The Crisis, The Budget and the Workers

[p012] THE CRISIS, THE BUDGET AND THE WORKERS iate, limited demands. A rank-and-file movement and a rank-and-file leadership must be built, with the aim of ending capitalism. This is not a far-fetched idea, for the immediate questions of wages and conditions are so closely linked with the fundamental anomalies of our society that you cannot solve the immediate problems without struggling for long-term solutions. This rank-and-file movement will also have to turn its _. attention to the transformation of the Labour Party. The vast majority of the busmen are solid Labour sup- porters, yet neither on the immediate question of their dispute nor on that of Labour’s future policy towards the BTC have the Labour leaders proposed any working- class solutions. The same reformist outlook of the Right- wing trade union leaders is reflected in the political leadership of Gaitskell and Brown. The battle against the Right-wing leaders of the TUC is part of the struggle against the Tories. These men must be exposed and removed from office. They are the fifth column of the Tory Party. THE FUTURE The busmen have been fighting with two handicaps: 1) Inadequate leadership. 2) The busmen’s lack of experience. It must be remembered that this is the first large-scale dispute for two decades. Unlike other sections—dockers, meat-market men and road haulage men—the busmen have not had the experience of Right-wing betrayals. They have not got a powerful rank-and-file movement down below, which can only be built against such a background. An example of this is the instructive contrast between the Smithfield market men and the busmen. The Smith- field men’s stoppage is completely unofficial. They have been on strike for eight weeks, yet are as powerful and determined as ever. The lesson is obvious. The Smith- field men and the dockers, out of their experience, have built up a powerful rank-and-file-movement that is capable of rejecting the official leadership and maintain- ing the confidence of the workers during a prolonged and difficult dispute. The busmen will undoubtedly take the same path. Reformism has no future. Capitalism will push until it achieves its main aim of cutting wages and living con- ditions. The problems of wage increases and the pro- tection of workers’ conditions will soon become much more acute. Only a rank-and-file movement of the kind I have mentioned will be able to solve these problems. Marxists will have a most important part to play in this movement, for only those committed to the use of working-class strength to solve both industrial and poli- tical problems can give any effective leadership. The winning of tens of thousands of :militant industrial workers for Marxist ideas in the course of the struggle is the only effective way to smash reformism and end capitalism. THE STRIKE BULLETIN Published as a supplement to The Newsletter, the first issue of the Strike Bulletin appeared three days before the strike began. Written entirely by rank-and-file workers, it won immediate support in the garages, on building sites and in the docks. Within a month weekly sales exceeded 20,000 copies. It was the only publication to give active guidance to the strikers and it served as a basis for bringing together dockers and busmen, market men and railwaymen, all involved in a common battle with the employing class and its Government. The. Strike Bulletin \aid the basis for a rank-and-file move- ment by attempting to link the different industrial struggles and by pointing out their political implications. This is creative Marxism: not to impose our ideas on the workers, but to encourage them to develop their owa ideas, from which we can learn a very great deal. The continuation of a regular publication of this kind, with the widest possible sale and the widest possible partici- pation of militants in its production, is essential if the rank-and-file movement is to grow and go forward. The Crisis, the Budget and the Workers Tom Mercer THE present American economic crisis was foreseen by many people, including people close to the Administra- tion of the USA itself, but nothing was done to try to avert it. Nothing was done, not because Treasury officials like Robert B. Anderson or big business tycoons like Henry Ford Jr, who foresaw the crisis, are evil and stupid. Nothing was done because nothing could be done without precipitating the very crisis they wanted to avoid. . The causes of crises are inherent in the capitalist economic system. This present crisis has its origins not in the events of last autumn, but thirteen years ago at the beginning of the post-war boom in 1945. OVER-PRODUCTION OF PRIMARY COMMODITIES At the end of the war there was a shortage of every type of commodity: food, industrial raw materials, metals and so on. As a result, the primary producing countries (mainly colonial and semi-colonial countries) stepped up production to the maximum. Capital poured into countries like South Africa, the Belgian Congo, Rhodesia, Australia, Malaya, India, Pakistan, the Arab countries of the middle East, Canada, Venezuela, Chile and Bolivia. _Investment in copper, tin, lead, zinc, oil, aluminium, nickel, tungsten, jute, wool and cotton vastly increased. 73

[p013] LABOUR REVIEW The post-war boom pushed up prices in spite of the ever increasing production of these commodities. One com- plicating factor was that the USA, itself the world’s greatest industrial country, is also one of the biggest producers of some of the primary products. For example oil, cotton, copper, lead, zinc and wheat are produced there in abundance. There was, in the end, too great an abundance from all sources for the capitalist world to absorb. . By. the spring of 1957 most primary products were being over-produced. . Prices began.to fall. The USA protected its own primary producers by cutting back production, paying compensation for loss of production (e.g., paying farmers doles for leaving good land un- cultivated) and offering guaranteed prices to farmers and others. American granaries are bulging with - grain. There are surpluses of wheat, butter, rice and cotton. The USA tried to give away the food but Canada objected on the grounds that this form of charity was ruining Canadian trade. But the other primary producers, i.e., the colonial and semi-colonial countries, could not afford to deal with their surpluses in this manner. Unlike the USA they lived in the main from the sale of such products; guaran- teed prices and governmental buying up of the surpluses: were impossible. oar By May 1957 world prices of many primary products were falling, though the price movements were not even. Some products, copper for example, were-in. over- supply long before others. Naturally these prices feil first, but generally speaking it was in the late spring of 1957 that the fall in prices of primary products. be- came serious. . re Let us consider, as an important example, coppér. In the early spring of 1955 a ton of copper fetched over £430, a year later £350, in May i957 £240 and’ today £174. Again, in May 1956, lead was £110 per ton’ By May 1957 it was still £104, but today it is down to £72. Some prices have fallen further than others. Some have been maintained by cuts in production. But whether production is cut and prices maintained or whether prices are cut and production maintained or both are cut together, the incomes of the producer countries have fallen. Consequently markets in the primary producing countries for manufactured goods from Europe and the USA have contracted. It-is ‘difficult’ to sell motor-cars to paupers. ae , THE INDUSTRIAL CRISIS IN THE USA At the end of the war, there were shortages of many commodities in the USA, particularly of industrially produced consumer goods. There was also an enormous pent-up demand with high incomes and high ‘saved’ incomes to back it up. That was the background of the post-war boom. Many of the shortages in the USA, Europe, and indeed throughout the whole capitalist world, were such that only American industry could satisfy them. Of course American industry did its utmost to satisfy demand. Huge investments were made in in- dustry. New labour-saving machinery was introduced. New industrial processes were developed. New materials, such as plastics and the whole range of ‘petro- chemicals’, were brought out. New sources of power such as atomic energy have been, and are, in process of rapid development. All this required large investments of capital. Industry expanded into the agrarian southern 74 - May-June-July 1958 states of the USA and productivity and production in- creased both in the new and the old industrial centres. The result was an unprecedented boom. ' There were only two brief setbacks, in 1949-50 and in 1953-54. Both were largely due to changes in produc- tion. In 1949-50 there was the switch to rearmament at the beginning of the Korean war. In 1953 there was a a new switch, after the Korean armistice, from war pro- duction to more normal peacetime production—though there remained huge government expenditure on arma- ments. These changes led to a running-down of stocks and necessitated adjustments in the emphasis placed on the type of product turned out. As a result, there was in. these years a measure of unemployment, but no ~ gerious fall in investment. THE END OF THE BOOM In the last quarter of 1957, however, the boom came to an end. Investment levelled off. In manufacturing industries development actually fell, with the expectation of a further fall in 1958, a decline which is now hap- pening. This fall of investment has all the features of a classical capital-goods crisis. By the end of 1957 it was clear that the USA was at the beginning of an economic crisis of over-production—a type of crisis which has regularly afflicted capitalist society since the beginning of the nineteenth century. Production of steel fell. Steel production is universally regarded as the most sensitive barometer of general industrial activity. In January and February 1958 total steel production was 12,489,000 tons, compared with 21,047,000 tons in the same period of 1957. This is a fall of more than 40 per cent. Steel production in the USA this week is estimated by the American Iron and Steel Institute as 1,283,000 tons as compared with 1,308,000 tons last week and 2,313,000 tons in the corresponding week of last year. The output in the past week was 48.53 per cent. of 1958 capacity.1 Last week, U.S. Steel Mills operated below 50 per cent. of _ capacity for the third successive week: Production was 1,285,000 tons . . . Scheduled production this week totals 1,265,000 tons.2 By the last week in April production had fallen to 46.9 per cent. of 1958 rated capacity. The same trend can be seen in the automobile industry: ‘U.S. first quarter . . car sales down by 25 per cent:’3 The Financial Times of April 26, 1958, wrote under the headline ‘Output less than one half of 1957 rate’: ‘Car output in the USA for the week ending tomorrow will decline to an estimated 59,814 units.’4 ‘Kennecott cuts production again; copper rate 67 per cent. of 1957 production.’> The Kennecott Copper Co. is the largest copper producer in the world. We can also use the more general measuring-rods of eccnomic activity to illustrate this same decline. The gross national product in the USA for January, February and March 1958 was 8,600 million dollars below the annual rate for the first three months of 1957 and 16,000 million dollars under the 440,000 million dollars record in the third quarter of 1957. 1 Financial Times, April 16, 1958. 2 Ibid. April 24, 1958. 3 Ibid. April 16, 1958. 4 Ibid. April 26, 1958. 5 Ibid. April 18, 1958.

[p014] THE CRISIS, THE BUDGET AND THE WORKERS Unemployment figures naturally reflect this decline. The number of registered unemployed in the USA has been increasing month by month since the autumn of 1957 and in March the total was 5,189,000, the highest for nearly seventeen years. The number of unemployed actually increased even in March, a month during which unemployment in the USA nermally falls substantially, usually by between 100,C0O and 260,000, as better weather brings people back to work in agriculture, building, road making and other seasonal jobs. Although employment in agriculture . alone rose in March by 250,000, there was an increase of 25,C0O0 in the number of registered unemployed. ‘Manufacturing employment fell by 200,000 with the sharpest lay-offs in the motor industry, machinery in- - dustries and primary and fabricated metals.”6 Jules J. Bogan, Professor of Finance in New York University, has written: The economy is experiencing a full-blooded depression instead of another inventory dip like that of 1948-49 and 1953-54. Such a depression would mean a durable goods- buying lull that could go on for two or three years with Government intervention ameliorating the ill effects. It is true that if the Government determined to use credit and fiscal measures without restraint to halt the slide, it could do so. But there is a strong conviction in both politi- cal parties, that is also strongly held by the President, that the consequence would only be another short-lived inflation- ary boom... with an even more severe collapse following.” In- short Professor Bogan is saying that economic in- stability, with all its consequences, is inevitable under capitalism.. The people in the U.S. Government whe have to make decisions ignore the economic theorists— on the grounds that to take their advice would, in the end, make things ‘worse’—worse, that is, for the capitalist monopolists whom the present U.S: Govern- ment represents. RECENT TRENDS IN BRITAIN’S ECONOMY Since the autumn of 1955 the Tory Government and the City of London (i.e., the political and financial wings of big business) have been operating ‘a policy of economic restriction. The cost of financing industrial expansion, both for old and new industries, has steadily risen. This rise resulted from deliberate policy and was achieved partly by putting up interest rates. Bank Rate was raised from 34 per cent: to 4 per cent. near. the: time of the Butler autumn budget of 1955. Then, in February 1956, it was raised to 54 per cent. In February 1957 it fell to 5 per cent., but was raised to 7 per cent. on Sep- tember 19 of the same year. On March 20, 1958, it was reduced to 6 per cent, on May 22 to 54:per cent. and: on June 19 to 5 per cent. oe vind Supplementing the increase in general interest rates which followed these Bank Rate changes was the credit squeeze. On the Government’s instructions, the banks assessed the amount of credit advanced to commercial and industrial enterprises and to individuals. Again acting on Treasury instructions, the Capital Issues Com- mittee of the Stock Exchange refused permission to raise capital on the Stock Exchange if it did not approve of its purpose. Local authorities and the nationalized indus- tries were compelled to cut their investments: In spite of all these measures there have been balance of payment 6 Ibid. April 9, 1958. 7 Thid. March 20, 1958. crises each year over the past three years and there might well be another crisis this year. THE CRISIS IS WORLD WIDE It is not only the under-developed countries and Britain and America. that are experiencing economic difficulties. The crisis has spread to all other countries, though naturally affecting them in different ways. The present recession is world wide: it shows up in Russian surpluses of tin and aluminium or in Mr Khrush- chev cutting the working week as well as in New Zealand’s problem of the butter price, Rhodesia’s loss of income from copper or in Detroit’s unemployment ... So far the U.K. has been fortunate to escape more than the slightest brush with the recession . . . Yet production as a whole has declined somewhat and can be expected to decline still more.’ In this way the organ of the City of London recog- nizes that the crisis of over- -production is world-wide. Its leader writer could have added Germany, Japan, France, Scandanavia, Australia, South Africa, Latin America and others to the countries affected. He could also have stressed more urgently the effects of the crisis cn the economy of this country. But to do so would have brought him and his paper into conflict with the Tory Government and particularly with Amory’s Budget. The City of London is naturally not in conflict with the Government. On the contrary, it is in complete agree- ment with Amory. THE BUDGET AND THE CREDIT SQUEEZE . The credit squeeze is still operating, and according to Amory is -going. to continue to operate. He said in his Budget speech: ‘At home, our first priority must con- tinue to be to finish the battle against inflation.’ This statement caused much surprise and was made in the face of a contradictory admission which he had made earlier in the same speech: ‘The level of industria] preduction has tended to decline. slightly in the last few months and unemployment has been rising. These trends may well go rather further during the rest of the year; but I do not think that.a sudden sharp recession in this country in the coming months is likely.’?~ Fg The optimism about no ‘sudden sharp recession’ is just normal Treasury ballyhoo. But it is absolutely clear that the inflationary phase in world economy is already. at an end, and statesmen who deny this fact must have some ulterior motive for doing so. British industrial in- vestment is falling, just as it did in the USA, but this fall is being aggravated in Britain by the credit squeeze. Investment in the last quarter of 1957 was down in com- parison with the same quarter of 1956. In Britain, further falls in production and a growth of unemployment are therefore inevitable. The trend all over the world is. towards inflation’s opposite, deflation—i.e., to a fall in the demand for goods. Wholesale prices of. ‘commodities are now beginning to fall. Retail prices will follow be- hind wholesale prices. The present price of butter in- dicates what is likely to happen to other consumption goods Yet Mr. Amory added: ‘It is still necessary for the banks to hold down the level of advances and for the hire-purchase restrictions to be kept on. The Capital Issues Committee will continue for the present to main- 8 Ibid. April 24, 1958. 9 The Times, April 16, 1958. 75

[p015] LABOUR REVIEW tain their critical scrutiny.’ In fact Amory accepts the whole policy of his predecessor, Peter Thorneycroft— a Bank Rate of 6 per cent..and one of 7 per cent. are. both.penal Bank Rates, deliberately calculated to reduce investment—especially that devoted to the ex- pansion of production. Here indeed is the main function of this high Bank Rate, for after all it also costs the Treasury extra hundred of millions of pounds a year in financing the National Debt, and sterling held abroad. Un the important front of oversea markets, Britain’s share of world trade has been steadily falling. The figures tell their own story. May-June-July 1958 proved very difficult, if not impossible, to halt—par- ticularly since first one country then another will attempt to ‘protect’ its home industries, as the U.S. Tariff Commission is already doing. But the British Government’s economic policy since September 1957 (as continued by Amory’s Budget) has had a curious air of unreality about it. To any outside observer, faced with the arrival of an economic crisis of over-production, the British Government has carried out a vigorous policy which appears to be aimed at accentuating, rather than delaying or mitigating, the effects of the crisis. Do the Tories really want to deepen SHARE OF WORLD TRADE IN MANUFACTURED GOODS (percentages) 1950 1951 1952 USA. 0.0... 22. 27.3 26.5 26.2 Britain... ... ... 25.7 22.0 21.4 Germany re 10.0 12.0 In the last six months Germany has overtaken Britain to become the second largest exporter of manufactured goods in the capitalist world. THE REAL AIMS OF TORY ECONOMIC POLICY The Tory Government and big business are using the crisis to fulfil their own aims. They are deliberately accentuating the effects of the crisis by their present policies, in order to beat down the standard of living of the working class. They know that British manufacturers have been losing the battle for world trade to more powerful com- petitors in the USA and Germany. It is also clear that with their falling incomes, due to the falling prices for their products and to cuts in production, the primary producing countries will not be able to buy as much from Europe and the USA as they did in the past. The greatly extended productive capacity of manu- factured goods of all the exporting countries is today coming into conflict with an ever-shrinking market. In this struggle Britain is particularly vulnerable. Her best customers last year were the USA, Australia, Canada, India, South Africa and New Zealand in that order. But these countries all find themselves in economic difficulty and must be expected to cut their imports during 1958. In the USA the Tariff Commission is already recom- mending increased tariffs and quotas in the lead and zinc industries, to protect home producers. Tariff ‘pro- tection’ will almost certainly be extended to other industries as the situation worsens. The other countries mentioned have all suffered a sericus reduction in their incomes and, in consequence, will be compelled to cut their imports. All this means that British exports, which are already falling, are likely to suffer further decline. (There were sunshine smilés after the New York motor show. But now they are ‘grinning and bearing it’.) This decline will mean reduced demand for British products and so less employment for British workers in the export trades. In turn, this unemployment will result in a fall in the demand for goods produced to be sold in the home market, followed necessarily by a further increase in unemployment. - Once under way, these spiral declines have always 76 1953 1954 1955 1956 1957 26.0 25.0 24.5 25.2 25.8 ~ 21.2 20.4 18.7 19.0 18.2 13.2 14.8 15.5 16.4 17.1 the economic crisis? Naturally not. But it so happens that at this period their principal political aim does coin- cide with a policy of aggravating economic crisis. Ever since the war, in opposition and in office, the Tories have steadily, with clear purpose, sought by control of the economy to create a state of affairs where they could cut the standards of living of the British workers. They want to introduce enough controlled un- employment and to produce enough instability (‘flexi- bility’) into industry to restore what their quack indus- trial psychologists, their joint consultative councils, their tame trade union leaders and all the ‘class-peace’ paraphernalia of the Welfare State have been unable to restore—the same degree of economic and political sub- jection of the working class to its bosses (they call it ‘discipline’) which they used to impose. It will indeed be a terrible time for the people of Britain if the Tory Government is not prevented from carrying through its reactionary policies to fruition. Only the working class stands in its path. THE LABOUR MOVEMENT AND ECONOMIC CRISIS The Labour movement can end for ever these con- stantly recurring economic crises. It will do so when it ends capitalist social relationships and creates a socialist order of society. Economic crisis is as much a part of capitalism as wage-slavery, profits, cut-throat competi- tion and war. Capitalist crisis is one expression of the anarchy, i.e., the unplanned nature, of capitalist pro- duction of commodities. So long as industry is motivated by the drive for profit rather than the satisfaction of men’s needs, so long will it endure the evil effects of unplanned production—instability, inefficiency and “over-production’. The only final answer to economic ‘blizzards’ is socialism. However, there is unfortunately a far cry between socialism and the policy put forward by Harold Wilson in Parliament after Amory’s Budget, or the policies adopted by the Labour Party at Brighton in the docu- ment Industry and Society. Economic instability is caused by the anarchy of capitalist production, by the arbitrary cutting down of investment at certain periods by capitalists when they cannot see a profit arising out of an investment. Con-