The Crisis of Post-War Capitalism

[p007] THE CRISIS OF POST-WAR CAPITALISM The crisis of post-war capitalism by Peter Jeffries Ir 1S Now quite clear that the post-war boom is slowing down in Western Europe and North America. It is therefore an opportune moment to make a preliminary analysis of developments in imperialism over the last 20 years. The fact that capitalism has made modest progress in this period has led tto the ‘rejection’ and ‘refutation’ of Marxism by many ‘bourgeois social scientists who view capitalism in a-historical and partial terms. The Marxist movement, as part of its general fight against revisionism, needs to analyse this longish period of boom and relative prosperity and, more important, to expose the contradictions which have lain beneath the surface during this phase. It is the aim of this article to make some investigation of these matters.! Before looking at concrete developments since 1940 it will be necessary to say a few words abvut the Marxist method of political economy. Marxists are concerned with the general ‘law of motion’ of capitalist society; ie., the forces which impel capitalist development and the contradictions which inevitably arise during this development. It was on the basis of scientific analysis of the development of capitalism that Marx constructed certain abstract ‘laws’; these are, in essence, a model of the way in which a ‘pure’ capitalism operates. Opponents who attempt to refute Marxism on a point-by-point, empirical basis, fail to grasp the essence of its method: to show, for example, that the rate of profit had risen: during a particular period of capitalist development is not to refute the Marxist law of the 1. T. Kemp, ‘The Course of Capitalist Development’, in Labour Review, Vol. 6, No. 2. tendency of the rate of profit to fall over time. For Marxism, laws are only an expression of the tendencies at work within the system; in the real world other forces, based on the struggle between classes, arise which can overcome the operation of these laws or even reverse them under certain conditions. In Capital Marx works out the basis of a theory of capitalist accumulation. The motive force behind accumulation is the rate of profit, Production for profit dominates production for use. Commodities are produced not because they satisfy a human need but because they yield a profit for their producer. Marx was mainly concerned to expose the contradic- tions which arise during the course of this accumu- lation. He was able to show that the process of accumulation may lead to a diminution of the ‘reserve army of labour’ (the unemployed) leading to a rise in the value of labour power and hence a reduction in the rate of profit, the regulator of accumulation. Secondly, by his introduction of the concept of constant capital, Marx pointed to another important way in which the very process of accumu- lation can lead to a break in accumulation. The process of capital accumulation tends to raise the ratio of the value of constant to variable capital (the organic composition of capital) and therefore to depress the rate of profit over time. Finally, because the process of accumulation under capitalism is an - unplanned one, determined by the rate of profit, development and growth in a capitalist economy tend to be uneven and disproportionate. These, briefly, were the basic contradictions which Marx unearthed as a result of his investigations of the accumulation process. But Marx’s analysis, even FOURTH INTERNATIONAL SUMMER 1964

[p008] THE CRISIS OF POST-WAR CAPITALISM in Volume III of Capital, remains a highly abstract model of the functioning of a capitalist system.2 To do justice to Marx’s work it is necessary to concretise the analysis, taking into account the big developments and changes in capitalism over the last century and the work of later Marxists such as Lenin, Plekhanov, Trotsky, Hilferding and others. It is the intention of this article to make some estimation of the process of accumulation in the imperialist world over the last 25 years in the light of Marx’s analysis of the inherent contradictions within this development. Since the epoch of imperialism began it is impossible to consider or to analyse the world economy as a series of isolated parts, each with its Own independent course of development and change: it is necessary to start from the total world economy, capitalist states and workers’ states, and relate each separate part to this whole. To say that the world economy is an integrated whole bound together by the international division of labour, trade and the market does not mean, however, that each part has an equal ‘specific weight’ in deter- mining the momentum of the whole. Clearly, the real weight of economic, political and military power lies in the ‘advanced’ countries of Europe and North America. Political and economic changes taking place in this area of the world have a dispropor- tionate impact upon the rest of the capitalist system as well as the countries of Eastern Europe and China. In this article we shall, therefore, concern ourselves mainly with developments in Europe, North America and Japan. The stagnation in the colonial and ex- colonial world and the sheer inability of the capitalist system to provide an all-round, balanced develop- ment of these areas has repercussions for the metropolitan states and these should not be ignored. 2. In its general construction Capital moves from a higher to a lower level of abstraction throughout the three volumes. For example, in outlining his general model of the accumulation process under capitalism in Vol. I, Marx makes certain assumptions about the rate of turnover of capital: in Vol. Il he considers the question of turnover and its effect upon the process, In the same way Marx, in Vol. Il, deals in some detail with the ‘counteracting tendencies’ which tend to check or reverse the fall in the rate of profit over time. These modifications and concretisations which are introduced into the analysis are not to be seen as discrete factors which Marx simply ‘tacked on’ to his analysis to make it more realistic: for example, the counteracting tendencies which arose in ithe real world (against the tendency towards working-class immisera- tion, for example) were integrally related to the objective processes taking place within capitalism and were a reflection of the complexities and contradictory nature of the accumulation process. FOURTH INTERNATIONAL SUMMER 1964 57 But they will not be our central concern at this stage.3 As we have suggested, at the heart of the accumu- lation process under capitalism stands the rate of profit, acting as the regulator and pace-setter for the expansion and reproduction of capital. Marx’s analysis demonstrated that, with the rise in the organic composition of capital, and given a constant intensity of exploitation of labour, there was a tendency for the rate of profit upon invested capital to fall. The key to an initial analysis of the rate of profit is therefore an estimation of the changing organic composition of capital (0.c.c.) in the post-war period. For Marxists, a calculation of the o.c.c. is extremely difficult in the sense that orthodox cal- culations and techniques of accounting do not correspond to the categories of Marxist political economy. As a long-term historical tendency there can be no doubt, however, that the o.c.c. has risen in most of the advanced capitalist countries during the last century. One writer, for example, has estimated that the average British worker of 1939 operated with roughly twice the value of tools and equipment as in 1870. In countries such as America the increase has undoubtedly been even greater. We should not however look upon this tendency for the 0.c.c. to rise over time as an even, uninterrupted development: it tends to take ‘jumps’ and ‘leaps’ during periods of rapid technological innovation and change, periods which themselves tend to follow years of stagnation or decline.t The period since 1940 has been such a period. Centred around the needs of war, rapid technical advances were made in many sectors of the capitalist states with the emergence or rapid development of ‘new’ industries such as electronics, aircraft, motors, chemicals, synthetic fibres, oil, nuclear energy, etc. Even in Britain, where there has ‘been relative stagnation, surprising changes have occurred in this old, comparatively backward sector of imperialism. Steel output has risen by nearly 25 per cent in the post-war years; over £1,000m. has been invested in oil refining and atomic energy; since the outbreak of war the production of motor vehicles has roughly trebled, and the output of the electronics industry has multiplied tenfold over the same 25 years.* In recent years the so-called ‘growth 3. Peter Jeffries, ‘New Trends in Imperialism’, in Labour Review, Vol. 7, No. 3. 4. M. H. Dobb, Studies in the Development of Capitalism, deals with this aspect of technical change and innovation under capitalism. 5. J. H. Dunning and C. J. Thomas, British Industry: Change and Development in the Twentieth Century, 1961. Figures for motors in Aubrey Silberston ‘The Motor Industry’, in D. L. Burn (ed.) The Structure of

[p009] 58 industries’ of British capitalism have been centred around oil, motors, and especially chemicals. In the latter case growth has been nearly three times that of industrial production as a whole, with certain sections—notably plastics—expanding at five times the rate of the economy as a whole. In the last half of the 50s similar trends were easy to see in the major European capitalist countries: production of passenger cars in Western Germany, for example, almost doubled, the output of crude steel rose by about one-fifth, and the chemical industry increased its output by 50 per cent in these 5 years. In France, often considered a backward, inefficient capitalist state, changes in the structure of the economy have been equally rapid.® The other side of the coin has been the decline of certain older sectors of the economies of Western Europe and America. Traditional industries such as coal, railways and textiles have all experienced sharp declines in the countries of Western Europe, the United States and Japan. In Britain, for example, on a long-term basis, whereas cotton accounted for one-quarter of total exports in 1914 this share has now fallen to something over 2 per cent. But this decline was not confined to the pre-war years: since 1939 employment in cotton has fallen by over one- third, and the coal mining, shipbuilding and railway industries have continued to decline, if not at so fast a rate.7 These basic structural changes in the metropolitan countries have undoubtedly brought about a sharp rise in the general o.c.c.8 There has been an overall British Industry, Vol. 2. For electronics, Thomas Wilson, ‘The Electronics Industry’ in the same volume. 6. Planning, Vol. XXVI, No. 445. October 1960. 7. ‘Industrial Production: A guide to Growth’ in Westminster Bank Review, May 1962, and Dunning and Thomas, op. cit. 8. Joseph M. Gillman, The Falling Rate of Profit, makes some estimates for the Uniited States economy. On the whole, however, his work is marred by a mechanistic, non-dialectical approach to the analysis of accumulation under capitalism. Thus he finds statistical evidence to show that for long periods of the twentieth century the rate of profit on invested capital in America showed no definite tendency to fall and did in fact show some tendency to rise. This leads him to reformulate Marx’s law by changing the categories ‘s’ (surplus value), ‘vy’ (variable capital, or the wages bill) and ‘c’ (constant capital). But to treat one of the basic ‘laws of motion of capitalist society’ merely as a mathematical relation- ship is to strip it of its content as an expression of forces operating in the real world. Thus, besides an analysis of modern technical development, a treatment of profit movements under capitalism must include, as THE CRISIS OF POST-WAR CAPITALISM movement of resources from the technologically backward sectors to those with heavy concentrations of capital and high organic compositions. But as we suggested above, a rising composition of capital does not inevitably produce, in the short run, a decline in the rate of profit. Before we can say anything about movements in profit rates we must analyse changes in the rate of exploitation. In other words we need information about the productivity of labour and the price of labour power. The increased use of machinery invariably means a rise in the productivity of labour: this is the driving force behind technical change and innovation in a capitalist economy. In the years 1954-62 in the electrical and engineering industry, while output in Britain rose by 40 per cent, manpower rose ‘by only 11 per cent; in the same period vehicle production rose by 30 per cent but manpower by only 12 per cent; in the case of chemicals manpower increased by 10 per cent but output by 50 per cent? Even the ‘declining’ industries have shown considerable increase in output per head in recent years: this is particularly true in the case of coal, where mechanisation and technical change have advanced rapidly in recent years. In the case of the United States, it has been estimated that the output of the electronics industry was nearly 280 times higher in 1952 than in 1947, but the labour force had only been increased by 40 per cent. In the early 50s productivity in American oil refining was rising at about 5 per cent per annum, not untypical of the expanding sectors of the economy.!0 This sharp increase in productivity experienced in the post-war years will undoubtedly continue. For Britain, where change and innovation are occurring with less rapidity than in other metropolitan countries, the National Economic Development Council, in reviewing future manpower needs of the various sectors of the economy, has given some indication of the speed at which productivity is likely to increase in the next period.!! In the case of chemicals the Council estimates that output will rise by over one-third in the years 1961-66 with only 5 per cent addition to the labour force. Total increase in the productivity of this industry in the period 1958-66 is expected to be around 50 per an essential feature, an examination of the development of the working class in the period, its state of organi- sation and above all the level of its consciousness and leadership. Gillman’s analysis pays little or no attention to these vital factors. 9. Sir Robert Hall, ‘Changes in the Industrial Structure of Great Britain’, Lloyds Bank Review, Jan. 1963. 10. S. Lilley, Automation and Social Progress, p. 117. 11. Growth in the United Kingdom Economy to 1966. H.M.S.O, 1963. FOURTH INTERNATIONAL SUMMER 1964

[p010] THE CRISIS OF POST-WAR CAPITALISM cent. ‘The industry has steadily modernised its processes, built new plants and incorporated labour- saving methods of instrumentation and control so that increased output has been achieved with only a small increase in the labour force.’ In the case of steel, the Council anticipates that productivity will rise by 36 per cent in the years 1961-66: this is because the rate of output of the new plant is much higher than that of the old; the faster this old plant is retired, the sharper will be the rise in output per worker. These examples are by no means excep- tional: similar increases are anticipated in all major sectors of the economy. In the capitalist countries showing the fastest rises in labour productivity—Western Germany and Japan —the working class was unable to take advantage of the rapid expansion and accumulation of capital. In both these countries the existence of a large reserve army of labour for much of the period meant that the share of wages and the level of consumption could be held down by the capitalists. It was out of the restricted consumption and low wages that re- equipment and modernisation of these two capitalist countries occurred. In Japan in the second half of the 50s, for example, industrial productivity rose by 55 per cent but real wages rose by only 25 per cent. Gross investment in this period amounted to 30 per cent of Gross National Product, the highest in the capitalist world12 The Western German ‘economic miracle’ can be explained in similar terms: the existence of high unemployment until the early 60s forced down wages and left a wide ‘margin’ for accumulation: in some years fixed investment took up nearly one-quarter of total national income, wages taking under one-half of national income (the corresponding figure for Britain being 58 per cent).13 12. Japan is an interesting case for many of the ideas discussed in this article. In the post-war period, the Japanese rate of development has been second only to that of Western Germany in the capitalist world. Progress and growth has been particularly rapid in the newer, highly capitalised industries: by the late 50s Japan had replaced Great Britain as the second highest producer of synthetic fibres; a large petro-chemical industry, based upon imported oil, has been established and steel production has grown at a rapid rate since 1939. As in Western Germany, one of the key factors involved in the relatively fast growth of Japanese capitalism was the existence of high unemployment for much of the period and the destruction of working-class organisations in the pre-war period. 13. R. G. Opie, ‘Western Germany’s Economic Miracle’, in Three Banks Review, March 1962. The ratio of gross fixed investment to G.N.P. in 1960 ranged from 16% (U.K.) to 24% (Western Germany) with France (17%) and Italy (23%) in the middle range. Economic Survey of Europe, 1961. United Nations, Geneva 1962. FOURTH INTERNATIONAL SUMMER 1964 39 In the other major capitalist countries, such as Britain, France and the United States, where the labour movement remained intact, strong and un- defeated, the working class was able to win a bigger share of rising labour productivity. This was possible because of the general expansion of the world market after 1945 following the acute shortages suffered during the war and the need to make good capital equipment either destroyed during the war or run-down during the stagnation of the 1920s and 30s. During the years after 1960, however, the situation began to change: the introduction of newer techniques of production, combined with a slowing down in the rate of expansion in the world market, brought significant increases in unemployment in countries such as Britain and the United States and with it a sharp rise in the tempo of the class struggle. In other words, we are suggesting that while the tendency for the rate of profit to fall has been operating throughout the period it is only during the last year or two that it has asserted itself as a major factor holding up the development of the productive forces. Clearly the o.c.c. has risen throughout the period ‘but because of the weak position of labour in certain countries and the general failure of leadership within the international working- class movement the capitalist class has been able to offset a downward pressure upon the real rate of profit by an increase in the rate of exploitation of labour. In the present period however the renewed activity and confidence of previously passive sections of the international working class, as in Spain and Germany, and the determination of the working class in such countries as Britain, France, Italy and the United States to retain the gains made in the years of full employment mean that if the capitalist class is to retain its power big battles must be prepared against the working class. Lying behind all the technical changes, the growth of new industries, the emergence of new techniques of management and production, lies the continuing concentration and centralisation of capital in the etropolitan countries. Throughout the 50s con- centration of production occurred in many important sectors of the British capitalism, including metals, vehicles, engineering and electrical, textiles, and paper and printing: this was paralleled in the other major capitalist countries. The speed-up of concentration of production in Europe and America coincided in the late 50s with the appearance of surplus capacity in many key industries, including motors, steel, and chemicals. It is interesting that the last major ‘wave’ of concentration and rationalisation occurred in the 1920s and 30s when capitalism was faced with severe problems of over-production and surplus plant. Not only has concentration gone on apace, but centrali-

[p011] 60 sation of capital has also occurred in nearly all advanced countries: i.e, not only have individual firms increased in size as a result of accumulation from their own internal funds, but many smaller firms have ‘been expropriated by the larger monopolists. An indication of the stage which the move towards centralisation has now reached was the ruthless if unsuccessful battle which ICI waged for the control of Courtaulds, itself one of the giants of European capitalism. In these developments the banks, insurance companies and other financial institutions have played a key role: the development of finance- capital oligarchy on an international scale, to which Lenin pointed as one of the outstanding features of imperialism, has certainly continued in the post-war period.!4 Closely connected with this dominant tendency towards concentration and centralisation of capital has been the role of the state. The state has openly entered the scene as one of the major economic and political agents in the streamlining and rationalisation of the monopolists. In countries such as Britain the state assumed responsibility for certain areas of the economy: coal and the railways were nationalized to provide a sound ‘infrastructure’ for the rest of the system. In other cases the State intervened less directly, attempting to maintain stability and growth through the application of Keynesian-type monetary and fiscal policies. In the recent period the state has attempted to draw the trade union ‘bureaucracies into some form of wage ‘planning’ designed to hold down the share of wages and allow an adequate surplus so that accumulation can carry on at the necessary pace: this has been important in such countries as France and Great Britain and also in Sweden where the unions have moved extremely 14. By concentration of capital, Marxists mean the tendency for individual capitals to increase in size: by centralisation they refer to the tendency for individual capitals to lose their identity and be brought under the centralised control of their (bigger) rivals. This distinc- tion in most non-Marxist studies is never explicitly . made. Other writers claiming to use tthe Marxist method are often guilty of similar errors. Thus William Mennell, writing recently in ithe theoretical journal of the Communist Party of Great Britain, Marxism Today (March and April 1962), discusses the growth of monopoly in Britain capitalism over the last decade in terms of the various spheres, and concentration and centralisation is examined within each area. But such a formal method ignores the central question of finance capital which Lenin pointed to as one of the fundamental features of imperialism. Thus the study of mono- polisation under modern conditions must start from an analysis of the relationships between the banks, insurance companies, etc., and industrial capital. THE CRISIS OF POST-WAR CAPITALISM close to the state apparatus. The State has, in general, been especially important in the fields of defence and research, providing an assured market for firms engaged in the aircraft, missile, electronics and other industries. To some extent the moves towards intervention and away from ‘laissez-faire’ conceptions of the role of the state were a result of working-class pressure for higher wages, better social services and assured employment after the crisis of the 1930s. But more important they were an indication of the inability of the traditional capitalist forms of organisation to meet up to the economic, political and military problems of the post-war world, not least of all the continual threat which the existence of the Soviet Union presented. It is noteworthy that the state first began to assume responsibility for the functioning of the imperialist economies precisely at a time when international rivalries and tensions were increasing and finally burst out into open warfare: ie., in the period 1890-1914. Now we must turn to the problems of uneven growth and development in the world economy over the last 20 years. As we noted above, because capitalist accumulation is driven along and governed by profit it is, by its very nature, an unplanned, contradictory, anarchic process. Uneven develop- ent does, of course, take place within each capitalist country, with ‘declining’ and ‘expanding’ industries existing side by side: here, however, we are more concerned with the question of uneven development between capitalist states themselves. Perhaps the outstanding features of post-war development in this respect has ‘been the rapid growth rates of the Western German and Japanese econo- mies, and the stagnation of British capitalism, with the United States, while retaining overwhelming importance for the future of international capitalism, showing only modest progress. Whereas the German economy expanded at over 7 per cent per annum in the 50s British capitalism managed a growth rate of only 2 per cent and America one of 3.5 per cent. These differences in performance are to be explained in terms of historical factors and not centrally in terms of the various economic and financial policies carried out by the rulers of these states. Most important from our point of view is the position of the United States, the dominant sector of world capitalism. Although American imperialism came out of the war in a strengthened position compared to some of her rivals, notably Britain, she also had had to shoulder the main responsibility for the future of imperialism, both in the metropolitan countries of Europe and also in the underdeveloped countries of Asia, Africa and Latin America. This FOURTH INTERNATIONAL SUMMER 1964

[p012] THE CRISIS OF POST-WAR CAPITALISM was seen clearly in the vast sums donated to Euro- pean. capitalism under such schemes as the Marshall Plan and the vast ‘aid’ poured into the rich oil- bearing countries of the Middle East and South America: in the case of Europe these expenditures were made necessary by the strength of the working class and its desire for socialism, reflected in the large Communist Parties of France, and Italy and the election of a Labour Government in Britain; the large volume of foreign aid and investment in certain areas of the world which flowed from the United States was again a symptom of the unrest in these areas and the need to preserve valuable markets and supplies of raw materials. The responsibilities of United States imperialism can be seen in the large balance of payments deficits which the authorities ran in almost every year throughout the 50s. This was not a serious problem while gold reserves remained high and the dollar remained strong. But ‘by the late 50s and early 60s the United States, for the first time in the post-war world, had to face up 15. In this respect much of the Marxist critique of Keynesian economics has been extremely formal: i.e., it has been over-concerned with the internal, logical, structure of Keynes’ analysis and not so much with a critique of the possibilities of State intervention at a specific stage in the development of capitalism. Thus for much of the post-war period it was possible in the United States to maintain a fairly high level of employ- ment via monetary and fiscal measures, public work programmes, etc. But at a later stage this was not so: the external weakness of American capitalism no longer allows domestic re-inflation as a cure for rising unemployment. Apart from further weakening the balance of payments and the position of the $, this would tend to push up wage costs in the United States and make exports less competitive. In Britain, however, the application of Keynesian techniques has been persistently hampered by a weak external position. In addition, the intervention of the State at one stage of development may only heighten the contradictions when they reappear at a later stage. Thus in Great Britain, the nationalization of coal and the railways released large sums of capital for more profitable private reinvestment in other sectors of the economy and as such was a factor in post-war expansion. But the long- term effect of this was to accelerate the rise in the organic composition of capital and the tendency for the rate of profit to fall. Many Marxists, in bending to the climate of Keynesian orthodoxy, have tended to twist the dis- cussion of crises into one about the nature of under- consumption under capitalism. (For example, Paul Sweezy in his influential The Theory of Capitalist Development distinguishes between two main types of crisis: those connected with the tendency for the rate of profit to fall and those associated with a tendency to underconsumption.) The basic contradiction in this FOURTH INTERNATIONAL SUMMER 1964 61 to the problem of a basic structural imbalance in her economic and financial relationships with the rest of the world market. There was serious talk of a devaluation of the dollar and great pressure was put upon the German government for an upward revaluation of the Mark. At the same time, with the continuing advance of technical change and automation inside American capitalism, unemploy- ment at a high level emerged as a semi-permanent feature of the economy. Because of the specific form taken by technical changes, unemployment is largely concentrated amongst the unskilled youth and especially the Negroes. But because of the basically weakened position of the economy extern- ally Kennedy and later Johnson found that they were largely powerless to act against the unemployment problem with the old Keynesian measures which had had some limited success in the past. To attempt domestic inflation through easier credit and a larger budget deficit would have been to risk an even more serious external crisis.!5 view stems from the limitless expansion of production in relation to restricted consumption. The fallacy of such views stems from a tendency to analyse capitalism in partial and static terms. Thus the period since the war has been one of a rapid growth in the production of investment goods (Marx’s Department I) and a relatively slower expansion of consumer goods (Marx’s Department II). Although these two Departments are related: i.e., investment in means of production must eventually produce more consumption goods in Department II which have to be realised upon the market at a profit, the relationship is only a relative one. That is to say, expension can occur in I which is, to a limited extent, independent of the rate of expansion of II. This is so because the demand, on the part of capitalists, for machinery, tools, building, etc., itself constitutes a part of total social consumption— what Lenin called ‘productive consumption’. As Lenin pointed out in his polemics against the Narodniks—who were basically underconsumptionists—it is, in fact, the historical task of capitalism to develop the means of producticn at a faster rate than the means of con- sumption: this is only equivalent to saying that, on a social scale, there is a tendency for the o.c.c. to rise with the development of capitalism (see especially V. L Lenin On the So-Called Market Question: Collected Works, Vol. I, pp. 75-129). But we have to study contradictions in their development, not at any one point in time: in the last resort there is, of course, a close interdependence between the two Departments and at certain stages the contradictions inherent within capitalism may reveal themselves in the form of a crisis of realisation. The rapid growth of production in such industries as steel, oil, chemicals and motors which has been an important feature of the expansion of the system since the war is currently leading to such a crisis in these industries.

[p013] 62 A contributory factor to the post-war boom and its prolongation into the 50s was the large volume of resources devoted to armaments expenditures. This was, of course, principally so in the United States, especially with the outbreak of the Korean war and the years up to 1955. Armaments production allows capital accumulation to proceed without the attendant -problem of realisation. But in this case we should not take a one-sided view of the role of state armaments expenditures. It is obvious that the vast programme of military expenditure carried out by the United States is now a burden upon the whole economy and is responsible in part for the slow rate of growth of the economy and the high level of taxation which hinders recovery and the attempt to reduce the level of unemployment. In other words, what at one time acted as a stimulant to the economic expansion of American capitalism has now turned into its opposite. Hence the desire, on the part of certain sections of the American ruling class, for limited disarmament agreements with the Soviet Union. This does not mean that the monopolists are now ‘peace-loving’ and can come to a permanent agreement with the Communist leaders: the political conflict with a rival social system cannot be separated out from these economic considerations: nor can the effect which a cut-back in arms would have upon the world market. Rather, certain of the American monopolists desire to devote less resources to the war programme and more to investment in the domestic economy, in order to speed up the rate of growth of American capitalism, and meet the growing demands for a solution to unemployment and other social problems. In many ways the post-war problems of British capitalism have taken a similar form to those in the United States. In the case of Britain the slow growth and recurrent crises which have been a dominant feature of the last 20 years have deeper historical roots. In effect the structural and organi- sational weaknesses which first became apparent before 1914 have continued since 1940, though their full outward manifestation was hidden by the general expansion of the world market, which occurred after the end of the war and continued until quite recently. In the case of British capitalism, its decline can be most easily seen in the semi-permanent balance of payments crisis which has gripped the authorities since 1945 with attendant devaluation (in 1949) and general instability of sterling as an international currency. Before the war the British ruling class relied upon income from foreign investment and ‘invisible’ exports (such as shipping, insurance and banking services). This source of income was largely lost during the years of the war and after THE CRISIS OF POST-WAR CAPITALISM that a rapid expansion of physical exports with a stabilisation of imports was imperative if British capitalism was to regain its place as a leading imperialist power. The strength of the working class has prevented the employers from carrying through the necessary plans of modernisation and change. As a result Britain’s share of world trade has continued to decline and even in its ‘own’ markets— notably the Sterling Area—ground was lost.16 Any attempt to speed up growth at home has invariably led to an external crisis: increased production at home tends to raise the import bill and reduce the incentive to export. In any case, over-expansion domestically means there is a tendency for the price of labour power to rise and hence a reduction in profit rates. In sharp contrast to the developments in the United States and Britain stands the rapid expansion since 1945 of German capitalism, the fastest-growing sector of the imperialist economy. Not only did production grow at a rapid pace at home but Germany increased her importance in world trade and exports. In 1950 her share of world trade stood at 7 per cent: by 1960 this had risen to 20 per cent, about the same as the United States and higher than that of Britain.17 The basis of the expansion, as we have suggested above, was the tremendous destruction of capital which occurred during the war, the high level of unemployment, and the weakness of the labour movement, stripped of its leaders during the fascist dictatorship. The low level of wage costs enabled her to expand exports rapidly and because consumption was held down (in turn a reflection of low wages) imports remained low throughout the period of the 50s. This enabled German capitalism to build up huge balance of payments surpluses, in contrast to the position of America and Britain. As a result the German authorities acquired large holdings of gold and dollars in the 50s. The fact that the necessary currency to finance an adequate level of international trade was concentrated in the hands of one state brought growing problems of imbalance in the imperialist economy: unless the United States is 16. This was obviously one of the main factors in producing a basic change in the economic and political strategy of British imperialism: ie., a move away from the Commonwealth and towards Europe. At least of equal importance, however, was the pressure exerted by American imperialism; in the post-war period the flow of capital into Britain from the United States has greatly accelerated. Britain’s exclusion from the EEC meant (and still means!) that this capital has to force its way into the rich European market on unfavourable terms. 17. N.LE.R. No. 21, Feb, 1962. FOURTH INTERNATIONAL SUMMER 1964

[p014] THE CRISIS OF POST-WAR CAPITALISM prepared to run a large enough balance. of payments deficit there will be inadequate currency to finance world trade, with a consequent ‘liquidity crisis’.!8 But America, despite her great strength and resources, can only run a deficit up to certain limits, determined by the volume of her gold reserves and the strength and stability of her domestic economy. Hence the pressures already referred to for a S per cent appreciation of the German Mark (which is equiva- lent to a 5 per cent rise in the price of German exports) and the serious consideration, on the part of the American government, of substantial borrow- ing from the International Monetary Fund. These financial instabilities are but a sign of the uneven, unplanned growth of the world economy over the last 20 years. They reflect the over-riding power of American capitalism and the stagnation in other leading areas, notably Britain and France. Because of this uneven growth and the consequent strain upon the external position of the United States, there is little prospect of a permanent and decisive upswing in the American economy. But without such an upswing there can be no rapid expansion of trade between the metropolitan coun- tries; their future increasingly depends upon the position inside the United States, where unemploy- ment remains high and a large proportion of the population live in abject poverty. The comparatively rapid expansion of productive capacity in such industries as chemicals, oil, motors, steel and engineering means that unless the world market does grow at an adequate pace there will be serious problems of surplus capacity with a consequent sharpening of price competition, the elimination of the smaller firms (some of whom are themselves giants ‘by former standards) and further concentration and centralisation of capital in Europe and America. This outline analysis of the trends in imperialism over the last two decades can provide the basis for a more thorough refutation of the Fabian conception of post-war capitalism.!9 It is clear that the basic 18. The rapid spread of the crisis from the United States in the inter-war period was partly caused by the fact that the trade of most countries with America was financed by American short-term loans. Once the money was recalled to the States during the crash of 1929-31 an international ‘liquidity crisis’ developed. In this respect the position in the 50s and 60s bears certain sim‘larities with that of 30 years ago. 19. The essence of these reformist theories was the view that, in its post-war phase, capitalism represents a new and reformed stage, differing fundamentally from the capitalism of the nineteenth century: some writers FOURTH INTERNATIONAL SUMMER 1964 63 contradictions of capitalism have continued to operate throughout this period: in the next few years they threaten to erupt with extreme violence and to provide the ‘base for bitter class struggle in Europe and North America, the heart of capitalism. In this respect, we need to work out in more detail a model of the main features of the modest phase of expansion enjoyed by the system since 1940, a model which takes into account, in an all-round way, the role of technical innovation, the position of the State, the importance of arms expenditure and the relationships between the backward and advanced areas of the world economy and finally the economic relationships between imperialism and the Soviet Union and China. These factors must be considered in such a model in terms of changes in the rate of exploitation and the strength of the opposing classes; without this, all consideration of rates of growth and accumulation is inadequate. This article has attempted to begin an investigation of some of these matters and has stressed the import- ance of a correct methodological approach to the study of capitalist development. (such as Mr. Crosland in Britain) suggested that in this period the Western economic system ceased to be capitalist and is now evolving into a new type of society. Various reasons are adduced by the reformists to justify this view but basically they rely upon (1) the belief that income has been radically redistributed away from the rich in the post-war years—the so-called ‘income revolution’; (2) ‘the so-called ‘Managerial Revolution’; and (3) the greatly changed réle of the State since the war. We have already touched upon this last point: the State, far from being a neutral force, sus- pended above the class struggle, has been the main instrument in organising the rationalisation and centralisation of capital in the metropolitan countries. Of the ‘income revolution’ we need say little: studies in Britain (by Professor Titmuss) and the USA (by Gabriel Kolko) show conclusively that there has been no income redistribution towards the working class. (Even Mr. Strachey in his Contemporary Capitalism is forced to concede this point.) Indeed in the USA statistical evidence shows that there has been a shift of income away from the poorer sections of the community. Of the “Managerial Revolution’, investigation in the USA and Britain (by Professor Florence) shows that there is no fundamental division between ownership and control, on which the case of Burnham and his followers rests. As a Strata, the top managers remain closely tied to the interests of capitalism and the capitalist class. But the important point in this respect is that Marxists are not interested in individual capitalists as such but only in capital as a social force which stands over men and - dominates their activities.

[p015] L.D. TROTSKY Through what stage are Speech at the 5th All-Union Congress of Medical and Veterinary Workers June 21, 1924 Translated by Brian Pearce from the Collection Zapad Vostok (the West and the East), Moscow 1924 (Translation London, 1960) FOURTH INTERNATIONAL SUMMER 1964

[p016] L.D. TROTSKY Trough stage are we = Speech at the 5th All-Union Congress of Medical and Veterinary Workers June 21, 1924 Translated by Brian Pearce from the Collection Zapad Vostok (the West and the East), Moscow 1924 (Translation London, 1960) FOURTH INTERNATIONAL SUMMER 1964