Finance & Industry: Our educated politicians (1961)

The Finance and Industry column from the February 1961 issue of the Socialist Standard

Our educated politicians

In an interview published in the Observer (8.1.61) the banker Lord Brand, asked if he thought that academic economists do more good than harm, replied that they are extremely valuable. He claimed that through the studies of Keynes and other economists knowledge has grown and this “has altered the whole picture of economic life”. Possibly because Lord Brand would hesitate to claim that economic life has altered particularly (“I do not think we have an easy time ahead of us in the next year or so”) he went on to blame the politicians for not accepting the good advice of the economists.

He recalled the reparations chaos after the first world war, when the politicians (backed however by 3 out of their 7 banking economic advisers) insisted on exacting impossible reparations from Germany. Lord Brand says: “It was clearly mad at the time to those who would, and could, see, and were prepared to act accordingly. But the people who had control of policy could not see”.

He singles out Lloyd George—”Like most statesmen of the day, he knew little or nothing of finance”—yet Lloyd George had been Chancellor of the Exchequer. But it appears, according to Lord Brand, that Lloyd George insisted on the mad policy because he had boasted of squeezing Germany “till the pip squeaked” and dared not back down for fear of losing political support among voters as blind as he was.

But in the second world war the statesmen appear not to have changed much. Lord Brand tells how Churchill and Roosevelt, on the advice of Morganthau, Secretary of the U.S. Treasury and with the agreement of Lord Cherwell (a “highly intelligent” man) adopted a plan to reduce Germany to a purely agricultural country. Lord Cherwell’s defence of his action was that the British Government wanted a loan from America and acceptance of this fantastic plan would make it easier to get the loan.

Capitalism 1961

Lord Brand’s complacency about the altered picture of economic life reads oddly in face of the motor car slump and the looming difficulties facing international trade and currencies. The years between the wars were spent creating currency collapse in one country after another and then laboriously re-establishing stable currencies. After World War II it was all supposed to be different but now Professor Meade is warning of the drastic remedies that he thinks may be necessary because of America’s loss of gold, so he proposes that the dollar and the pound should be cut adrift from their existing link with gold.

The Guardian in an editorial (3.1.61) remarks “Undoubtedly a period of chaos would follow. Professor Meade feels sure that stability would return at a new level of exchange rates within six months. Perhaps so; but in the process the structure of the International Monetary Fund, one of the greatest achievements of international collaboration in our generation would have been laid in ruins “.

One prospect seen by the Guardian is that “soon the Russian rouble might be the only major currency with a fixed gold parity “.

This seems ironical to the Guardian but only because they persist against all evidence in believing that Russia is not a great capitalist power, but something else.

Flood Havoc in China

Through floods and storms China is threatened with what may be a catastrophic fall of food supplies. In a Socialist world such an event would be met by movement of supplies from elsewhere. But under capitalism a different set of values rules. America, Canada and other countries have masses of food they cannot sell profitably. The Times (20.12.60) reported that in the four chief exporting countries America, Canada, Argentina and Australia, “the end-of-season carry-over on July 31 next are expected to reach the unprecedented total of 60,400,000 tons, a rise of 7,500,000 tons on the year”.

So what problem can there be? But capitalist trade and rivalries create problems. The American government when it wanted to give wheat away or sell it cheaply met opposition from the other exporting countries, who feared this would reduce world prices and cut into their own sales. Secondly there are those who on political grounds would object to help being given to China, and according to Mr. Cyril Osborne, M.P., who was recently in Peking, there are politicians in that country who reply that the Chinese people “would rather starve than eat American food or accept American charity”. (Daily Telegraph, 3.1.61). (The starving might give a different answer).

According to Reynolds News (1.1.61) projected Canadian sales of their surplus to China are likely to meet with objections from the American government.

In the meantime the American food stocks are being nibbled at by the recently increased numbers of unemployed :

“In September 3,200,000 Americans were given food from the surplus supplies held by the government”. (Guardian 2.1.61).

Speculating in Misery

Under the heading “It’s an ill Wind” the Financial Times (9.1.61) had the following:

“Americans, by their law, may not trade with Communist China. But no law stops them speculating on the effects of China’s misfortunes, and for the past week they have been rushing to do just that. Scene of their operations is the Chicago soybean (spelt this way in America) market, biggest commodity futures market in the world.

The present bout of speculation in soya-beans and their products began three months ago, as reports of crop disaster began to seep through from China, only big soya-bean producer apart from America itself. People in the trade saw then that if the usual Chinese exports did not reach Europe, American beans and oil would have to go instead. So they put their money on a rise in the market.”

Edgar Hardcastle

Russian Imperialism (1948)

From the April 1948 issue of the Socialist Standard

If, in 1918, the words and deeds of the Bolsheviks inside Russia stirred the imaginations of workers everywhere, so also did their abrupt reversal of foreign policy. They preached “no annexations, no indemnities," called on all workers to repudiate the aggressive policies of their governments, and demanded the ending of the war. They published the sordid treaties in which the Allied Governments had secretly agreed to dismember Turkey and divide up the rest of the spoils of war. They renounced Czarist Russia's century-old aim of controlling the Dardanelles, and voluntarily gave up the Russian “spheres of interest” in China and Persia extorted by force from governments too weak to resist. They proclaimed the right of "self-determination" and allowed Finns, Poles, Estonians, Latvians and Lithuanians to secede and become independent states. They denounced the annexations of territory and demands for reparations imposed on the defeated countries under the Versailles Treaty, and vigorously attacked the whole idea of backward peoples being exploited as colonies and protectorates by the imperialist powers. They preached internationalism, opposed militarism, and encouraged their followers in all countries to seek the reduction or abolition of armies, navies and air forces.

All of that was 30 years ago. Now Russia stands forth as a great imperialist power, armed to the teeth, trying to overtake America in atom bomb production, glorifying nationalism and militarism, and entering into the competitive struggle with the same plundering aim as the other imperialist powers.

How far Soviet Russia has departed from the earlier anti-imperialist proclamations of the Bolshevik party can be seen by comparing its present actions and attitude in foreign affairs with the views of Lenin in his work “Imperialism, the Highest Stage of Capitalism," written in 1916. (See Selected Works of Lenin, Vol. 5, Lawrence & Wishart, London, 1936.) Lenin condemned the imperialism of all the powers, but because of the Russian censorship he had to illustrate his case by avoiding reference to Russia and mentioning only Japan. Writing a year later in the 1917 Preface Lenin explained this:—"I was forced to quote as an example—Japan! The careful reader will easily substitute Russia for Japan, and Finland, Poland, Courland, the Ukraine, Khiva, Bokhara, Esthonia and other regions peopled by non-great Russians, for Korea." (1917 Preface, Collected Works, Vol. 5, p. 6.) He instanced Japanese imperialism in Korea. Now by an ironical turn of events Northern Korea is occupied, not by the Chinese from whom Japan annexed it, but by Russian troops (while Americans hold the southern half). Now also Russia has a base on Finnish territory; has annexed about a third of Poland (while Poland has compensated itself by taking territory formerly in Germany); and has incorporated the Ukraine as a Republic in the Soviet Union. Esthonia has been annexed—the vote endorsing this being taken with Russian troops in occupation; likewise Courland, part of what, between the wars, was independent Latvia. Khiva and Bokhara, conquered by Czarist Russia and reduced to vassal states in 1873 are now republics in the Soviet Union.

Lenin's statement that "the war of 1914-18 was imperialistic (that is, an annexationist, predatory, plunderous war) on the part of both sides; it was a war for the division of the world, for the partition and repartition of colonies, ‘spheres of influence' of finance—capita), etc." (1920 Preface) can as truly be applied to World War II, Russia again being one of the predatory powers, but this time with greater success than then fell to the lot of the Czarist regime. Examples in great number could be quoted showing the many regions in which the Russian expansionist drive is operating, by methods reminiscent of Russia's Czarist past and of British, Japanese and German imperialisms in their heyday.

At the Yalta Conference in 1945 and again in August, 1946 (see Daily Telegraph, August 13th, 1946, and Daily Worker, August 14th, 1946), the Russian Government revived the old Czarist demand to have a base on Turkish territory from which to control the Dardanelles. This had been preceded some months earlier by a campaign in the Russian Press for the annexation of large areas of Northern Turkey. Part of this territory had been ceded by Russia to Turkey in 1921 after a plebiscite had been taken. No one can reasonably quarrel with the Communist argument (Daily Worker, January 12th, 1946) that the vote was a farce because taken whilst Turkish troops were in occupation, but exactly the same can be said of Russia's annexation of the three Baltic Republics in 1940.

As has been mentioned it was the Bolsheviks who exposed the secret treaties of the first world war. In the second world war it was the Russian Government which had its imperialist claims embodied in a secret agreement signed by America and Britain at the Yalta Conference in 1945. As a condition of entering the war against Japan Russia was to be allowed annexations and spheres of influence at the expense not only of Japan but also of China, Russia’s ally! Under the agreement, which was made without the knowledge of the Chinese Government and was not published until a year later, Russia not only received the strategically important Kurile Islands and Southern Sakhalin, rich in timber, minerals and oil, but also received recognition of Manchuria as a Russian sphere of influence though it was Chinese territory until annexed by Japan in 1931.

The agreement was subsequently published by the British Government (Command Paper 6735, 1946). The relevant clauses read as follows: —

1. The status quo in Outer Mongolia—the Mongolian People’s Republic—shall be preserved.

2. The former rights of Russia violated by the treacherous attack of Japan in 1904 shall be restored —namely,

   (a) The southern part of Sakhalin as well as all the islands adjacent to it shall he returned to the Soviet Union.

   (b) The commercial port of Dairen shall be internationalised, the pre-eminent interests of the Soviet Union in this port be safeguarded, and the lease of Port Arthur as a naval base of the Soviet Union restored.

   (c) The Chinese Eastern railway and the South Manchurian railway, which provide an outlet to Dairen, shall be jointly operated by the establishment of a joint Soviet-Chinese company, it being understood that the pre-eminent interests of the Soviet Union shall be safeguarded and that China shall retain full sovereignty in Manchuria.

3. The Kuriles shall be handed over to the Soviet Union.

Clause 1, referring to Outer Mongolia, meant that the Government of China would be expected to confirm recognition of the independence of this formerly Chinese territory. The required recognition was given in January, 1946. Outer Mongolia, nominally independent, is now in close military and economic dependence on Russia.

The Kuriles and Sakhalin had been objects of the rival Japanese and Russian imperialists since 1875, Russia being forced to leave the former and the southern half of the latter after her defeat by Japan in 1904-5.

The granting of the Russian claim to Port Arthur is described as a “restoration"—so it was, but not to the original owners. After the Chino-Japanese war, 1894-5. Japan annexed it from China but was expelled by Russia, France and Germany on the plea that the occupation threatened the independence of Peking; in spite of which China was then forced to lease it to Russia. Dairen likewise was, under pressure, leased by China to Japan in 1915.

Members of the Chinese Government were quick to protest against the Yalta secret agreement as being “contrary to the Atlantic Charter." (Times, February 25th. 1946). and the following news, item indicates that some of the Chinese are still not prepared to accept it: —

“The Chinese People’s Political Council yesterday adopted a resolution urging the Chinese Government to demand the return to China of Port Arthur and Dairen, which have been occupied by Soviet forces since the collapse of Japan.’’ (Sunday Despatch, March 14th, 1948.)

The fact that the Yalta Agreement contained the face-saving clause about China retaining “ full sovereignty in iManchuria” deceived nobody, least of all the Chinese Government, and the following shamefaced comment was made by the London Observer (February 17th, 1946); —

“The surrender at Yalta of China’s rights in Manchuria to Russia as the price of the latter’s entry into the war on Japan was no matter for pride, whatever the gain in speeding victory . . . . the fact remains that China’s rights in a region more important to her than any disappeared. Dr. T. V. Soong obtained some modifications of the Yalta terms in the subsequent Russo-Chinese Treaty. But since then Russia has stripped Manchurian factories of machinery and still fails to withdraw her troops. Urgent diplomatic pressure in Moscow is our immediate due to China.’’

On coming to power in 1917 the Bolsheviks relinquished all the Czarist claims and rights to spheres of influence and oil concessions in Northern Iran (then known as Persia). In 1946, with Russian troops in occupation, the Iran Government was forced to agree to the re-imposition of much the same Russian privileges. The form taken by this new Bolshevik imperialism was the setting up of a joint Russian-Iran company to exploit the oilfields for 50 years, the important point being, however, that majority control would be in Russian hands for 25 years. For the next 25 years the control would nominally be equal but not until the expiry of 50 years would the Iran Government have the right to buy out the Russian half of the shares. The text of the clause relating to the first period reads: “In the course of the first 25 years of the activity of the company 49 per cent. of the shares will belong to the Iranian side, and 51 per cent. to the Soviet side . . . " (Published in “Soviet Weekly,’’ September 18th, 1947.) When Russian troops left (after complaint had been made to the United Nations) the Iran Government, backed by the American and British interests, which have their own oil concessions in other parts of Iran, repudiated the agreement with Russia. Doubtless Russia’s claim will be revived when the Russian Government considers the moment opportune.

Another example of Russian imperialism was the treaty imposed on Finland which ceded to Russia the province of Petsamo and leased “territory and waters for the establishment of a Soviet naval base in the area of Porkkala-Udd.” (News Chronicle, July 23rd, 1946.) In March, 1948, further demands were being made.

During the lifetime of the League of Nations the Russian Government never failed to point out that the so-called League of Nation's mandates were only another name for the old avowed annexations of colonial territory. When the United Nations replaced the League, and the Italian colonies came up for disposal, the Russian Government promptly made a proposal “for international control of two parts of Libya, with a Russian administrator in Tripolitania and a British or U.S. one in Cyrenaica." (Daily Worker, April 30th, 1946.) The claim was, however, not favoured by the other powers and was withdrawn.

Forgetting the early Bolshevik arguments against the stupidities and dangers of reparations, the Russian Government pressed its claim for 10,000 million dollars as reparations from Germany.

Another aspect of Russian imperialism has been the setting up of subservient governments in the countries on Russia’s borders in Eastern Europe. This was defended by Premier Stalin in a statement to the Moscow “Pravda’’ in 1946 (reproduced in the Manchester Guardian, March 14th, 1946). Speaking of the East European countries through which Germany had attacked Russia he said: “Is it to be wondered that the Soviet Union, in its desire to safeguard itself in future, is making an effort to secure in these countries governments loyal to the Soviet Union? How can one, unless one is mad, qualify these steps and aspirations of the Soviet Union as expansionist tendencies in our State? ”

It may seem a plausible argument, but it is precisely the one used by every expanding Empire as an excuse for “protecting its frontiers”; as for example by British imperialism in India and Egypt, by Japan, mid by Czarist Russia itself.

A last illustration of Russian imperialism strikingly shows the gulf that separates the outlook of the present regime from its own early proclamations. In January, 1948, the American Government published German documents, captured in 1945, which purported to disclose the secret agreements between Russia and Germany after the Pact of 1939 was signed by the two Governments. According to the Daily Herald (January 22nd, 1948) these secret agreements “ divided Eastern Europe into spheres of influence, gave the Baltic Republics to Russia and provided for the partition of Poland . . . Russia's claim to naval and military bases on the Dardanelles as part of the ‘carve up ’ . is recorded."

In 1918 in a somewhat similar situation the Bolshevik Government was able to make the most devastating of all answers, it answered the secret treaties of the Czar’s Government by renouncing them. It showed the sincerity of its protestations against imperialism by giving up all claims and by evacuating all territories seized against the wishes of the inhabitants. The Bolshevik regime was held in high esteem by workers in all countries because it could show clean hands to contrast with the loot-laden talons of all the governments powerful enough to enforce their claim to spoils.

Not so in 1948! Now the Russian protests against the imperialism of other governments have a hollow ring because the Russian Government is itself gorged with loot. Instead it had to combat the secret documents published in U.S.A. by producing a parallel volume purporting to expose the secret negotiations between the British and German Governments in 1939. “These negotiations were designed to secure a broad political agreement with Hitler, Including the division of spheres of influence throughout the world. Germany was to be given the predominant influence in South-East Europe.” (Daily Worker, February 16th, 1948.)

Unable to show by deeds that their hands are clean the Bolsheviks have perforce to fall back on the cynical plea—for that is what it means—that they are no worse than the other brigands of predatory capitalism.

And that will be the verdict of history on the melancholy decline from the idealist principles of 1918 to the sordid practice of thirty years after. 

Edgar Hardcastle

Editorial: The Power to Produce. (1930)

Editorial from the June 1930 issue of the Socialist Standard

The recuperative powers of modern industry have been fully vindicated by the remarkable position of France eleven years after the war.

In spite of the enormous waste of wealth and loss of man-power during the four years of war, France, according to recent reports, is now being strangled by prosperity ! There are no unemployed worth talking of, and there is a tendency for workers to flock to the easier and better paid occupations, so that, for instance, coal production has seriously slumped in consequence.

A part of France’s opulence is due to the amount they have received from Germany ; under the Dawes Plan they have had over £200,000,000 during the last five years.

Germany has paid heavily in money, labour, and kind since the war to the “victorious” nations, besides harbouring an army of occupation.

How is it with Germany, then? Is Germany sinking under the burden? Not at all. Germany has shouldered the burden and more. She is again attacking the world’s trade routes, both by sea and air, and looks very much like being successful again.

In each case, then, we have an example of the marvellous fecundity of modern industry. When it is also realized how much of the labouring power of to-day is wasted on useless objects, or going over the same greengrocers, and the like, the fruitfulness of industry is seen to be more remarkable still.

Imagine the numberless workers who waste their time in advertising trades, in menial duties for the rich, in military service, and similar occupations; in useless clerical work and salesmanship. If all these workers, including the unemployed and the rich, were devoted to useful occupations wealth would be more abundant still, and would call for a comparatively small amount of effort from each if the work was spread equally over all.

Here, then, is convincing evidence that the sufferings of the workers are not due to any weakness in the capacity to produce wealth, and also exposes the hollowness of the plea of the nationaliser, except that nationalization produces larger profits.

The workers’ attention should, therefore, be directed to securing an alteration in the distribution of wealth. The distribution, of course, depends upon the method of production. The method of production to-day is by means and instruments of production that are privately owned. By converting these privately-owned means into social property the workers will then reap the benefit of the energy they put into the production of wealth, and will also reap a good deal of much-needed leisure and freedom from worry.

When the workers decide to secure this fundamental change there will be no need for Labour sponsored cotton weeks, silk weeks, leather weeks, wool weeks, or any of the other Canute-like or cute dodges with which the employing class try to throw dust in the workers’ eyes.

The Croupiers and the Faro Wheel. (1940)

From the April 1940 issue of the Socialist Standard

Throughout the political system of British capitalism, with its amazing fluidity, its shifts of front and of allegiance, and its apparent contradictions, runs one clear thread: the idea that there are insiders and outsiders.

So says “The Unofficial Observer,” in his work, “Our Lords and Masters.”

The “outsiders” may get the best jobs, if it suits the purpose of the “insiders,” but they can never determine policy.

For behind and beyond the British political scene there is a superior force, which assigns values, which enumerates—or rather takes for granted—”the things no feller can do,” which pulls the wires and decides events. With Americans that power has been the business and financial community, with its tradition of general corruption and its innocent conviction that individual greed is the yardstick of social utility. That such is not the case in Great Britain can be proved at a single glance at the leaders of British industry and banking. Where American bankers oppose and criticise, where American steel magnates defy Governmental labour legislation, where American oil companies have juggled with administration after administration, British industry and finance work hand and glove with British government. It has taken some consideration above the holding of political office and the fattening of the pocket-book to accomplish this result. There are “insiders” in British business as well as politics. Why?

Snobbishness is what helps to make the wheels go round and induces the lamb to go to bed with the lion on the breakfast-for-two basis. For four hundred years the British social system has been elaborating itself until it has become the most potent force in British life. “There has been no ‘free and equal’ nonsense about it. Great Britain has been governed by a privileged caste of aristocrats, whose morale has been high and whose purpose has been plain—to keep themselves and their country on top of the pile.”

This aristocracy has been open to birth and to wealth. You can be born to the purple, or buy it. So for generation after generation society has set the standards that others try to follow and has renewed itself from vigorous and successful men of every age ; ”The Victorian manufacturers, the merchant adventurers and Indian ‘nabobs’ of the eighteenth century, and the historians, artists, poets, scientists and authors of all generations have all seen as the reward of success the patent of nobility.”

“An aristocracy of birth, an aristocracy of wealth, and an aristocracy of brains when combined constitute a formidable society. When they follow the same standards set by the aristocracy of birth and fortified by a system of privilege, they are irresistible. In England Babbit knows that his place is at the tradesmen’s entrance rather than at the front door unless he ‘plays the game,’ whose rules are set by British society. That is the secret of British power.”

The question before this war was can England recapture her old world-wide predominance in economic affairs ? The Bank of England, that powerful organisation, under its influential Governor, Montagu Collet Norman, is one instrument now being used to work towards this end. It exemplifies the baffling fusion in England of the same interests which have led to the incompatible dualism of Wall Street and Washington in America.

Mr. Norman’s biographer has called him “the greatest statesman in Great Britain since the war.” As head of the Bank which directs the financial destinies of half the world Mr. Norman has perhaps enjoyed more power than any individual of his generation. He it was who brought the country back to the gold standard in 1925 and moved heaven and earth to keep it there. Between 1923 and 1925 the Bank of England, acting in close and informal co-operation with the Foreign Office, extended credits to a number of central banks in foreign countries and brought most of Europe on what is known as the gold exchange standard. This, by fixing the export value of goods in terms of a single stable commodity, both protected British manufacturers from competition in terms of depreciated foreign money and also assured British exporters with reliable means of payment for their wares.

In the realm of high politics, the Bank’s credits to Germany stabilised Central European conditions, prevented the mark from repeating its nose-dive of 1923 and thus sought to ward off radical upheaval, as well as reconstituting the European balance of power. Thanks to Mr. Norman’s efforts at that time the international gold standard was fully re-established and functioned smoothly from the time the franc was stabilised in 1926 until the disastrous summer of 1931.

The blending of business with diplomacy, however, led to disaster. Mr. Norman’s Central European loans may have been made for political reasons, but they were made at interest rates which accurately reflected the business risk. As it worked out, the Bank of England, not being in business for its health, borrowed money from France at 3 per cent, and reloaned it to Germany at 6 per cent. The Germans, in turn, reloaned some of this money to Austria and Hungary at still higher rates of interest. When the collapse of international wheat prices robbed the Danubian countries of their power to pay, the result was a chain of failures, which ran from Rothschild Bank in Vienna—the Credit-Anstalt—through the German “Big D” banks to the Bank of England, and when the French in their inconvenient way asked to have their money back England went off the gold standard with a bang.

Another “Wizard of Finance,” however, is to be found in Germany, Dr. Hjalmar Horace Greely Schacht, the Nazi Finance Director, the originator of the German confidence game, by which the Allies and America allowed their own cupidity to cheat themselves.

The first step in this game was the inflation of the German mark after the war. German marks were purchased by eager speculators in London, Paris, Amsterdam, Switzerland and New York long after they had become patently worthless. In this way Germany acquired foreign exchange at little or no cost to herself and thus compelled the international bankers to apply the Dawes Plan in 1924, which relieved Germany of much of the burden of reparations by providing a new racket.

This time the racket was in German industrial bonds. These were sold to foreign investors—largely American—and their proceeds eventually were used to pay German reparations. This cost the Germans nothing except interest on bonds for a while, gave the Allies their financial pound of flesh, paid commissions to the international bankers and, best of all, gave the British and American investing public a stake in Germany’s economic prosperity. When investments ran dry, the Germans borrowed short-term funds from British and American banks. Finally, the depression made this impossible, Germany stopped paying reparations and refused to pay back either long-term loans or short-term debts. The American bankers showed their true colours—bright yellow—by offering to sacrifice American investors, if only the banking loans were paid, but by this time Schacht knew he had command of the situation. By its holdings of foreign exchange and by other special controls the Reichsbank had accumulated such large stocks of raw materials that it was able to pass through the difficult winter of 1934-1935 far better than any other country.

Since then Schacht has taken advantage of every crisis Hitler has brought about to bring off barter deals; the game, however, became played out and a naked smash and grab raid was the only way Germany could keep going.

We can now understand her cries of encirclement and her desperate moves to avert the catastrophe the Nazi policy forced upon Germany by capitalist development and the greed of her rivals make inevitable.

The attempt to get capitalism to sail on an even keel after the war of 1914-18 failed. The economic problems confronting the world after the present war is over will be beyond the powers of Montagu Norman, Schacht, and Morgan of the United States.

The firm of J. P. Morgan & Co. is a group of private moneylenders, whose principal office is at 23, Wall Street, New York City, and which has important affiliations in Boston, Philadelphia, Paris and London. The Morgan firm controls (not owns) between a quarter and a third of the organised wealth of the United States, being especially powerful in rails, steel, chemicals and the heavy industries generally. It owes its existence to the opportunities for profiteering in the Civil War and attained its present world-wide importance as Fiscal Agent for the British and French Governments during the period of American “neutrality” in the last world war. “At this time the Morgan firm established the technique of using American money to ‘pay’ for British purchases of American goods, which later flowered in the lavish War Debts and the post-war American loans to the European countries. This practice is an invaluable asset to the British Government, and the relations of the Morgan firm with that Government can only be described as ‘extraordinarily intimate.’ To a very considerable extent Morgan is America and Morgan is the informal viceroy of the British Crown in its American Dominion.”

The spider of Wall Street is an episcopalian —it is easier for a camel to pass through the needle’s eye than for a Jew or a Catholic to enter the firm of J. P. Morgan.

It was the house of Morgan and its associate firms in London and Paris which was responsible for swinging large-scale international transactions during the last world war. “When foreign exchanges were dislocated and the credit of the City of New York was jeopardised by inability to meet obligations of 80 million dollars maturing in London and Paris, the city authorities appealed to Morgan, who quickly organised a bankers’ syndicate, which raised the needful. The Allied purchases of war supplies and foodstuffs were cleared through the Morgan firm as fiscal agents for France and Great Britain on decidedly profitable terms. To facilitate this activity they first established export departments headed by Edward R. Shellinius, with a staff of nearly two hundred engineers, manufacturers and experts. Two thousand five hundred million dollars’ worth of food and materials were purchased in this way, thus creating an American economic stake in Allied victory, sustained by a series of commercial credits totalling 1,550,000,000 dollars. This credit was floated through the Morgan banks, after being negotiated by a joint French and British commission.”

The ruling class of Britain may hope during the present war that Morgan will eventually swing things their way again, as he did during the last blood bath. Americans may reiterate again and again that under no circumstances will she allow herself to be involved. When the time comes for American aid to be essential to victory the United States is likely to line up with whosoever Morgan decrees she shall support. So much for democracy under capitalism.

The political victory of the British and French Governments in the present conflict can be anticipated, but the results from an economic standpoint will be barren. The world struggle for markets will not have ceased but will be intensified.

As for the future of the human race, everything depends upon the knowledge possessed by the working class. Not least in Britain, the United States and the western world. We are building better than we realise. The common ownership of the means of life, production for use and the elimination of all profit will be an economic necessity after the war if society is to advance.

Charles Lestor

Editorial: Reparations or Revolution. (1924)

Editorial the September 1924 issue of the Socialist Standard

The World Situation.

The scramble for the spoils of war has entered another stage. The Versailles Treaty arranged the division of the plunder but the Allies have been quarrelling about the “sharing out” process. So “experts” have been called in to advise methods for a quicker “delivery of the goods.”

The working class has no interest in reparations or indemnities. The fight among the capitalists over these questions is an effort to relieve themselves of the financial cost of the slaughter which they engineered in 1914. The workers do not own property and therefore cannot pay for wars, and so the capitalists must fight it out between themselves as to how the bill can be paid. Behind the reparations question there is the ever present struggle for markets on the part of the world’s capitalists, and this struggle is keener and more desperate than ever.

In spite of military victories and vastly increased territory the Allied Capitalists are faced with a world problem which they cannot solve. The productive power of labour and the use of improved machinery has greatly increased since the war, but the market has not expanded. Not only are the rival national capitalists unable to find fresh markets, but the manufactured goods which once they could sell to foreign buyers are not wanted in countries now manufacturing for their own home market. Instead of exporting shoes to countries like Chile they are exporting shoe machinery.

Capitalist Governments like that of Herriot, MacDonald, etc., support a reparations policy in the hope of defeating the competition of Germany and so restoring the trade and commerce of the Allied Capitalist world. But each one of the Allied Nations capitalists are out to smash the competition of the other, and even with Germany “scrapped” the same problem and the same murderous struggle for markets and territory would go on. And in the rivalries and conflicts of the exploiters the workers have no concern. The workers’ interest is to abolish the system under which they are robbed of the results of their labour.

The Fraud of the Labour Party.

The Labour Party on platforms and papers throughout the country declared that the Treaty of Versailles must go.

They said in their handbook for Labour Party speakers (Labour and the Peace Treaty):

  “The commitments of Labour to revision of the Treaty have steadily grown in definiteness and emphasis during the last four years. Not only is Labour committed to revision by the fact that the Treaties, both with Germany and Austria, are in plain violation of the principles it has so often expressed during the war, but it is committed also by repeated declarations, made since the terms of the Treaty and of the Covenant of the League of Nations (embodied in it) became known.”

In complete defiance of election promises and literature the Labour Party have endorsed the Dawes Treaty which MacDonald defended and signed. Thus not only have the Labour Party supported the war, but now they assist the ruling class to reap the spoils.

After all their denunciation of the Versailles Treaty when in opposition, the Labour Party in office ignored their specious promises and promptly repudiated Arthur Henderson’s election pledge at Burnley to revise the Versailles Treaty.

The Labour Government were praised by the Capitalist Press, specially eulogised by the King, and showered with laurels by leading enemies of the workers, for their work in arranging the Dawes Treaty.

The capitalist work of the Labour Party has been admitted by its own members. Mr. E. D. Morel, writing in the “New Leader,” says :—

  “That it should have been possible for the Conservative leaders last week to affirm dogmatically that a Labour Government had re-established the authority of the Versailles Treaty not again to be questioned by any British Government, without such affirmation being queried by so much as a negative interjection, is the kind of thing which is calculated to spread the dry-rot of suspicion and disillusion in our ranks. For everyone is aware that so long as an unamended Versailles Treaty continues to be the public law of Europe, Europe will not know Peace. We have been told so by our leaders for five years, and we knew it without their telling us. Principles proclaimed for years cannot be abandoned in a night by a Party to whom principles are realities.”

The Dawes Plan.

“The Dawes plan is a plan devoid of sentiment or political or nationalistic feeling ; it is a plan which considers simply and solely the best way of getting the greatest amount of money out of Germany.”

That is the description of the Scheme by the “Manchester Guardian Weekly” (July 18th).

The process, however, of “getting the money” is to place Germany in the hands of Pierpont Morgan and other bankers who are to have the first call on German assets should there be a default in the interest. The railways of Germany are to be converted into a private company, and a huge joint stock bank set up. The Dawes plan tells the German workers that “wage increases are out of the question,” and German capitalists already hint at longer hours and lower wages.

The “brainy” capitalists and their “experts” have evolved a scheme to finance industry in Germany so that out of a larger production goods may be sent to the Allied countries, as reparations.

That policy is simply a continuance of the “dumping” process which our masters have been complaining of for the past few years. But the Dawes plan intensifies it by arranging for more goods to be given free to the capitalists of Allied Nations. Not only so, but the speeding up and greater output which will ensue in Germany will intensify the competition in the world’s markets. This peace cure of the Labour Government will not improve the economic situation. The capitalists here who support this reparations swindle will hypocritically tell the workers “You must accept less and work longer owing to German competition and their low standard of living !”

Its Economic Effects.

The economic effects of getting the spoils of war has been pointed out by leaders of the Capitalist Parties.

Mr. Asquith said : “The indemnity ships have paralysed our shipping industry, while the German yards are busy.”—(Paisley, 2nd June, 1921.)

The financial agents of the Governments, Samuel Montague & Co., declared : “The diversion of German indemnity coal to France has spoiled our market in that country.”— (Parliamentary Debates, July 14th, 1924.)

The Conservative Leader, Mr. Baldwin, said, in the House of Commons :

  “What I want to know is, where are those exports going ? The most obvious place for them to go first is into the openest and freest market they can get, that is to say, ours. Unless there happened to follow a period of world expansion such as followed the introduction of Free Trade into this country—an expansion partly due to discovery in industry, and partly due to discoveries of gold—unless you could have some world expansion of that kind, you will have an immense amount of suffering in every industrial country in the world, that receives those exports, but principally in our country. Theoretically, it is perfectly true that over a period of years the position may right itself, but the process of absorption may take many years, and the dislocation that will be caused in the highly-developed industrial communities is a dislocation that will ruin them before the absorption takes place.”—(Parliamentary Debates, November 15th, 1923.)

Mr. Hardie, of the Labour Party, replied to a speech thus :

  “The right hon. gentleman has so little understanding of British industry and British products that he does not realise that we have 1,300 coke ovens standing idle in this country, and that the workers are on the dole. Yet we have a combination of our present Prime Minister and ex-Prime Ministers wanting to bring in coke from Germany, although our coke ovens are shut down and the men are on the dole.”—(Parliamentary Debates, July, 14th, 1924.)

The Miners’ Federation have also protested about the economic effects of Reparations, but as they belong to the Labour Party they are also responsible for them.

The Coming War.

That this Dawes plan contains the seeds of further war is the claim made by Mr. Morel:

   “This reparation policy does not make for a peaceful settlement; it makes for dislocation and war. Indeed, my own feeling in this matter is that, if the Dawes Report receives the support, as it does, of a certain number—shall I say a large number?—of financiers, business men and economists, it is because they entertain the view, although, perhaps, it is discreetly hidden, that it will show, after a year or two, that the whole idea of obtaining these vast sums of money from Germany is impracticable in practice, because the Transfer Committee will not be able to transfer to Germany’s creditors, either in German currency or in deliveries in kind, the vast sums which are laid down. That hope may mature, but one thing is perfectly clear, and it is the most dangerous aspect of the whole Report, namely, that the whole of this stage-managed Conference, based upon the still continued partial ignorance of the British people of the essence of the reparation policy, and the complete ignorance of the French people of the essence of the reparation policy, is based upon the expectation held out to the British and French peoples that these huge sums of money will, in fact be obtained. That is the most dangerous thing, because, after those expectations, the reaction of disappointment will come about when it is found that they cannot be realised. That will lead once more to a revival of feeling, and the whole thing will again be thrown into the melting pot.”—(Parliamentary Debates, July 14th, 1924.)

Mr. P. Snowden represented the British Government at the London Conference, but after the congratulations to the Labour Government was over, he admitted to the Manchester Guardian (August 22nd) that the occupation of the Ruhr was illegal, and that “the French industrials have designs upon the economic control of certain German industries which they make no effort to conceal.”

The Socialist Position.

The general effects of the present Treaty will not be to improve labour’s condition anywhere. German capitalists will make sure of their profits, and, with the assistance of the bondholders of allied countries, will squeeze the last ounce of work out of their slaves. The workers in allied countries will find unemployment increase due to payment of reparations in the form of goods. The workers will have to face world wide efforts to make them work harder and, with a large army of unemployed, wages will be cut down further.

There is no escape from the effects of private property in the means of life. The system is based upon trade for profit, and as competition for trade increases, more scientific methods of production are employed and fewer workers are required to do the work. An ever-increasing part of the wealth goes to the employing class, and thus class distinctions become more glaring. The world’s resources, whether in the Ruhr or elsewhere, are eagerly struggled for in the effort to get the world’s wealth into fewer hands.

No reparations policy can touch these facts, which are the result of the rule of capital. This intervention of the banking interests into the fight for the spoils of war shows how international that rule of capital is. The Labour Government’s unity with Pierpont Morgan & Co. may be explained by the Daily Herald’s editorial (March 29th, 1924), which said :

  “The policy of all capitalist countries is, in the last resort, controlled and determined not by the politicians but by the economic and financial powers whose creatures they are.”

The Present system is beyond repair. Only a revolution can abolish the “evils” of to-day. Hence our demand is not Reparations, but a Social Revolution !