French competition. Only now beginning to rise to its full potentialities, with one half of the total agricultural land of the Six, the most favourable climate for agriculture in Europe, and soil fertility higher than the average, French agriculture threatens them all. With a negligible amount of farm machinery at work on its farms after the war, it is now mechanising rapidly. Tractors and combine harvesters are now replacing animals and men in ever-increasing numbers.

The shadow of surplus

Production has been rising steadily in recent years and the French Government is becoming increasingly concerned about rapidly mounting surpluses of cereals, butter and milk products, and beef, as well as fruit and vegetables. This year there will be a record wheat harvest of 13 million tons (the previous highest was 11½  million tons in 1959) which compares with the present U.K. estimate of 3.3 million tons. The French export surplus is likely to exceed in fact the total U.K. output.

The situation will be eased somewhat since the maize crop has been cut to a quarter of normal by drought. But this year’s results in general have served to re-inforce the warning to the rest of Europe that with every year that passes France will be a more and more dangerous threat—and to the French Government that they are in for bigger and bigger headaches. The French Minister of Agriculture has already announced that “ the fighting aim of 1963 will be the conquest of the external markets.”

The same pattern

As usual under capitalism, this ever increasing production is coming from fewer and fewer workers. Statistics show that, as in most other countries, the population living off the land is falling. The farmers are leaving the land and going into the towns. In France, there are 12 per cent. less people in agriculture than there were six years ago. Just how far this process still has to go is shown by the fact that it still leaves 20 per cent. of the population on the land, compared with 3 per cent. in this country.

There are clearly still great changes to come in French agriculture—and their repercussions are likely to be wide.

More absurdity

The shattering losses made by B.O.A.C. this year (no less than £65 million) reflect once more the crazy capitalist world we live in.

One of the main reasons for these losses has been, we are told, the frantic efforts made by the company to keep up with the constant developments in aircraft. So swift are the changes that planes have to be put on the scrap heap long before they have given their full term of useful life. That nearly all the other major airlines of the world are doing the same thing, and suffering equally crippling losses in the process, only makes the situation more farcical.

The apologist for capitalism will, of course, reply that progress must always be allowed full scope and that the new planes constantly coming forward will be better and safer than their predecessors. Even this is not true. The Press has been full of stories recently about whether safety is not being sacrificed in the bitter struggle among the national airlines. Allegations have been made that the strain of the new and ever more complicated aircraft on their pilots is becoming too intense, that they are being worked more hours than is safe, and that many airfields are just incapable of meeting properly the demands of the new machines.

Tailpiece

We discuss elsewhere Professor Titmuss’s new book exploding the myth of growing economic equality—a subject incidentally to which we have ourselves given attention in recent issues. Samuel Brittan in the Observer (he is Economic Editor) gave a useful review of it recently. But the most interesting few lines of his article were those in which he defined the capitalist class in a paragraph at the end. Here they are:

  The existence of a separate class of people who own the means of production (including land) and are not therefore dependent on their own personal earning power is still the basic characteristic of capitalism. . . .

Our own definition, in fact. True he spoils it all by bringing in Russia later on, but it’s a crumb of enlightenment al! the same.

Stan Hampson

Not what it used to be (1962)

From the November 1962 issue of the Socialist Standard

The rich are always sensitive about the sufferings of the poor; not, of course, to the point of being willing to get off their backs, but at least to the point of being glad to be told from time to time that the poor are not as poor as they used to be and that if any are it is their own fault. Such assurance is a great comfort to the rich. It carried them safely through the miseries of a dozen slumps and made them (and still makes them) genuinely indignant whenever the workers come out on strike, because, as the newspapers always inform them, strikes were justified in the bad old days but not now when everything is so nearly perfect. How are they to know that the newspapers were saying exactly the same in the “bad old days," twenty, forty, a hundred years ago?

About a hundred years ago Marx and others were commenting on the great inequality of income and property between the workers and the property owners. Already the defenders of capitalism were at work suggesting that it used to be even more unequal and that things were improving daily. Ever since then there has been a continuous stream of that kind of propaganda. It was flowing strongly in the depression between the wars, as the following samples show:

  It appears safe to say that the distribution of capital is less unequal than it was before the war. (Manchester Guardian, 12 March 1936). 

  . . . the great re-distribution of wealth and income that has happened in this country since the war. . . . (Times Literary Supplement, 7 March 1936. 

  The gap between rich and poor in this country shows every sign of continuing to grow smaller. (Star, 9 April 1936).

The line has changed since then; not that it has been given up, but the dates have been altered and the great improvement is now supposed to have taken place since 1936. not before. In truth, apart from the continued post-war conditions of very low unemployment (which does not look so secure now) the main features of ownership of capital and division and of national income appear to have altered very little over a long period. Which explains why the stream of propaganda about alleged growing equality gets interrupted from time to time by statistical inquiries showing how little, if any, change there actually has been.

We have just had such an inquiry in Professor Titmuss’ Income Distribution and Social Change (Allen and Unwin, 25s.). He refers to the widespread opinion among politicians and economists that this country had become more a much more equal society than it was before the war and sets out to examine again the statistical material on which this opinion has rested. He makes many criticisms of the material on national income distribution and the way it has been interpreted (and also some criticisms of statistics of ownership of wealth). He holds that the earlier studies may have reached wrong conclusions: there is, he claims, need for a re-examination because the belief in greater equality of income distribution may be seriously in error.

But no matter what Professor Titmuss writes about it, the propaganda claiming that things are better than they were will persist.

Among other reasons, it always suits the political party in power to argue that its policies have had or will have a beneficial effect in the direction of diminishing poverty and it can be taken as certain that there will be an almost universal agreement in the Press and elsewhere not to consider doing anything that matters about the fundamental social issue of the means of production and distribution, land, factories, etc., being owned by a small minority of the population. A case in point is the review of Titmuss' book by Samuel Brittan in the Observer (Sept, 30th, 1962). He recognises, as does Titmuss, that distribution of income cannot be considered apart from the ownership of wealth, and actually remarks that "the whole subject of inequality is largely discussed without hypocrisy. The basic question is the ownership of personal wealth.” Yet this promising opening leads on to the pettifogging and irrelevant proposal that there should be “a moderate and graduated annual tax on personal wealth in the upper incomes.”

Just how this is supposed to alter the basic situation is not explained.

Edgar Hardcastle

Editorial: Taxing Capital Gains (1962)

Editorial from the May 1962 issue of the Socialist Standard

Lots of speeches have been made and articles written about the "unfairness" of stock exchange and property speculators having been able to buy shares or land or buildings, hold them for a while, and sell at a profit without paying tax on it. The people who see this as “unfair” do not think it “unfair” that the wealth the workers produce should belong to someone else.

Now the short-term speculators will have to pay tax, and we are being assured that this is a small step towards making the rich less rich and the poor less poor. Of course, it will have no such effect. America, which has for years had taxation of capital gains, has seen no lessening of the concentration of wealth. On the contrary, the inequality is as great as, or even greater than, it has ever been, and in nine years the owners of five million dollars or more have multiplied from 2,113 to about 10,000.

Wealth-ownership in Britain sheds even more light on the success of the propertied class in holding on to their own, for here, in the past 100 years, there have been many promises and campaigns to reduce inequality with no result whatever.

One of the advocates of a wealth tax, Mr. Samuel Brittan, writing in the Observer (April 8th, 1962). rejected in advance the idea of a mere capital gains tax. as one that “deserves to be laughed out of court," and stated his case for something much more drastic. He based it on what he described as the “fantastically unequal distribution of wealth” in this country, and urged that there should be a regular annual tax on accumulated wealth itself, not just on the increase of it. He pointed out how easy it would be to collect such a tax because it need be levied only on the 800,000 people who own £20.000 or more and possess between them nearly half of the total personal wealth. (He also thought that the total of personal wealth and the inequality of ownership are probably even greater than the official figures show).

Each time someone like Mr. Brittan comes along to advocate a new scheme for reducing inequality he has to explain why earlier schemes failed. Mr. Brittan recalls the death duties, which in their day were supposed to do the trick, and tells us. what is indeed common knowledge, that death duties “have become a farce." He quotes one example, the Ellerman fortune, but does not tell its interesting history.

In 1933 death duties reduced the fortune from £40 million to £18 million. By 1937 it had increased to the original £40 million and it is now reported to be about £100 million!

Other nostrums for dealing with inequality have included taxation of land values (in the Liberal Programme in 1892), supertax and surtax and taxation of company profits. There was, too, the movement for a “capital levy” after the first world war, favoured by Liberals. Tories, and the Labour Party, but dropped on grounds of administrative difficulties and probable disturbing financial effects.

If it had been imposed it would merely have been a transfer of wealth among wealthy persons, not a reduction of the wealth and income of the propertied class. And nationalisation in some muddled way was supposed by the Labour Party to have the effect of lessening inequality.

After all those years and all these “cures” capitalism exhibits just the same “two nations" that the Tory Disraeli described over a century ago.

One man who saw capitalism as it really is was the banker R. H. Brand (later Lord Brand) who in 1923, in a booklet "Why I am not a Socialist" wrote: “There has always been and there will always be inequality of wealth . . .  nothing like equality can be attained without the abolition of the whole present system of wealth, ownership and production.”

As a wealthy man who prospered under capitalism his attitude was understandable. By the same token the working class should give up following futile schemes for achieving the impossible dream of an equalitarian capitalism. Their interest lies in establishing Socialism,

False Distinctions (1969)

Book Review from the February 1969 issue of the Socialist Standard

Left or Right: The Bogus Dilemma by Samuel Brittan (Secker and Warburg, 25s.)

For quite different reasons, Samuel Brittan, Economic Editor of the Financial Times, argues two points we have been making for years. First, that the left/right distinction is virtually useless for analysing political views. Second, that the Labour/Tory struggle is, in his own words, 'shadow boxing' and a ‘sham party war' in which differences are exaggerated or manufactured while what they agree on is obscured. Labour and Tory are Tweedledum and Tweedledee and ought, says Brittan, to recognise this.

The terms ‘left' and ‘right' go back to the meetings of the States-General in France in 1789. The nobles sat on the king’s right while the commoners sat on his left. The two sides were divided on the issue of the powers of the king. Throughout the nineteenth century in France and some other European states the left/right distinction was that between republicans and monarchists. Only later did it acquire its present vague meaning as a distinction between the opponents and supporters of capitalism, and it is only since the 1920’s that the terms have been used with reference to politics in Britain.

Confusion has arisen because most of those who claimed to be socialists in fact stood either for reformed capitalism or for state capitalism. The Socialist Party of Great Britain has always refused to be tagged “leftwing” because of the term’s links with reformism and state capitalist Russia. We are socialists and opposed to those who call themselves the Left. Now others too are realising that the view of the British political scene as the forward line of a soccer team—with the Communists on the Left Wing, Labour at Inside Left, the Liberals at Centre Forward, the Tories at Inside Right, and the fascists on the Right Wing—is irrelevant and silly.

Brittan is concerned that this confusion helps obscure the real issues facing British capitalism. He lists a number of trivial matters like devaluation, the Common Market, East of Suez and planning on which, in his opinion, party shadow boxing delayed the necessary action. He reveals himself as a floating voter unable to choose between Labour and the Tories (though he has probably always voted Labour). We are concerned that this confusion helps obscure the real issue facing the workers: capitalism or Socialism?

Adam Buick

What the papers don't say (2): The broadsheets (1999)

From the June 1999 issue of the Socialist Standard

We conclude our examination of the capitalist press. Last month we dealt with the tabloids. This month it's the broadsheets.

Although there has been a general contraction of newspaper reading since the 1960s, there is one area that has bucked the trend: this is financial journalism. Here we find in the British press almost a model of probity. Financial reporting is factual, reasonably accurate, and does not exhibit any of the hysteria rightly associated with the downmarket press. Whilst the tabloids may be screaming blue murder about some take-over by a foreign company of an English one (a notable example was the take-over of Rover by BMW), the Financial Times, by comparison, will actually report the intricate financial details—the financial facts.Why does the financial press behave like this? The papers take the power of the City seriously; as well they might since the City is seriously powerful. The levels and detail of financial journalism have increased steadily in all the broadsheet papers since the 1960s. In that time the Financial Times has become, arguably, the most successful heavyweight paper. One can only begin to imagine what its corporate sales must be like; it is difficult to imagine a financial department or institution anywhere in Britain that does not take at least one copy of the Financial Times. Unlike the tabloids, the broadsheets print detailed and accurate business information. Who reads these papers? Why the capitalists and those who run their businesses of course! Bullshit for the workers—but information for the capitalists.The financial press has, over the years, gained autonomy from other sections of the press, and has also cultivated a really rather cosy relationship with Whitehall and its various departments. For instance Denis Healey, who could never be described as having an easy time of it with the press during the 1974-79 Labour government, described his relationship with the financial press like this:

"I regularly invited the top editorial staff of the leading newspapers to dinner, and accepted their invitations in return. I would discuss my problems frankly with them, and never had a confidence betrayed. As a result, at least they understood what I was trying to do, even if they did not approve of it. However much I deplored their criticisms, I rarely felt it was unfair. This was true at least of the so-called 'quality press', including newspapers which supported the Conservatives." (The Time of My Life, pp. 442-3).

One important and identifiable role that the financial press came to play in the politics of the 1980s was the switch away from Keynesian economic policies which unravelled so disastrously in the late 1970s, to the Chicago Monetarist policies which unravelled so disastrously in the late 1980s. The major players in this scenario were Samuel Brittan of the Financial Times, and Peter Jay, and William Rees-Mogg of the Times. Also important here was Nigel Lawson, Chancellor of the Exchequer from 1983-89, and who was a Financial Times journalist from 1956 onwards. All four of these men came from Oxford or Cambridge, and had remarkable family connections in the field of politics and finance, and were all converts to Friedmanite Monetarism. Wayne Parsons in his The Power of the Financial Press argues that the Times and the Financial Times introduced monetarism to Britain, ahead of the Treasury civil servants, the Bank of England, and the academic consultants.

In line with the increasing globalization of capitalism the Financial Times, in 1979, began its first foreign printing in Frankfurt. It currently gets 50 percent of its circulation and over half of its advertising revenue from outside Britain. The massive polarization is obvious: whilst The Sun exudes xenophobia "Up yours Delors", and "Hop off you Frogs", the capitalist papers of choice are international in scope, and provide hard facts.  

Lobby system

The tabloids deliberately limit the quantity and quality of their political coverage to screaming abuse, and then only for a small part of the paper, so as not to alienate the voters whose political party is being abused. The broadsheets, meanwhile, carry much more political news and comment. This is obtained through the lobby system. Very simply, this involves lobby journalists being allowed to speak informally to politicians in the lobby of the debating chamber in the Houses of Parliament; these stories can then be used on a "non-attributable" basis. Although television has impacted upon this scene with its various "on-the-record" interviews, the lobby system remains potent and mischievous. Here the picture gets very muddy indeed.

Politicians use lobby journalists to leak information that might:

• damage the opposition,
• damage a fellow politician with whom they have fallen out,
• to fly the kite as it were - to experiment with policy to see how it will go down,
• or simply as an opportunity to trade points of view.

This situation is made more problematic in that the lobby system is essentially self-policing, and self-censoring, according to unwritten and ill-defined rules. Nowadays the various spin-doctors are extremely adept at manipulating the journalists, in order to spin a story that may deflect attention from other things that are going on, or to put a different spin on another story from another non-attributable source, and so it goes on.

But arching over these various machinations is the market. Journalists need to move copy, and nothing does so like a crisis. Papers feed on crises. It is the media that provides the image and framework of "the crisis". Once the papers have reached the "crisis" conclusion, the government can either deny the crisis, and thus give the original story more weight and run the risk of "Crisis, what Crisis?" headlines, or ignore the situation and be accused of inaction and incompetence.

Jeremy Tunstall, in his book Newspaper Power, has identified a pattern to the media crisis. Once there has been one "crisis", this is usually followed by a couple more. Once the press's appetites have been whetted, and circulation temporarily increased by the "crisis"—another is the journalistic equivalent of manna from heaven, and so a rather ordinary event may be promoted to the crisis league.

So what have we learned? The press was recently described by the ex-chancellor Kenneth Clarke as a bucking bronco which he was continually forced to ride. For the Socialist the press can sometimes be a goldmine of information. Occasionally, in the oddest places, the press pay unwitting testimony to the lunacy of capitalism. We don't want to suggest for a moment, that there is nothing but lies in the press; rather that the capitalists, as the newspaper owners and users, as political movers and shakers, have the press as part of their armoury with which to dominate and subdue the working class.

At the same time they have inevitably created a warped and highly unstable instrument of communication, which has its own internal rules, and which plays a massive power game with the capitalists representatives in Parliament. The capitalists of the late twentieth century make sure that it is their message that gets across. Whilst the workers are encouraged to be parochial and xenophobic when the occasion demands, the capitalists and their papers have expanded their field of operations world-wide.

Intellectual vacuum

Newspapers exist in a dialectical relationship with the capitalist system, "bucking bronco", "a snapping rottweiler"; this kind of metaphor has been used by the politicians who benefit from press coverage. However, the press is there to sell papers and who can predict what they are going to have to do in future in order to achieve this.

There is a literary theorist called Pierre Macherey who wrote in his book A Theory of Literary Production that "a text says what it does not say". His argument is that the silences in a book or a play or indeed a newspaper are as significant as what is said. It is the work's silences that give it form. He argues that in order to really know a work we must, in his words, "move outside it". Then to question the work: "the work has its margins, an area of incompleteness from which we can observe its birth and its production. It is not what the work refuses to say that is important, but rather what it cannot say". Put simply we have to read between the lines, but more than that we have to understand why we are having to read between the lines, and to understand why certain things cannot be said by the press.

For example, when increased emphasis upon personalities replaces real political debate—this happens in all the papers and is justified by extremely erudite pieces in the heavyweights—why does this happen? From a Socialist's point of view it's easy: image increases in directly inverse proportion to content. The Nazi Nuremberg rallies were all lights, loud music, excessive amounts of Wagner, and ranting meaningless rhetoric; a bit like Tory and Labour conferences of today (except without the Wagner). The Nazi's rhetoric of blood and soil had to be couched in these terms, because like the politics of today it was an intellectual vacuum.

The future will re-evaluate the tabloids not for what they said, but for what they did not say. Imagine being in the position of having to explain to a couple of aliens from outer-space why the gold-blend couple (the couple from an advert) were given front page status in the biggest-selling newspapers in the land, when a third of the population of the world were starving. A monumentally difficult task to do without slipping into platitudes.

In a sane world information would be available not because it was saleable, but because it was necessary. Some information is boring, but necessary; some is interesting and fun. All will be available in a socialist society without the distorting lens of the market getting in the way to inflate, downgrade, change, or otherwise manipulate the information we need.

It's easy to disbelieve everything we read in the papers, the more difficult job is to realize what we are not reading in the papers, to identify where the silences and areas of incompleteness lie. Socialist understanding undoubtedly makes this job easier, but it is faced with a deluge of scrambled and partial truth, unconscious misrepresentation, and downright lies. Karl Marx once said, "The first condition of the freedom of the press is that it is not a business activity". How right he was.

Jacek Krause

So you want Inflation to be stopped? (1974)

From the February 1974 issue of the Socialist Standard

The great majority of workers think how happy they would be if only someone would bring inflation to an end. Sooner or later their wish will be granted, but it will not make them happy.

Ending inflation means ending the continuing rise of prices caused by currency depreciation, by far the largest single element in the thirty-six-year rise which has brought the price level now to more than five times what it was in 1938.

Of course the people who wrongly attribute the rise of prices to workers’ wage claims, or to taxation, or to the greed of manufacturers and shopkeepers, or (like Peregrine Worsthorne) to the “spirit of evil”, will not believe it possible to end inflation. But depreciation of the currency is due to none of those causes. It is the result of excess issue of the currency, something for which the Government alone is responsible. Inflation has gone on since 1938 by the action of successive governments, the wartime Tory-Labour-Liberal coalition, and the various Labour and Tory governments since 1945. What governments do can be undone by governments. It has happened twice before in this country: on a small scale after the Napoleonic Wars, and on a bigger scale after World War I.

The increase of prices since 1938 has been faster at some times than at others but latterly it has speeded up: in the past twelve months about 10 per cent., with expectation of a faster rate in 1974 (added-to by other factors such as harvest failures and the price squeeze by the oil producers). One guess for 1974 is 14 per cent. If that rate continued the price level would double every five years.

During and after World War I prices rose much faster than since 1938. In the four-and-a-quarter years of the war the price level more than doubled, but the really fast increase came afterwards. Between June 1919 and November 1920 the rise was 35 per cent., equivalent to 25 per cent, a year. Capitalism was having a short-lived boom, unemployment was very low and wages were rising faster than prices. Trade union membership, 8,337,000 in 1920, was at a record level never reached again until after World War II.

Then the government decided that the time had come to end the wartime currency depreciation and get back to “normal”. On the recommendation of a Committee of Inquiry, the Cunliffe Committee, the Bank of England was instructed to limit the note issue. This was in December 1919. For a time prices went on rising but five months later wholesale prices began to drop, and retail prices followed nine months after the new restriction was applied.

Wages began to fall, by a total of 33 per cent, in 1920-24: prices fell rather less. The trade unions lost nearly three million members. Unemployment jumped from 400,000 in 1920 to 2½ million in 1921 and then stayed at well over a million until the next crisis in the nineteen-thirties when it reached nearly 3 million.

The trade unions did their best to resist the reduction of wages but could not prevent it. In 1921 the number of days lost through industrial disputes was nearly 86 million, far more than in any subsequent year except the year of the General Strike. (In 1972 it was under 24 million days.)

It is interesting to consider why currency depreciation was halted after World War I and not after World War II. One very important factor has been the change of attitude among most politicians and economists, brought about by the popularity of Keynesian economics. Under the guise of “government management of the economy” to promote expansion and “full employment” it had become respectable, and other means such as wage and price controls were sought to keep price rises within limits. Samuel Brittan in the Financial Times (3rd Jan. 1974) calls it the policy “to print enough money to preserve employment”. Writing about the past two years he says:

The Government, Confederation of British Industry and TUC were all agreed that we should make another “dash for growth” — by which, of course, they meant large Budget deficits financed by printing money. The only instrument for containing the strains to which such a policy always gives rise was the fig-leaf of “incomes policy”.

While all the time protesting about rising prices, the trade unions and TUC have been solidly behind the policy for the past thirty years.

It was only when unemployment, after pushing upwards for a decade, went over the million mark in 1972 that Enoch Powell’s policy of repeating what was done in 1920 began to gather backing among employers and Tory MPs.

So where do the workers stand? They can have unemployment with inflation or unemployment without inflation. (In the period 1920-23 when prices were coming down fast in Britain they were shooting up fast in Germany, with unemployment reaching peaks in both countries!)

Of course the workers, when they so decide, have the alternative of getting rid of capitalism.

Edgar Hardcastle

Marxian Economics in the Modern World (1973)

From the September 1973 issue of the Socialist Standard

Economists claim that they can get behind surface appearances and tell us what really determines such things as prices, wages, profits, foreign exchanges, market demand, unemployment and so on, and what will be the consequences of developments in industry, or of government measures in the field of taxation, currency, and wage and price controls. The test for any economic theory is a practical one. Was Marx right, for example, in denying the proposition that wage increases are useless because they put up prices? Or was Keynes right in claiming that if governments take certain action they can ensure continuous full employment? With this practical consideration in mind the question presents itself: have Marx's economic doctrines, elaborated a hundred years ago, any relevance today, or was Keynes right when he described Marxian economics as "not only scientifically erroneous but without interest or application for the modern world"?

Before answering the question it is useful to note how and why the study of Marxian economics has changed with the passage of time.

In Britain and other countries in the "Western" world interest in Marx's philosophical and political writings has never been so great as it is now, as is shown by the flood of reprints and of new works about Marx. Partly this is a sympathetic interest but partly also a by-product of the "Cold War". In the nineteen-sixties influential American politicians (among them Richard Nixon when Vice-President, and Allen Dulles, Director of the Central Intelligence Agency) were urging the need for schools to include the study of Marx in their curriculum so that there would be a better understanding of the then "enemy", Soviet Russia, its leaders and their policies. But interest in Marxian economics has followed a different course from that of other Marxist studies. The twenty-year "Great Depression" of the last quarter of the nineteenth century forced governments, economists and business men to look for an explanation of the seeming universal "overproduction", an explanation they could not find in the works of older economists, and Marx came in for a great deal of attention if only to combat the growing interest in him shown by dissatisfied workers and their organisations. This continued right into the years of the next acute depression in the nineteen-thirties. Then the scene was drastically changed by Keynes' rise to fame, based on his confident demonstration that governments need no longer put up with idle factories, falling profits and mass unemployment, with all their devastating economic and political consequences.

Keynes ousts Marx
The effect of the Keynesian upsurge on the study of and interest in Marxian economics was striking, not only in the universities but also in the political parties and trade unions. At the universities further study of Marx became irrelevant - why waste time on reading difficult works such as Capital, that "obsolete textbook" as Keynes called it? What happened was that Marx came to be regarded as an example of discarded error. As Professor Robert Freedman put it in 1961: "Most students of Marxian economics rarely read the master, but are content to let his critics speak for him".

In Britain the Tory, Labour and Liberal Parties found common ground as disciplines of Keynes, or of what they (sometimes mistakenly) believed to be Keynesian doctrine. The official Labour Party version in 1944 was in the following terms:

If bad trade and general unemployment threatens, this means that total purchasing power is falling too low. Therefore we should at once increase expenditure, both on consumption and on development, i.e. both on consumer goods and capital goods. We should give people more money and not less, to spend.

The trade unions were delighted to welcome the prospect that a future Labour government (or even a Tory one) would encourage them to press for higher wages. How much more pleasing this was to them than the customary action of employers (backed by the 19th-century economists) of seeking to restore profit margins in a depression by reducing wages; or than the teachings of Marx that capitalism's periodic crises and depressions happen anyway and neither higher nor lower wages will prevent them. The trade union enthusiasts for Keynes failed to notice that what he was proposing to meet such a situation was to reduce the workers' real wages by putting up prices instead of reducing their money wages.

One effect of the Keynesian cult was that a number of people who had called themselves Marxists recanted (John Strachey, for example, who took office in the Attlee Labour government) and the group of trade union officials and Labour MPs who had studied Marxian economics became silent. The Communist Party of Great Britain, which continued to urge the study of Marxian economics by its members, had no difficulty in simultaneously supporting the incompatible Keynesian doctrines of the Unions and the Labour Party.

But now the scene is changing again and there is the beginning of a revival of interest in Marxian economics. Two happenings have brought this about, the growing recognition of the failure of full-employment policy and the unprecedented and uncomprehended rise of prices.

Because, for other reasons, unemployment happened to be very low in Britain and many other countries in the first decade after the second world war, it was easy to represent this as a proof that Keynes was right, but in Britain the steady climb of the peaks of unemployment since 1955 back at least to pre-1914 levels, has induced re-examination of the problem. The rise of registered unemployed to over a million in 1972 with probably another half-million not registered could not be disregarded, and some who had written Marx off are now wondering whether perhaps he was right and that capitalism inevitably creates unemployment; low in boom times and rising in depressions to peak levels.

Keynes and Marx confront each other about the problem of unemployment and, in an indirect way, about the problem of inflation. When Keynes formulated his theories in the nineteen-thirties unemployment was in the region of two million, but prices had been falling for most of twenty years, so not high prices but high unemployment was the preoccupation of governments and economists.

In 1944 when the three parties in the wartime coalition government issued their joint Keynesian statement on post-war policy it held out the prospect of full employment, steady growth of production and more or less stable prices. The one they were then most apprehensive about was unemployment but now successive governments feverishly grapple with all three problems together. As prices are more than five times what they were in 1938 and rising fast, inflation is declared to be enemy No. 1 in 1973. It finds most of the politicians and economists completely baffled, so that they offer such childish explanations as that the general price rise is caused by wage claims or by the greed of the bankers, manufacturers and retailers - as if trade unions were not doing their utmost to push up wages and employers doing their utmost to push up prices in the nineteen-twenties when prices and wages were falling fast in spite of all their wishes to the contrary.

Marx in Capital provided a comprehensive explanation of the factors which govern prices, including general rises of the price level caused by an excess issue of an inconvertible note issue. It was an application of his labour theory of value. Most economists not only reject it but see no need for any theory of value, yet ironically Keynes accepted it completely. His exposition of inflation in his Tract on Monetary Reform reads like a paraphrase of Marx, as indeed perhaps it was. Although Keynes advocated a short-term deliberate increase of prices in certain circumstances he was not a crude inflationist and if he had lived into the post-war inflation it is probably that he would have disowned what was being done in his name. Yet the responsibility was largely his because it was he who influenced economists and through them governments to take off all formal restrictions on the note issue in the belief that it is not necessary.

To complete the comparison between Marx and Keynes it must be remembered that while Keynes concluded from his studies that capitalism can be controlled and managed in such a way as to avoid booms and slumps and secure continuous full employment, Marx held no such view. Keynes said that capitalism could and should be saved, Marx held that it had outlived its role in human society and should be replaced by Socialism.

Marx made many other valuable contributions to economic theory. His explanation of the cycle of booms and depressions removes the mystery from the superficial appearance that the population sometimes seems to be too small and at other times too large; and that in one phase there appears to be "too much money" and at others "too little", the reality being that in a boom the capitalist wants to turn his cash into means of production and in a slump wants urgently to turn his commodities into cash.

His analysis showed how the periodical big expansions of production depend on the existence of a "reserve army" of unemployed - something being demonstrated at the present time when the short-lived boom is already being threatened by shortage of workers.

One of the failings of many modern economists is their confusion about what constitutes an increase of productivity. The labour theory of value shows that the amount of labour needed to produce a commodity includes the labour at all stages, not merely the final stage of the production process. For a table or chair, for example, this includes the growing and felling of the timber, its processing and transportation as well as the final process in the furniture workshop, and an increase of overall productivity per worker cannot be measured by technical changes in the workshop alone. Appreciation of this would have obviated the common wildly-exaggerated estimates of the effects of mechanisation and automation.

Marx also showed the fallacy of the belief that booms are created by bank lending; the expansions and contractions of credit being not the causes but the symptoms of the trade cycle.

Marxian economics in Russia
Trying to estimate the influence of Marxian economics on the administration of State capitalism in Russia and other Comecon countries in which the study of Marx is official dogma comes up against many difficulties, not the least of which is the difficulty of deciding whether the official reason given for any government policy is the real one: government double-talk is at least as common in Russia as in the rest of the world. In Russia it takes the form that publicly everything the government does has to be presented as "Marxist" and when the policy is reversed that too is "Marxist".

We can take for example the question of depreciation of the currency. As sometime students of Marxian economics Russia's rulers should know that an overissue of inconvertible paper currency causes inflation, and they used to claim that this could only happen elsewhere, not in Russia - until it did happen in Russia and was drastically dealt with in 1947 by the issue of a new currency. What we don't know is whether they blundered into their inflation in ignorance, or whether it was by design as the easiest method of financing government expenditure.

A specific charge that the Russian government has been influenced by, and led astray by, Marxian economics is made by Harry Schwartz in the Introduction to Marxian Economics edited by Robert Freedman (Pelican Books 1961). The charge is that the labour theory of value led the Russian government to suppose that "interest on capital" does not need to be taken into account as a cost. He says that the Russian planners chose hydro-electric power stations in preference to coal or oil-fired stations because the latter need fuel and the former do not and therefore the hydro-electrical stations must produce electricity more cheaply; but they disregarded the much larger amount of capital required for hydro-electric stations.

All this proves, if true, is that the Russian government, like Mr. Schwartz, did not understand the Marxist labour theory of value; for it includes in the value-forming socially-necessary labour required to produce a commodity (in this case electricity) the value transferred from the plant and machinery.

Like any other constituent of constant capital, machinery does not create any value, but yields up its own value to the product it serves to beget. In so far as it has value and therefore transfers value to the product it forms an element in the value of the product. (Capital Vol. 1, Alien & Unwin edition, p.410)

Schwartz also charges that the labour theory of value has not "provided any very useful guidance for the setting of prices by Soviet planners".

This is not surprising and does not support Schwartz's belief that there is something wrong with the theory. Marx was describing a capitalism in which the prices of commodities are determined under the play of market forces, not a state-capitalist form in which the kinds of commodities, their quality and their prices are centrally fixed by the planners. If this has resulted, as recently reported, in there being millions of pairs of shoes in the shops which customers do not want this has nothing to do with Marxian economics.

Marx and the Vulgar Economists
Marx made a distinction between such men as Petty, Adam Smith and Ricardo and their successors. He wrote of the former that they devoted their efforts "to the study of the real interrelations of bourgeois production", while the latter were "content to elucidate the semblance of the interrelations" and to act in effect as apologists for the capitalists (Capital Vol. 1, Alien & Unwin edition p.55). His use of the terms "classical" and "vulgar" to describe them was one of the very few things that Keynes acknowledged having borrowed from Marx.

What of the modern economists, now numbering many hundreds? Few of them even claim to be serious students in the way that Smith, Ricardo, Marx and Keynes were. To quote what Marx wrote of their predecessors, "they spend their time in chewing the cud of materials provided by others", and "proclaiming as eternal verities, the most trivial and self-complacent notions which the agents of bourgeois production entertain with regard to their own best of all possible worlds".

Some who do have a better understanding of capitalist problems complain that they are talking to the deaf ears of politicians. Nothing written by Marx about the vulgar economists of his day was more harsh than criticisms of modern economists recently made by Samuel Brittan, himself an economist, and by The Economist.

Samuel Brittan, contrasting modern economists with Smith and Ricardo, had this to say:

Economists do not exist mainly to promote enlightenment, to discover how the economy works or for other such vague and worthy purposes. Like other producers, economists survive and prosper by studying the market and supplying what it appears to want. (Financial Times, 28th October 1971)

And The Economist (2nd June 1973) in an unsigned editorial, also making comparison with Adam Smith, wrote:

If economists today took more trouble to explain in simple language what they are trying to prove and what relevance it might have, the gulf between theory and practice might be closed somewhat. As it is, more and more economists fill more and more pages of learned journals with an endless stream of ill-written, verbose, half-baked mumbo-jumbo which has as much value to policy makers as the chattering of starlings.

When modern economists dismiss Marxian economics as difficult, unscientific and without application it is fitting to bear in mind who are the people who make the charge.

Edgar Hardcastle

An Edgar Hardcastle page has just been opened on the Marxist Internet Archive.