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Andrew Glyn

Capitalist Crisis:
Tribune’s ‘Alternative Strategy’
or Socialist Plan

(1979)

A Militant Pamphlet, 1979.
Transcribed by Iain Dalton.
Marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Introduction

I. Capitalist Crisis

II. The Alternative Strategy of the Left

III. A Socialist Plan of Production

Introduction

The boom in the capitalist world during the 1950s and 1960s represented the fastest growth of production in human history. But even this could conceal only to a degree British capital’s headlong plunge into oblivion as a world economic power. While continuing to invest much less than their rivals, the British capitalists blamed their decline on the improvements in living standards and social services they were forced to concede to the workers. Their humiliation was sealed by the defeat of the Tory Government after the miners’ strike of 1974.

Against this background there is an element of grim satisfaction amongst the bosses in presenting as an inevitable scaling down of the pretensions of the mass of workers the developments of the last two or three years. The million rise of unemployment is said to be the inevitable “natural” result of “too high” employment in the past, the cut in public expenditure is presented as a cut in “unproductive” spending which “cannot be afforded”, the cut in living standards is explained as a facing up to “economic reality”. The real hardship involved in long periods of unemployment, in hospital wards being closed down, in school children inadequately fed, in housing waiting lists growing must be endured as “facts of life”.

Revenge is all the sweeter because these “sacrifices” are being imposed by a Labour Government, forced also shelve its plans to curb the power of capital – the wealth tax, land nationalisation, planning agreements, nationalisation of profitable firms. This pamphlet examines first the depth of the crisis and the policy of the capitalists which they have forced on the Labour Government. This is essential in order to take up in a detailed fashion the Alternative Economic Strategy proposed as an alternative to capitalist policies by many on the Left of the Labour movement. Given our assessment of the inadequacy of this strategy in the final section we consider the basic elements of a socialist plan of production capable of surmounting the crisis and mobilising society’s resources.

I. Capitalist Crisis

Unemployed Resources and Social Needs

As well as the incalculable cost of the demoralisation and misery of the unemployed and their families, unemployment represents a monstrous waste of society’s resources in terms of what those workers could produce.

There are at present around one and a half million workers registered as unemployed. Many more people want a job but are not registered because they are not entitled to benefit or live in areas where there is no chance of finding work. The Cambridge Economic Policy Group has estimated that these unregistered unemployed total nearly one million, bringing total unemployment to around 2½ million or 10% of the labour force.

10% lost production would be bad enough. But in fact, if all these workers were employed, production would rise much more than 10%. Not because t hose out of work are much more energetic than those in jobs. Nor because they would be working with better equipment – firms will obviously try to keep their most efficient plant operating in a recession.

But the reality is that in many industries unused capacity also means low productivity. A good proportion of jobs are not tied directly to the level of production – the capitalists have to keep on most office and sales staff even during a fall in production. Also a growing number of direct production jobs cannot be cut out by the capitalists as soon as sales fall. Most nineteenth century factories consisted of large numbers of workers doing a small range of jobs, and it was simple to layoff a proportion as soon as output fell. But now many industries involve integrated processes with each worker like a cog which cannot be removed without the machine grinding to a halt. And even where there is the technical possibility of culling employment as output sags, the capitalists’ freedom of action curtailed by the opposition of the workers.

These technical and ‘labour relations’ difficulties explain why so many redundancies now take the form of the bosses trying to find an opportune moment to close down a whole plant or section of a plant, particularly if it is old and inefficient, or one with a high level of militancy. But they also explain why a low level of production means low productivity. And conversely that an expansion of production sufficient to provide jobs for the unemployed would involve a very substantial increase in productivity as well. The economists’ calculations are that to increase employment by 10% (and thus eliminate unemployment) would require increased production of about 20%. Or to put it in another way, the unemployment of 10% of the labour force involves underproduction of 20%. Confirmation of this figure, and for the really enormous increase in production which could be achieved without any increase in employment at all, comes from a survey of spare capacity in industry.

20% lost production means that around £20,000 million (in 1975 prices) worth of goods and services which could be produced are not £20,000 million squandered through unemployment compares with the production required to provide the following essential improvements:

Why Has Unemployment Risen?

This immediately raises the question of why all these resources are left unused. If it was true that the unemployed were scroungers it would certainly be a magnificent testimony to capitalism, that it turned a large section of society into parasites. Parasites there are of course, who live on the labour of others, but out of choice and in great comfort derived from their stocks and shares. The vicious and reactionary theory that the unemployed are there from choice has no basis. One of the reforms of the 1964–70 Labour Government was to raise the level of unemployment and supplementary benefit relative to earnings. Bearing in mind that unemployment is concentrated amongst low-wage sections it has been calculated that the average dole for a married worker relative to earnings in their most recent job rose from about 50% in the early sixties to around 60% since the late sixties; those receiving earnings-related benefit get 75–80% of their ‘probable earnings’ in work, but only for 6 months (Cambridge Economic Policy Review 1978). It is possible to find individual cases where these ‘improved’ rates have caused workers to quit a lousy job a bit earlier or to stay on the dole a week or two longer before being forced into some sweatshop on starvation wages. But there is no evidence whatsoever that this applies to very many workers on the unemployment register. And even if it did, it just means that their place in a particular job is being taken by somebody else. The Tories and the gutter press never explain how cutting down workers’ capacity to hold out on the dole while looking for a job will increase total employment. It would do nothing of the sort since production is not low because there are not enough workers but because there are not enough profitable markets. The campaign against scroungers and in favour of making the dole less “generous” has got nothing to do with reducing unemployment. What the capitalists are after is making unemployment even more intolerable, so that fear of the sack is a more potent weapon for ‘disciplining’ the workers.
 

Technological Unemployment

A hundred years ago the Church told people to accept their fate as the will of God. In 1978 a TV pundit mutters darkly about technology and presses a button which makes “2 to 4 million unemployed in the 1980s” appear in computer-readable lettering on the TV screen beside him. He is also conjuring up the idea of a process beyond the control of man. But this new technological fatalism is just as much of a smoke-screen as its religious counterpart.

For the idea that the mass unemployment of recent years is due to a sudden acceleration in technical progress has no basis. Certainly the tendency to replace men by machines (the increase in what Marx called the technical composition of capital) has been a feature of capitalist development in recent years. But this is always the case. It was just as true of the boom of the fifties and early sixties when there was more or less ‘full’ employment. There is absolutely no evidence that there has been an acceleration in this process in recent years. Certainly there now seems to be the possibility of a leap forward in automation opened up by the use of micro-processors – the tiny silicon chips with the power of a computer. But this process has hardly begun and has no connection with present mass unemployment.

And, even if the possibilities for the replacement of human labour in the direct production process are speeding up, this would only spell unemployment in the context of stagnant production.

The reason for the rise in unemployment over recent years has not been a sudden acceleration of productivity – in fact it has stagnated. Rather it is explained mainly by the slower provision of new jobs rather than the faster destruction of old jobs. No more male workers are joining the dole each year than was case 10 years ago. The rise in unemployment reflects the fact that each worker put out of a job, or leaving for some other reason, is finding it much more difficult to find a new one – the average unemployed worker had been looking for a job for 17 weeks in 1977.

But isn’t there an insoluble contradiction? If investment does not rise British industries are driven out of world markets and unemployment rises. If investment does increase it means more and more workers replaced by machines and unemployment rises. But the fundamental point is that investment in new equipment does not itself cause loss of jobs. Certainly in the context of a stagnant market investment will tend to have that effect, as new capacity, which can produce more cheaply and which employs fewer workers, displaces older plant. But in the context of an expanding market, higher investment would increase employment immediately in the industries producing the investment goods. And in the longer run extra workers could be taken on to work with the new plant to supply the growing market, without requiring the scrapping of old plant. To see investment and technical progress as destroying jobs is to see just one side of the two-fold relation between the accumulation of capital and employment. As Marx explained, on the one side accumulation of capital means more jobs on the new capacity. On the other hand accumulation ‘repels’ workers as competition from the new capacity drives out old. In Japan for example in the 1950s and 1960s the industrial capital stock grew at 12.5% a year, three times as fast as the British capitalists managed. But far from meaning that employment grew slower, it grew at 3.7% a year in Japan and not at all in Britain. This, despite the fact that industrial productivity in Japan also grew three times as fast. The crucial difference is that Japanese capitalists were able to expand their share of world markets on the basis of this tremendous rise in productivity, and that their home market was propelled forward by the massive growth of investment. So the basic reason for the rise in unemployment faced by British workers over the past ten years is not too high investment, it is too low a growth of production. In capitalist terms this means just one thing. Too slow growth of a profitable market.
 

The Market

If the immediate factor behind the rise in unemployment is the slow growth of the market perhaps the whole problem is due to the crisis in the world economy. Dennis Healey might be right when he said in his 1978 Budget speech that “If we are to solve this country’s problems we need to take action on a world scale”. However, the idea that the rise in UK unemployment can be blamed simply on the stagnation in the world economy is completely false. The following table shows that it is not exports which have slowed down and account for the slow growth of the last four years. The stagnation has come predominantly from workers’ living standards (private consumption), public investment and investment by the capitalists.

These cuts cannot be blamed primarily on the world economy. The basic factor behind these developments was the catastrophic fall in the rate of profit sustained by British capitalism – from 13.5% in 1960 to 3.5% in 1975 according to the Bank of England’s figures for the pre-tax rate of profit of industrial and commercial companies.
 

The Cuts

In response to this decline in profits the British capitalists have reduced Investment and demanded reductions in living standards which the Labour Government has implemented through the various stages of the Social Contract. Moreover they have insisted that the government cuts its expenditure. There seems at first sight to be something very contradictory about big business demanding these cuts. For public expenditure provides markets for private industry directly (building council houses etc.) or indirectly (through the spending by teachers of their wages etc.). Moreover, lending to the government to finance its deficit (the excess of its spending over taxation) has been (for many capitalists) a more lucrative avenue for investment than buying more machines, factories etc. So cuts in public spending mean less markets and less opportunity for lending to the government, at a time when other markets and investment opportunities are scarce. In 1975, in fact, interest paid out by the government on the national debt (which represents the deficits of past years) was actually greater (at £4,500 million) than the net profits of industrial and commercial companies. Isn’t the CBI cutting off its nose to spite its face when it calls for further cuts?

But the capitalist class in Britain, even the financiers of the City who have reaped the immediate profits, have seen the ultimate futility of lending to the government at the expense of neglecting reinvestment in industry. For it is only investment in industry which would allow British capitalism to compete with its rivals on world markets on the basis of the latest technique of production and halt the decline of its share of world trade. Only the ploughing back of profits into new factories and plants, will increase the productivity of labour in the future and enable concessions to be granted to the labour movement in terms of wage increases and improved social services. By contrast, investing profits in government bonds does not lead to greater productivity in the future. Except in the most indirect and long-term fashion (via improved health or educational standards), expenditure on the social services financed by borrowing from the capitalists is not productive as far as the capitalist system is concerned. Although the capitalists who lend to the government receive interest they are in effect sharing in the surplus value produced, without increasing it. Most government investment, in schools or hospitals for example, does not lead to cheaper public services in the future and thus savings for the capitalist class. Rather it tends to lead to improved services (better hospitals allowing more sophisticated treatment) and thus more expenses in the future. The capitalist class in Britain has seen that continuing on the road of accumulating 10% or more of the national product in the form of government bonds spells ultimate ruin. The offensive against public spending, the CBI’s message that “it is good to create wealth” and that “wealth has to be created before it is distributed” reflect the realisation that lending to the government to provide concessions for the working class in the form of improved social services cannot be a long-term strategy. Only driving down living standards to increase profits, and ensuring they are ploughed back into investment which improves its competitive position can restore the position of British capital.
 

Catch 22

The phases of the Social Contract have held down living standards whilst profits doubled between the summer of 1976 and early 1978. The massive planned cuts in spending of £2½ billion per year have been supplemented by “unplanned” cuts of £4 billion through the operation of the vicious cash limits system. Still investment is stagnating. The explanation is that to justify new investment capitalists do not only require to be earning an ‘acceptable’ rate of profit on their existing investments.

An adequate market in which to sell the extra products turned out by the new factories is necessary as well. And the attempt to improve profitability by cutting wages and pushing up unemployment reduces the level of spending which workers can afford. Sales fall and excess capacity develops in the consumer goods industries. Cuts in public spending compound the problem. It seems as though the capitalists are caught in a “Catch 22” situation. If they don’t succeed in driving down living standards, profitability is too low to justify investment. If they do, then there is no market for the goods which would be produced with the extra plant and equipment.

An individual capitalist can avoid this logic if he can find a market at the expense of his rivals by driving down his costs (the living standards of the workers he employs) to a sufficient extent.

Capitalists tend automatically adopt this attitude when confronted with an overall decline in profitability; the profit margin can be restored by driving down real wages so that is the first priority. And, for the capitalist class in an individual country, the strategy of driving down living standards would work if it could expand its sales at the expense of its rivals; that is by increasing the share of its exports in world trade and reducing imports. In the crisis each country relies on an export boom cutting into the others’ markets to provide the growing market needed to justify investment. This is why the CBI announces boldly:

“The aim must be to increase the penetration of world markets including our own domestic market. All other strategic objectives, notably high employment, depend on this.” (The Road to Recovery)

So it is not that the stagnation in the world economy is the immediate cause of the crisis in Britain; it is rather that it makes a way out from the crisis much more difficult.
 

The World Crisis

To hope to secure an export boom on the basis solely of cutting into other capitalists’ markets is a pipe dream, especially because capitalists abroad are attempting just the same policies of wage cuts and rationalisation. Any chance of an export boom depends crucially on the growth of the world market. If there was rapid growth in the other capitalist countries then British firms could increase their exports without the need to secure a higher share of the market. But the world boom of the fifties and sixties, which to a certain extent dragged limping British industry along in its wake, is over for good and all.

The most dramatic indicator of this is the slump in investment, which is the real motor of the capitalist economy. In Europe and Japan the rates at which the capitalists increased their expenditure on new factories and machinery, declined, during even the feverish boom of the early seventies, to little over half the rate of the early sixties. In the crisis of 1974/5 investment slumped by between 7% (UK) and 22% (Japan). The forecasts for 1978 show private investment (excluding housing) only at about the 1973 level in all the major countries except Japan where it is still 15% below the 1973 level. The report of the Bank for International Settlements pointed out that in Europe investment in new factories and machinery is one third below the level it would have reached if the trend of the sixties had continued; in Japan it is less than one half of the trend level.

The Organisation for Economic Co-operation and Development has labelled the capitalists’ refusal to invest “investment shyness”. But far from being hesitant to press their claims, all that the capitalists are shy about is losing their money. For underlying this decline in investment has been a more or less drastic fall in profitability in the various major countries. While figures for profits are notoriously difficult to calculate on a comparable basis as between countries, the following table does give an indicator of the decline in profitability within each country:

The process by which the huge rates of capital accumulation in some countries such as Japan, and the relatively low rates in others such as Britain, combined to give a generalised decline in profitability is a complex question which cannot be gone into here. But the fact that in each of the major capitalist countries the rate of profit had fallen by one half or more as compared with the early sixties, shows the depth of the crisis with which the capitalist class is faced with on a world scale.

While total profits certainly rose since 1975 in a number of countries, they have not recovered earlier heights. The first task of capitalists in all the countries is to restore rate of profit by driving down real wages, through wage controls and unemployment, and by increasing productivity through rationalisations and speedups. Like the British capitalists each group hopes to solve the problem of markets by expanding at the expense of the rest. But only the strong capitalists will succeed.

Moreover it is no good the weak countries like Britain calling on the strong countries to expand their own economies by tax cuts or higher public spending. They all know that their last attempt in 1972/3 to drive the world economy forward through tax cuts and money supply increases collapsed in a disastrous acceleration of inflation. The cuts in living standards have not restored profitability sufficiently, whilst the resulting stagnation has driven out the memory of the booming markets of the sixties. Meanwhile the mass unemployment has not materially weakened the trade union and labour movement. Together with the cuts it has built up a legacy of bitterness likely to lead to industrial struggles and Left governments. Against this background the successive economic summit statements have a hollow ring. “We will not allow recovery to falter” (Paris, November 1975); “the soundness and breadth of our recovery” (Puerto Rico, June 1976); “sustained non-inflationary growth” (London, April 1977). Not surprisingly the Bonn meeting (July 1978) sounded a plaintiff note: “We need an improvement in growth”. The Japanese government summed up all their fears when it pointed out that “it was important not to end up making everybody equally weak rather than trying to get all countries equally strong.” (Times, March 2 1977)

Excess capacity is running at 15% or more in the capitalist world. Profits are still extremely low. The strong countries are refusing to expand.

The OECD survey of the world economy in July 1977 pointed out the failure of investment to rise.

“The difficulty of stimulating business fixed investment in conditions of moderate recovery and remaining slack may have been underestimated. In most Member countries business fixed investment is likely to remain below – or only fractionally above – the peak attained in 1973. Capacity utilisation rates, already low in most countries, are unlikely to rise. much over the next twelve months. Stronger growth in the United States might be expected to boost business expectations elsewhere, but there are as yet no indications of this in business surveys. The persistence of inflation probably weighs heavily on business expectations. Profits, although recovering over the last 18 months, remain well below pre-recession levels, and a further shirt to profits may be necessary in many countries to restore a position which – other conditions being satisfactory would encourage productive investment to rise.”

At the end of 1977 the story was the same: “any marked revival in business investment – the essential motor if expansion is to be sustained – is now extremely unlikely”. The July 1978 survey echoed the same point. “There is little indication of an impending upswing in capital formation – neither profits, capacity utilisation nor confidence have recovered sufficiently”.
 

Protectionism

The effect of sluggish investment is that the capitalist world has stagnated and the possibility is growing that control of imports will escalate as individual countries seek to protect their markets from the increasingly fierce competition. One economic historian has recently described how in the 1930s there was “a headlong stampede to protection and restriction on imports, each country trying to ward off deflationary pressure of imports, and all together ensuring such pressure through mutual restriction of exports”.

The April 1978 General Agreement on Tariffs and Trade pointed to “a worldwide and disturbing resurgence of protectionist pressures which in recent months have reached a level not experienced for more than a generation” It blamed “a search for new panaceas in the face of unacceptably high unemployment, low investment, an unhappy combination of recession and inflation, monetary disturbances and doubts about the stability of the postwar monetary and trading order”.

The IMF’s report said “that by early 1977 it was apparent that there had been an interruption to the reduction of protectionism that had characterised the commercial policy of the industrial countries” since the War. So far few of these measures have comprehensive, across the board restrictions (Sweden for example invoked a security of supply clause, always reserved for strategic materials, to justify keeping out imports of tennis shoes and Wellington boots!). But the trend is unmistakeable, as the usually cynically cheerful Economist reported in an extraordinary review-of-1977 article worth quoting at length:

“It was easy to believe in free trade when everyone seemed to benefit. Today, the best it receives is lip-service; and, in any seriously affected industry, not even that. Subsidies, though widely practised, were officially regarded as a support to the halt and the lame – the Mezzogiorno or the farmers, for instance. Today, they are, in many countries a normal part of industrial policy. The industrial development of the third world was proclaimed a case for public sympathy; now it is privately cursed as a bloody nuisance.

Another country’s trade surplus is no longer a virtue to be emulated but a vice to be denounced; and your own appreciating currency no longer reason for pride but cause for lamentation.

The change did not happen suddenly. But 1977 was the year when it became all but respectable. Near the start of the year, when the French prime minister used the words ‘organised free trade’, it was the word ‘organised’ that raised eyebrows. So he changed the slogan to ‘orderly growth’ of trade – and today quite a lot of eyebrows go up at the ‘growth’.

The trouble may arise, as in domestic electricals, from a growth in world capacity as new, cheaper sources of supply are established, typically in low-wage countries. Or, as in steel and shipbuilding, it may come from dramatic fall in world demand; those industries would be struggling today even if the third world had never set a finger to them. The results in both cases are much the same: fierce competition, price-cutting and dumping, then protection to secure home markets and subsides to grab markets abroad. And the problems look much the same: to protectionists, how to keep the bastards out, to all but purist free-traders, how to allow time for, and to ensure, orderly rather than instant and chaotic adjustment.

But the rich countries are singularly short of any agreed rules for orderly adjustment. They have no mechanism at all except ad hoc get-together, as between Europe and Japan in shipbuilding, to handle proposals for a general reduction of capacity (or the parallel problem, as in synthetic fibres, the non-installation of gross over-capacity).

So, instead, the world has built up its private armouries of unilateral protective measures, bilateral ‘orderly marketing’ or ‘voluntary restraint’ agreements, and the multilateral multi-fibre arrangement.”
 

North Sea Oil

Many people are bound to wonder whether the promised bonanza of North Sea Oil will allow Britain to escape from the ravages of the world crisis. Tony Benn, for example, recently said that the countries to whom the British Government was going cap in hand to borrow cash will soon come begging to Britain for energy supplies. To answer this it is necessary to go into the economic effects of North Sea Oil in some detail.

The Government’s forecasts are that the UK will be self-sufficient in oil by 1980; that is equivalent to a saving of about 13% of imports by 1981.

But while this improvement in the balance of payments does ease that problem, the following points indicate just how ‘marginal’ is the effect of North Sea Oil.

1. The improvement from North Sea Oil is hardly any greater than the effect on the balance of payments which has already come from the earlier development of North Sea gas and which has quite failed to stem the catastrophic performance of the rest of British industry.
    
2. North Sea Oil does no more than offset the impact on the balance of payments of the quadrupling of the oil price in 1973. So only somebody who held that there was no crisis in British industry before 1973, and that all the problems stemmed from the rise in the price of Arab oil, could possibly argue that North Sea Oil solved the crisis. Given the increasingly rapid decline in the position of British capitalism before 1973, such a view is quite unsustainable. In fact North Sea Oil does not even fully offset the 1973 rise in oil costs. North Sea Oil will actually cost more foreign exchange in 1980 than Arab oil cost in 1972. This is because of the profits sent home by the US oil companies, which have developed much of the field, and the imports of machinery etc., used in the exploration and production.

Using the oil to buy extra imports, takes some pressure off the pound but any argument that North Sea Oil will transform the position of British capitalism must rest not on its direct impact, but on indirect effects on the rest of industry. Can the revenues from North Sea Oil production be seriously expected to get an investment boom going?

Now it is certainly the case that the production of North Sea Oil itself is extremely profitable. The Labour Government did introduce a special Petroleum Revenue Tax (PRT) to mop up some of the extra profits resulting from the huge 1973 increase in the world price of oil. But this only applied to fields yielding less than 30%. Estimates of the expected rate of profit from the individual fields range from around 20% at the bottom and to practically 50% in the case of Occidental’s Piper field (Financial Times, February 27th, 1976), many times rate of profit in UK industry.

Moreover Labour’s original plan that the Government share in these high rates of profit, through compulsorily taking a majority share holding in all the oil fields already licensed, was dropped in the face of opposition from the oil companies. It was no good the government saying that there would be “no unfairness to the licensees (of the oil fields) since the state contributes its share of the costs, including past cost.” The oil companies obviously objected bitterly and successfully to losing part of their super-profits. All that is left of direct state participation is the right of the British National Oil Corporation to take a majority shareholding on fields resulting from the much less important rounds of license allocation in 1977 and later, plus the interests in various fields inherited from the Gas Council and Coal Board. BNOC will only get about one tenth of the profits from North Sea Oil in the early 1980s.

The “participation agreements” for existing fields stipulate that the BNOC should be able to purchase 51% of the oil at market prices. But in the cases of Shell and Esso the Government has agreed to sell back an equivalent amount of North Sea Oil for refining in Britain. These agreements simply have the minimal effect of guaranteeing British access to North Sea Oil in case of emergency.

The profits resulting from North Sea Oil will be very large – around £2½ billion in 1981 or 1½% of national product (National Institute Economic Review, November 1977). If all the North Sea profits were reinvested in British industry they would go over half the way towards the target of doubling manufacturing investment. But there is no likelihood that this will happen. Nearly two thirds of these profits will go abroad to the foreign oil companies which took the major part of the licences. They will have no reason to invest these profits back into unprofitable British manufacturing industry. Nor indeed will the UK firms receive a share.

Of itself North Sea Oil production does nothing to increase the profitability of the rest of UK industry (since the oil is sold at world market prices), nor does it widen the market (with the rather minor exception of those industries supplying the rigs etc.). So this leaves the question of whether the taxes paid by the companies extracting the oil could be used to transform the profitability of industry.

The National Institute’s figures suggest that in 1981 taxes would be a little less than the profits earned from the oil (together with revenues of £300 million or so for BNOC, the taxes from the North Sea Oil would be less than 5% of public expenditure).

So could the extra revenue equivalent to around 1½% of GOP be used to initiate an investment boom? But even if it was all offered to the capitalists as grants it would not provide a profitable market which would make it worthwhile investing.

North Sea Oil does improve the balance of payments but not through a profitable “export-led boom” in the rest of industry; and it is the profitable export-led boom, not the improvement in the balance of payments, which would be necessary to “justify’ investment.
 

A Service Economy

One section of the capitalists based in the City of London, far-sighted enough perhaps to see that the restoration of British industry on a capitalist basis is a pipedream, has turned to a new solution. Former Tory minister David Howell has called for an end to the restrictions on overseas investment, which have been labelled “a most sinister infringement of personal freedom” (Times, January 3, 1978) by Lord Cromer, ex-Governor of the Bank of England. Sam Brittan of the Financial Times explained the advantages for the capitalists:

”To attempt to force still more (!) resources into domestic manufacturing investment when we are already on the threshold of negative returns makes very little sense ... with overseas investment the case is utterly different ... A policy of overseas investment would not run into the problem of rapidly deteriorating marginal productivity of capital (i.e. profitability!) which would beset any forced investment drive at home.” (Financial Times, September 15, 1977)

But even if investment overseas promised fabulous profits for the capitalists, which is certainly not the case in the context of world crisis, a policy of investing overseas is a policy for driving more and more industries in Britain out of business. For they are uncompetitive because they have invested too little. The effect of more overseas investment on the domestic manufacturing sector is more or less admitted by Howell when he calls for “still further expansion of an immensely profitable service industries at which we are so good and which earn so much in world markets” (Evening Standard, November 7, 1977). Could these service sectors provide jobs for the industrial workers put on the dole by the further rundown manufacturing? The overseas earnings of service sectors are very large:

But most of these sectors employ tiny numbers of people. 88,000 people were employed in sea transport, 78,000 in air transport in 1975. While 690,000 were employed in the financial sector, the great majority work in the routine High Street operations of the banks, building societies, and insurance companies. Only a fraction handle the big international deals, and so expansion of these overseas financial operations would provide next to nothing in terms of employment. That is even if it could be achieved anyway. UK “invisible earnings” have fallen from 14.6% of the world total in 1964 to 11.1% in 1973, and there were falls in the British share in every major category. Howell never explains how the falling behind in these sectors as well could be reversed.

About the only service sector with big overseas earnings which does employ large numbers of people is tourism. But what are the ex-industrial workers of the Midlands, Tyneside, and Liverpool supposed to do during the long winter months when there are no more jobs dressing up as beefeaters or selling (Italian) ice-creams on the beaches? Apart from the dream of establishing financial dominance, the call for an expansion of the services sectors is really a recognition that the one advantage British capital has is cheap labour and that this gives the biggest advantage in ‘labour intensive’ service sectors. But the task of driving industrial workers into being the skivvies of Europe is no more realistic than the industrial capitalists’ hope of recreating their lost industrial might.
 

Programme of the CBI

The capitalist class as a whole is too closely dependent on industry to succumb to such ridiculous fantasies. The CBI’s pamphlet The Road to Recovery published at the end of 1976 was an agenda for wage controls and public spending cuts which has still not been completed. The CBI said:

“The balance of power has been distorted(!) overwhelmingly in favour of many groups of employees so that collective bargaining has ceased to be a process whereby voluntary agreement on terms and conditions is sought to the satisfaction (!) of both sides and consistent with economic needs.”

Subsequently they proposed that all bargaining over wages should be concentrated in three months after the Budget and that would be a “restructured free bargaining system” to distribute an overall increase in the wage bill agreed by the CBI, TUC and Government. In effect there would be “freedom” allowed to workers to fight amongst each other for a bigger share of what the capitalist class reckoned it could afford.

The CBI’s pamphlet goes on to document the decline in profitability in British industry over the last 10 years, together with the parallel decline in the rate of investment. Even the increase in profits since the pamphlet was written has not reached the CBI’s target of restoring profitability.

Although profitability has risen by nearly one half since the summer of 1976 it is still not quite half the level of the mid-1960s. And a third of the increase in profits has been from North Sea Oil and so does not reflect higher industrial profits generally.

The hard-liners of the Tory party have no faith in further use of incomes policy, but are at one with the CBI in wishing to hold down wages.

”Monetary restraint, including the setting of targets for monetary expansion, is a key feature of economic policy. Excessive wage chums should clearly not be accommodated by an easy expansion of bank lending. In the public sector this must be supplemented by the use of cash limits. Every organisation, including those in the public sector should be put in the position in which workers and management are obliged to face together an inescapable choice between realistic pay levels and job security or excessive earnings and a doubtful future.” (The Right Approach)

Sir Keith Joseph has made it all too clear how he would like to proceed. “As we know, the right to work has come to mean the right not to work, the right to go on receiving wages, usually high wages, unrelated to economic contribution,” and he called British Leyland and Chrysler, “foci of highly-paid outdoor relief” (Monetarism is Not Enough). The leaked Ridley report gave a crude insight into the strategy of class confrontation which the Tories are working out, a strategy mapped out much more subtly by Jan Gilmour, the Tory defence spokesman, in his book Inside Right. (See the long analysis by Peter Taaffe in Militant International Review, Summer 1978)

The CBI’s pamphlet gives some revealing pointers to how they foresee the dismantling of the so called Welfare State:

1. “Rents on municipal housing could be increased to more realistic levels” (the CBI does not point out that in 1975 rents paid by council tenants more than paid for maintenance and depreciation on the houses – the true cost of the housing – while the subsidies of more than £1,000 million all went to pay interest on the money borrowed by the local authorities to pay for the houses).
    
2. “Transport subsidies should be substantially reduced.”
    
3. “There is scope for commercial charging for some of the services provided which could save several hundred million pounds. A few examples that could be considered include pre-schools, leisure courses, school meals, higher charges for certain medical services. More radical changes, such as the substitution of loans for grants in higher education and personal insurance to cover the cost of health care, should also be considered to reduce the burden on the general tax payer.”

What is surprising is that the CBI seems to take seriously the view that if workers are charged more for public services, and if their taxes were cut by an equivalent amount, they will feel better off and will be content with lower wage claims. Here we have the ideology of the free market deceiving not a raving Tory backwoodsman like Heseltine, but the representative of big capital. A worker faced with say an extra £3 per week to payout for rents, school meals, health charges etc. (this is roughly what the cuts of £3,000 would amount to for the average worker if they were all concentrated on charges for social services) is supposed to be so pleased with the extra £3 he receives in reduced taxation (more likely it would be £1 of course) that he foregoes his next wage claim. Because some of his consumption is “privately financed” (i.e. he pays for it directly himself), implying a “wider freedom to choose between public and private services”, he is supposed to feel better off. This may seem plausible to the authors of the CBI’s programme who no doubt do feel better off ‘privately financing’ their children’s schooling and their own private hospital care (at the expense of the rest of society). But it does not take much imagination to visualize the attitude of most workers to the suggestion that they should feel the glow of satisfaction from handing over more cash to the rent collector or to the doctor’s receptionist.
 

The Labour Government

The perspectives of the capitalist class whether for the regeneration of industry or the expansion of services offer no solution to the problems of workers. The Labour Government, under relentless pressure from the CBI and the City, ably supported by the IMF, has faithfully followed the demands of the big business, as described earlier.

In his 1976 budget speech, Dennis Healey said:

”It is because our manufacturing industry has declined since the war both in size and efficiency by comparison with those of our competitors that our economic record since the war has been inferior to theirs.” Remedying this would require “a major shift in the use of our resources away from private and public consumption (i.e. workers’ living standards – AG) towards export and investment.”

He summed it up in a remark at the Overseas Bankers Club in January 1977 that “firms will only expand and invest if they can see scope for making profits.”
 

Job Schemes and Subsidies

The rising tide of unemployment that has resulted from these policies has led the government to introduce a barrage of special employment and training measures to try and keep down the numbers on the register. Albert Booth claims that after the various modifications recently announced the total number of workers involved in the schemes will be 400,000 by March 1979. At the end of 1977 177,000 workers were said to be covered by the temporary employment subsidy, 47,000 by Job Creation and around 80,000 more by other experience programmes and training schemes.

The Job Creation Scheme has been correctly criticised for sometimes involving youngsters in meaningless make-work projects like knocking down World War II pillboxes. And even the genuinely useful projects in the area of public services often do no more than stem the ill effects of the public spending cuts. The left hand obviously knows what the right hand is doing, but it is convenient to pretend that some of the effect on employment of the spending cuts is being offset by the government. But the pretence is thoroughly hypocritical for in the context of the government accepting that spending has’ to be cut by so many hundred million, then the more spent on schemes like the JCS the more that has to be cut elsewhere. In reality, then, all that happens is that a number of younger workers are taken off the dole to work on the schemes and in order to ‘pay’ for them, more cuts are made elsewhere, pushing other workers on to the dole.

This effect of shuffling around who is unemployed, rather than reducing the total number, was even more obvious with the subsidy to firms to take on school leavers. The Department of Employment Gazette (July 1977) reported a survey which showed that three quarters of the school leavers taken on by firms claiming the subsidy would have been taken on anyway, and half of the rest merely replaced other workers. The school leavers’ subsidy was replaced by the Youth Employment Subsidy which gives £10 per week for up to 26 weeks for firms taking on workers under 20 years of age who had been out of work for six months or more. The DE dutifully carried out another survey into its effects (Gazette, April 1978) and found almost exactly the same results. Three quarters of the “subsidised young people would have entered their employment regardless of the subsidy” and half of the rest were filling jobs which would have gone to somebody else. However desirable it may be to break up extended periods of unemployment for youngsters it just shares the misery out more evenly (and salves the government’s reputation by allowing it to boast of the number of jobs covered by its schemes).

Much the biggest employment subsidy is the Temporary Employment Subsidy which gives £20 per week for a year for each worker kept on who would otherwise be made redundant (recently restricted under EEC pressure to cover only 70% of a firm’s labour force with the rest being eligible for a subsidy to make up 75% of lost wages while on short time). In principle this gets round the problem of giving money to capitalists to employ people they would take on anyway, since the applications are supposed to be rigourously scrutinised to ensure that the redundancies really would take place. The TUC is pressing for a Job Expansion Subsidy of £20 per week per job to be provided for one year to all firms providing an increase in manufacturing jobs, and so far the Government has responded with the Small Firms Employment Subsidy (SFES) which does just that (for six months) but limited to small firms. All these schemes, if they really do save jobs, have a great attraction for the government since £20 a week is much less than the government makes in terms of not having to pay the dole and in getting the tax and national insurance contributions paid by the worker. As the DE put it, referring to the TES “flowbacks to the Exchequer might amount to three quarters of the worker’s earnings” – so if the job “saved” paid £60 the government would gain £45 and only spend £20 on the subsidy. Pure magic ... a scheme which cuts unemployment and government borrowing at the same time!

But do the jobs “saved” by TES, or “created” by SFES really reduce unemployment? Or do the subsidised jobs simply “displace” unsubsidised jobs in other firms leading to no real difference in total unemployment at all? The argument that this “displacement” does occur is straightforward. If a given amount of commodities are being produced, one firm producing more as a result of a subsidy, means another firm producing less which will have to cut its labour force. Since the subsidies do little or nothing to increase demand for commodities they will not increase employment. And the government will lose as much tax and national insurance from the worker “displaced” as it gains from the job “created”. All that’s left is an addition to the numbers which the government can claim to be helping. And those individuals are kept off the dole, but just to make way for somebody else. These schemes must be condemned as basically cosmetic operations.
 

The Industrial Strategy and Rationalisations

Dennis Healey, described the “industrial strategy”, as the means by which “the government, the trade unions and the employers are seeking to improve the performance of our manufacturing industry, in particular its productivity and its ability to compete in world markets.” The main function of the Sector Working Parties so far has been providing a forum in which the employers pressurise the government for more hand-outs. The favoured ones have been successful in getting a larger slice of the £3,000 million currently handed out to big business via Regional Development Grants (£393 million), Selective Assistance (£144 million), Export Credits (£544 minion), Industrial Training £286 million), Employment Subsidies (£181 million) – nor to mention the £4000 million tax concessions to encourage investment.

The object of such “planning” as there has been is not to expand industry, but rather to savagely “rationalise”, as the TUC sadly noted when it wrote that “implicit in some of the reports is the idea that employment reductions are needed” (TUC Economic Review, 1977). The capitalist hope that by closing down old plants, and speeding up the production process in the rest they can reduce costs and increase profits. Indeed the government has used the companies controlled by the National Enterprise Board to give a lead to this process (see table below) – a vicious parody of what the Board was supposed to do (see pages 43–45).

Even with all these efforts manufacturing productivity rose by only 3% in Britain between 1973 and 1977, as compared with 12% in the USA, 14% in France and Italy, 19% in Germany and Japan. So the period of acute crisis since the early seventies has seen a further falling behind of British capital.
 

Mass Unemployment Into The Eighties

Despite the profits explosion no boom in investment is in prospect. Forecasts for the growth of manufacturing investment in 1977 were reduced from 15–20% to 10–15% and the outcome was only 8%. The same process of downward revision occurred for 1978. The first forecast was for a 12–17% rise, revised down to 10–13%. Even this is above the National Institute’s forecast of 5% growth, slowing down to 4% in 1979. It is no good Dennis Healey bleating to the City that:

“At a time when ... working men and women are being asked to show their confidence in the future by continued self-discipline in pay negotiations, I do not believe it is unfair to ask that British firms should match that confidence by their discussions on investment and show for once (!) that their announced intentions are fulfilled in the event” (Financial Times, October 21, 1977).

The stark fact is that after deduction of depreciation net investment in manufacturing is little over one third of the level of 1961, and probably less than in 1951. Manufacturing output in mid-1978 was hardly above that of January 1974, at the height of the 3-day week. Stagnation in the world economy is deepening. OECD In July 1978 forecast that growth in the capitalist world would be around 3½% in 1978, and would tend to slow further in 1979. They forecast UK export growth of only 1% per year. So the dream of an export-led boom remains just that; and the higher profits of British firms will be channelled into financial assets. The surplus on the balance of payments reflects the huge excess capacity in industry which means lower imports. The enormous rise in the reserves of foreign currencies – more than £15 billion during 1977 – represents cash which the multi-national banks and firms have decided to deposit in the City because interest rates are high and confidence in the pound improved. But this is simply borrowed money, which could leave quicker than it arrived. To use it to pay off IMF debts would merely change creditors, following the advice of the Chicago money lender who advertised his services with the slogan “We will lend you enough money to get you right out of debt”.

The Government’s own Public Expenditure White Paper of February 1978 was based on virtually no fall in unemployment up to 1981. The Times (December 14, 1977) reported a Bank of England paper concluding that it would be impossible to reduce registered unemployment below the one million mark in the 1980s. Even the usually optimistic National Institute was unable in its November 1977 discussion of “medium-term policy options” to construct a “scenario” with unemployment below a million in the early 1980s. The Institute for Manpower Studies (Times, May 15. 1978) suggests that in 1986 unemployment of people under 25 will be 1 million, twice as high as in 1976. The Cambridge Economic Policy Group foresees unemployment of 3 million by 1985 if existing policies continue. The unanimous view of all the serious capitalist commentators, then, is that mass unemployment will persist and most probably increase substantially if present policies continue.

II. The Alternative Strategy of the Left

The conclusion of the first section of this pamphlet is that the continuance of orthodox policies has no chance of guaranteeing jobs and living standards. In response to the cuts and mass unemployment the majority of the left in the Labour Movement, led by the Tribune Group of MP’s a number of prominent trade unionists and the Communist Party are now advocating an Alternative Economic Strategy to the policies advocated by the CBI and implemented by the Labour Government. While there are many variants suggested – from the “soft” version of the TUC Economic Review to the hard versions of some of the Tribune Group and the Communist Party (CP) – the measures listed by Brian Sedgmore (Tribune, October 29 1976) under the headline The Alternative Strategy, provide a useful starting point for discussing the different measures involved. He gives the following nine points as the “invisible bedrock upon which the alternative strategy is founded”:

Other ideas usually given a fairly prominent position are the wealth tax (e.g. Tribune Group Economic Report, No. 2, June 1975) and the call for the government to expand the economy through higher real wages and increases in public spending e.g. Bert Ramelson’s pamphlet Bury the Social Contract. We also discuss the 35-hour week, included for example in Stuart Holland’s latest version of the Alternative Strategy.

The basic idea is that armed with these policies, a Labour Government could pressurise what would remain a capitalist economy, in that the overwhelming majority of the means of production would remain in private hands, into providing sufficient jobs and improvements in living standards. One assumption behind this approach is that the severity of the economic crisis is exaggerated, so that simply a more determined approach by the government will succeed in securing a ‘better performance’ from industry. If the basic conditions for the capitalist to invest are present then removing some of the temptations (property speculation, investment overseas), together with more pressure from the government and trade unions will do the trick. Playing down the extent of the crisis ties in with the even more fundamental assumption that the capitalists will accept the directives of a socialist government. If more government intervention could really lead to a boom in the economy, then the capitalist would stand to gain a great deal in higher profits, as compensation for allowing the government a more active part in directing the economy. Moreover the distinctly nationalistic flavour about these policies, the idea that Britain’s economic problems can be solved by Britain, rather than seeing them in the context of a crisis for the labour movement in the world as a whole, is also related to the depth of the crisis.

The capitalist class abroad has more freedom of manoeuvre economically and politically to adapt to policies adopted to protect British capital’s interests (e.g. import controls), the less serious is the situation in the world economy. But with the present crisis in the world economy there is no possibility of the capitalists abroad accepting measures to restore the position of British capital at their expense. Much of the detailed criticism of particular aspects of the Alternative Strategy which follows rests on the view, argued for in the first section of this pamphlet, of the deep-seated and international nature of the economic crisis. But is it really fair to claim that the proposers of the Alternative Strategy play down the depth of the crisis?

Calculations like those given on p. 16 above show the drastic fall in the rate of profit in the UK over the last ten years. These figures attempt to measure real profits, that is to exclude the fictitious element arising from inflation, which is counted in the profits announced by the companies. The CP’s pamphlet, Bury the Social Contract, says that these calculations are a swindle “to relieve the bosses from the major part of taxes as well as to hide the real profits being made”, and that the old conventional methods of accounting show that there has been no fall in profitability.

Of course the capitalists will use every means available to reduce the taxes they pay. But the fact that the new methods of accounting have been devised with this in mind does not mean they are a swindle. A story from the German inflation of 1923 will show why it is quite correct to only reckon profits after taking account of the cost of replacing stocks of goods and machinery at current prices. The story concerns a young iron monger whose father had always told him that if he kept the money value of his stocks intact he could treat all the rest of his takings as profit and spend it on himself. All went well until inflation began to rocket and then he found that keeping stocks to the same money value led to his shelves becoming emptier and emptier. But he kept on enjoying himself, reckoning all his takings over and above what was required to maintain the money value of his stocks as profit, as he had been told. Eventually he found himself without any stocks at all except one nail and a piece of rope, which were now worth the same as his whole stock has cost at the beginning. Bert Ramelson points out that all the textile industry’s reported profits for 1976 would disappear if the accounts were adjusted for inflation. But the fact that these methods for adjusting for inflation are new (for the very good reason that they have only become necessary with the acceleration of inflation) does not make them wrong. Profits “appear to have been squeezed” on the new methods of accounting because they have been squeezed; they appear not to have been squeezed on the old methods of accounting because these methods are wrong. The textile industry was earning no profit which it could plough back into expanded plant. The fact that these methods “are not applied to measuring wages” (presumably meaning that the extent to which wages have been hit by inflation is concealed where possible) is absolutely right. But “retaliation”, by denying the fall in profits, is to lose sight of real depth of the crisis.

Stuart Holland also suggests that the growing involvement of British companies in overseas operations has increased than ability to understate profits earned in the UK by charging low “transfer prices” for their products shipped abroad to overseas subsidiaries and that “this factor alone could account for a considerable proportion of any profits squeeze” (The Socialist Challenge, p. 396). Of course the capitalists will use this method to transfer profits to where they pay least tax, but it is unbelievable that there devices could have increased sufficiently to account for much of the drastic decline in profitability. And the string of huge firms in dire trouble (Rolls Royce, British Leyland, Alfred Herbert etc.) shows that it is quite wrong to regard the multinational firms as substantially immune from the overall decline in profits.

It is a gross exaggeration to suggest that the profits crisis is fundamentally a reflection of the power and manipulations of the multinationals – in squeezing out the small firms and then syphoning off their own profits abroad. Without the fall in profitability all the policies of the capitalist class, such as wage cutting, appear simply as evil-minded greed, rather than as something which they are forced to do if their system is to survive.
 

Expand the Economy

Expanding the economy is an obvious first step to eliminate unemployment. This is how Bury the Social Contract puts it:

“There is only one way to expand the economy and that is by an incentive to Increase output. The only incentive ... is to ensure a market for the increased output. The only way to ensure a market for the increased output is to increase the demand which is within Britain’s control. That in turn means and end to wage and public spending cuts.”

But this approach only sees one side of the dilemma of the capitalist class – the question of markets – while ignoring the other and equally fundamental, question of profitability. Any policy which increased real wages, while temporarily improving the market situation, would further. drive down profits. On the basis of capitalist production – that is production for profit – such gains in employment as would result from higher demand would soon be wiped out by a further rush of closures of factories by firms which could not meet the higher wage bills. The only way this could be avoided is through the government pumping in sufficient cash into the economy and letting the pound slide, so that prices could rise at least as fast as wages and maintain the profitability of production.

The C.P. calls for price controls to prevent the inflation which would tend to result from an expansion of demand. But to impose rigid and effective price controls in a situation where workers were taking advantage of a temporary upswing and an ending of wage controls to put in for big wage rises would be to drastically worsen profitability. This would eliminate any possibility of the temporary rise of production being translated into a sustainable boom through higher investment. The extra credit would flow into speculation as in Barber’s ill-fated boom of 1972/3. The strategy of the capitalist class sees quite correctly that the contradiction between profitability and markets can only be solved by expanding at the expense of the rest of the capitalist world. It is unacceptable to the labour movement, in terms of reductions in living standards, the unemployment and the social spending cuts involved; its chances of success are negligible given the situation in the world economy and the opposition of the labour movement at home. But the implication drawn by the CP is to opt for a policy which ignores the workings of the capitalist system by asserting that in a situation of crisis production and investment can be expanded by driving down profitability further. What the CP and the other proponents of the Alternative Strategy will not face up to is that there is no way to reconcile the interests of the working class and the continuation of production for profit. Keynesian policies to expand demand) provide no solution at all. Obviously all socialists would support the call for a massive programme of public works to soak up unemployment, but the proponents of the Alternative Strategy never face up to the contradictions involved if this is implemented while the economy remains on a capitalist basis.
 

Import Controls

Superficially the idea of import controls is attractive. A system of licenses for imports (quotas) would reduce the volume of imports of those commodities which could be produced at home. The balance of payments would be improved, and, most important, unemployment reduced as consumers switch to home produced commodities. The great advantage claimed for import controls is that, unlike devaluation, the price of imported commodities is not automatically pushed up.

The first point to be clear about is that import controls would, mean that British workers would be faced with higher prices. With their sales limited, foreign capitalists would no longer have any incentive to undercut British firms and they would raise the price of the imports which were allowed in. Not only would workers also be forced to switch to already dearer British goods, but these would also be increased in price as British capitalists would no longer be restrained by foreign competition. To a substantial extent, then, import control is just a variant on the old capitalist theme of the necessity for the working class to pay, with a wage cut, for the “privilege” of maintaining employment.

Moreover if import controls were introduced there is no reason at all to suppose that the capitalists would take advantage of the breathing space afforded them to boost investment and radically improve efficiency. All experience points in the opposite direction. In the ten years or so after the War, British capital was virtually totally protected from foreign competition, both in the home market and in the colonies. Profits were high, credit was available, the firms were flush with cash due to investment being held back during the war. Yet even in the late forties the British capitalists were only investing half to two thirds as much as their rivals abroad. Of course Tribune pins its faith in boosting investment and efficiency on the NEB and Planning Agreements. The point being made here is that without effective government control of industry import controls would certainly not lead to a revitalisation of British industry.

Perhaps the most basic question is that of retaliation. If other capitalist countries took similar action against British exports the whole scheme would be ruined as employment and the balance of payments would be hit. Tribune has suggested that capitalists abroad should be just as happy to see their exports to the UK limited by import controls as they would be to see them held down by deflationary policies. But a deflationary policy-cutting workers living standards and keeping up unemployment – is the orthodox, and correct in capitalist terms, response to the crisis. Import controls would be seen by foreign capitalists as an attempt to deal with Britain’s problems at their expense.

Their reaction would be all the fiercer since the import controls would have to be concentrated on a relatively narrow range of manufactured commodities, since more raw materials would have to be imported to sustain a higher level of production. The Cambridge Policy Group sees a reduction of imports of manufactures of nearly one quarter as necessary; and since some sorts of machinery cannot be produced in the UK with the present capacity, the degree of restriction on other manufactured goods, such as cars, would have to be sharper still. Such imports come mainly from the major capitalist countries – the EEC, Japan the USA – which are precisely those in the best position to take the most damaging retaliatory action. To label retaliation by major exporting capitalists abroad as based on “spite or ignorance” (Brian Sedgemore, Tribune, August 18, 1978) may not be spiteful but it certainly is ignorant; it ignores the fact that they are bound to protect what are their real interests.

The fact that they have the most to lose from a trade war is irrelevant. They would use their control of international institutions like the IMF, on which a capitalist Britain depends, to do all in their power to prevent the introduction of the controls in the first place.

The experience of the 1964 Labour Government of Temporary Import Surcharge is instructive in this respect. Harold Wilson’s memoirs (p. 35) record the situation less than one month after the measure was introduced:

“On the night of Thursday 19 November I had an emergency, almost panic call from Patrick Gordon Walker in Geneva. He needed my clearance for a firm assurance that the 15% import surcharge would be reduced in a matter of months. Otherwise the discussions (with EFTA) would break down and country after country would be likely to retaliate against our trade.”

Within two years Wilson was forced to scrap the surcharge entirely; and the TIS was a feeble measure, calculated to have reduced imports by about £100 million a year, and that at a time when the capitalist world was still enjoying an unprecedented boom. For Labour’s Programme 1976 to say that retaliation did not occur when “Britain imposed import controls in the mid-sixties” is irrelevant because there was no need for retaliation given the ineffectiveness of the measures and the successful pressure to end them.

Similarly the reference in the programme to Italy’s import deposit scheme not provoking retaliation is not convincing. It was a very mild measure (simply requiring advance payments for imports), it was of limited duration (1 year, though subsequently reapplied) and it was partly aimed at the orthodox objective of deflating the economy. It is not difficult to imagine what reception a Labour Government would receive if it attempted to introduce really tough import controls (Tribune talks of £3,000 million) in a time of crisis in the capitalist world. With markets shrinking, and competition intensified, each government would be under overwhelming pressure from big exporting industries to prevent British capitalists getting away with the controls, however “intelligently” they are applied, and however much “care is taken that they do not fall too heavily on any individual country” (Bob Rowthorn, Comment, 13 May 1978).

The depth of the economic crisis, and the competitive nature of the capitalist system, make it inconceivable that the British state could get away without retaliation to the introduction of really tough import controls. If they were introduced as a last resort it would probably tip the balance in the world economy towards widespread protectionism. Workers abroad whose jobs would be threatened by the controls would be pushed into supporting their bosses in the campaign for retaliation, and the same thing would develop in the UK as export industries met retaliation from import controls abroad. The competitive scramble for tighter import controls, rather than solving the mass unemployment faced by workers in every capitalist country, would just make the situation worse as world trade spiralled downwards, after the pattern of the thirties. So the demand for import controls must be recognised as being nationalistic – an attempt to preserve the interests of the ‘British nation’, workers and capitalist’s alike, and on this basis there would be no possibility of British workers appealing to the labour movement abroad to oppose the retaliatory action of their capitalists. A class approach, by contrast, sees the only solution to the problems faced by workers in all the capitalist countries in a common struggle against the capitalist system which is the source of these problems. So any measure which sets workers in this country against workers in other countries must be rejected. It weakens the struggle for socialism by strengthening one of the strongest ideological weapons in the hands of the capitalist class – the appeal to workers to make sacrifices in the name of a national interest being threatened by actions of foreigners.

How do proposers of import controls counter these arguments? In an article in Tribune (November 21, 1975) Brian Sedgemore says that “every socialist country in the world, including China, Cuba, Yugoslavia and the Soviet Union, uses such controls on a scale undreamed of by the Tribune Group” implying that it is absurd to call them reactionary. But what he fails to understand is that the content of a policy depends on the context in which it is introduced. It is perfectly correct that under a socialist plan of production, such as Militant argues for, a monopoly of foreign trade would be an essential planning tool. But there is every difference between a policy introduced to protect a section of domestic capitalist class (Sedgemore has never proposed the immediate nationalisation of every industry where he wants to see import controls introduced) and its introduction as a necessary part of a socialist plan to control the economy in society’s interests.

On the question of exporting unemployment he says that the purists, “conveniently forget that the alternatives of deflation and devaluation do precisely that”. Sedgemore is perfectly right as to the effects of these policies; but we do not accept, like him, that the only alternatives to import controls are devaluation or deflation (or rather both). These, just like import controls, are both capitalist policies for meeting the crisis at the expense of working class living standards. Socialists should never be forced into arguing for one capitalist solution to the crisis on the basis that it will be less harmful than other capitalist solutions. Opponents of capitalist import controls are not thereby supporting the nineteenth century liberal principle of free trade as Bert Ramelson suggests. Indeed it is symptomatic of the CP’s failure to see beyond capitalist solutions that Ramelson can talk in this way.

Sedgemore says we forget that “it is capitalist countries such as Germany and America which, by their insistence on running balance of payments surpluses despite the colossal rise in oil prices, are exporting unemployment to Britain”. But what an argument for a socialist to use; that we should reply in kind to the capitalist policy of unemployment. Sedgemore says we forget that “the Tribune Group has always excluded the goods of Third World Countries from such controls”. But all that means is that the effect on workers on the advanced countries will be greater (and as we pointed out above the capitalists in those countries are best able to retaliate).

Sedgemore says that “it is a demonstrable truth that reflation behind widespread import controls would lead to such economic growth that world trade would quickly increase”. Here he seems to be arguing for all the major countries to expand behind import controls. But to the extent that the policy worked it would be the reflation which would push up world trade, and not the import controls which would have the opposite effect. Sedgemore gives no analysis whatever of why the major capitalist countries will not reflate, why they are all waiting for an export led boom, why they fear growth substantial enough to push down unemployment. Without an understanding of the real situation in the world economy, such as we tried to give earlier, Sedgemore can only complain about the wrong headedness of the policies of the main capitalist countries.

Finally Sedgemore says that “every argument which can be adduced against import control can be adduced against the control of the movement of capital”. This is quite ridiculous. How can it be argued that controlling the outflow of capital will lead to lower living standards and retaliation costing the jobs of those in export industries? The effects on the British economy of limiting the outflow of capital are much over-rated by many of the left (see below). But controlling the ability of British capital to move funds overseas is at least a fundamentally anti-capitalist measure (and one bitterly opposed by the CBI for example). Limiting imports protects a section of the capitalist class (though it is opposed by the capitalist class as a whole for fear of retaliation).

Neither import controls nor free trade provide a solution to the crisis of British capital; the fact that the capitalist class in Britain may be forced by the growing tide of protectionism, and by its own weakness, to impose import controls is all the more reason why socialists should give no credence to them.

Lawrence Harris (Marxism Today, April 1977) professes to find the argument that import controls will tend to export unemployment to be a Keynesian one. He says that it is impossible to know the precise effects without “a detailed analysis of each country’s particular circumstances”. But it is possible to understand the basic implications of import controls without waiting for detailed analysis. Harris’ paralysis has nothing in common with Marxism and serves to cloak the Communist Party’s nationalistic approach.
 

End Sterling’s Role as a Reserve Currency

This proposal has a slightly dated feel since the government is already putting into effect a scheme whereby governments which previously held their reserves in Britain (the sterling balances) are to be given guaranteed bonds. But this does little to deal with the speculation that afflicts sterling periodically. For while overseas governments will no longer be moving their funds out of London the huge international companies can move billions of pounds out of the country simply by delaying or speeding up payments to their subsidiaries abroad. Whether or not they decide to do this has nothing to do with the role of sterling, but depends on how they view the underlying prospects for the British economy. It is also rather bizarre that Brian Sedgemore should advocate handing over the sterling balances to the IMF as a way of “free(ing) us from the dictates of international bankers”. (!)

This also raises the question of controlling the outflow of private capital from the UK. There is no exchange control system imaginable which can determine which overseas payments made by the monopolies are strictly commercial, and which are tied to protecting themselves from fluctuations in the exchange rate. The only way to effectively control such payments would be for these companies to be nationalised.

This was the experience of the Labour Government of 1945–51 which imposed apparently rigid controls, and when firms had many fewer overseas links than now. Lord Balogh, an ardent supporter of exchange controls estimated at the time that there was illegal export of capital of £2,000 million between 1946 and 1948.

Control of long-term investment abroad (the setting up of factories overseas) is a more feasible proposition as identifiable financial transactions are involved. Indeed quite stringent controls, in terms of how the investment is financed, how quickly there will be inflows of profits etc. have been in operation for a number of years, though are currently being weakened under pressure from the City.

It is often suggested that more stringent controls on foreign investment would lead to higher investment in the UK. In 1974–75 overseas investment by British firms was 37% of investment inside the UK, almost double the ratio of three years earlier. Tribune comments:

“Clearly this trend holds serious dangers for the British economy. It means that British manufacturing industry is being starved of the new capital needed to buy the new machinery, expertise and plants required to improve our international competitiveness and economic potential.”

Now any suggestion that overseas investment involves a drain of profits generated in the UK is completely incorrect. As the Treasury Progress Report (September 1976) shows direct investment overseas has actually been less than the profits earned overseas by British firms, so that there has been a net flow into the British s economy as a result of past investment abroad. This inflow has been as big as £1,500 million per year because the British firms investing overseas have raised very considerable sums of finance in the foreign countries concerned.

Of course if the big firms were forced to repatriate all the profits they earn by exploiting workers overseas this would increase what they have available for investment in the UK. But it is wrong to suggest that there would be some more or less automatic increase in the amount they invest in new capacity. Stuart Holland points out that British firms produce twice as much abroad in their subsidiaries as they export, whereas for German and Japanese firms the figure is about one half. But simply reducing the amount which British firms can produce abroad, would not lead them to produce at home. In many cases transport and other costs, or import policies, would make exporting too expensive. And the capitalists will only plough back more in capacity in the UK if they see a profitable market to supply. Rather than additional productive capacity, they always have the alternative of investing in government bonds or other financial assets and this would happen if stiffer controls on capital export were introduced. Simply preventing the capitalists from doing something, will not automatically cause them to do what the government wants, especially given the political advantage for them in showing the government’s policy to be a failure. Stressing the role of the multinationals in moving capital around tends to divert attention from the basic issues as to why capitalist production in Britain is falling behind. The fact that a government introducing a real socialist plan of production would certainly have to clamp tight controls on movement of funds to prevent capital flights, should not delude anybody into thinking that applying the same type of measure within the context of the capitalist system would have very significant results, in terms of higher investment etc.
 

Muscle to the National Enterprise Board

The industries nationalised by the Labour government of 1945–51 provided the basic inputs of fuel, steel and power for the private sector. They were mainly unprofitable industries that the capitalist class in Britain was manifestly incapable of reorganising and rationalising into the large production units necessary for efficient operation. The best known example of this is the coal industry, where as early as 1919 the Sankey Commission had recommended nationalisation in the interests of efficiency.

The most important aspect of the plan, in Labour’s 1973 Programme, to use the National Enterprise Board to take over a range of giant manufacturing companies was that they were to be profitable. The original Labour Party Study Group’s proposal was for the N.E.B. to take, within a five year period, a controlling interest in 20–25 companies controlling about one third of the turnover and half the employment of the top 100 manufacturing companies. Labour’s plan for nationalisation has always been in terms of industries or firms which were ‘failing the nation’ (the actual phrase used in the 1951 Programme). The realisation that profitable (or relatively profitable) manufacturing industry was ‘failing the nation’ in terms of investment, jobs etc. marked a definite watershed and one which was distinctly threatening as far as the capitalist class was concerned. The plan for selective nationalisation remains a cornerstone of the Left’s policy, being reiterated for example in Labour’s 1976 Programme in terms of there being publicly owned firms in “each of the key sectors of industry” covering the 32 industries identified by the N.E.D.C. plus industries “whose main customer is nationalised”. In the shorter term Brian Sedgemore wrote (Tribune, April 2 1976):

“The National Enterprise Board might legitimately be expected within the next two years to extend its coverage and/or move into the process plan, instrument systems, petrochemicals, chemicals, ferrous foundry, machine tools, telecommunications and food process plan, instrument systems, petrochemicals, chemicals, continued growth”.

Before examining the political implications of such a programme it is important to look at whether it really represented a viable plan significantly increasing government control of the economy. The theory behind the plan for selective nationalisation of profitable manufacturing firms is most fully spelt out in The Socialist Challenge by Stuart Holland, an economist influential in drawing up the plan.

The vital point in Holland’s analysis is that the group of 25 or so nationalised manufacturing companies would not merely carry out expanded investment programmes of their own. (Tribune has often mentioned £1,000 million per year being invested in this way). They would also exert a “pull effect on other big firms,” based on “oligopoly leadership, or the situation in which one of the new firms at the top end of an industry breaks from the pack and pioneers a new product or technique on a major scale. While the remaining leading firms might otherwise have hung around and delayed introducing a similar project or process, they cannot any longer afford to do so without risk of losing sales, profits and market share to the pioneer firm” (page 185).

Here we have the essence of Holland’s economic case for selective nationalisation – that the extra competition, which the nationalised firms with the expanded investment programmes would represent, would force the majority of large firms left in private hands to invest more. For the competitive pressure proposed by Holland to work, the private firms would have to have profitable markets, which for some reason they were not taking advantage of. This is precisely what they do not have at present. Holland in fact wants the nationalised firms to be used to get more information on costs which would “increase government capacity to levy effective taxation on real profits” (page 201) and to act as price cutters themselves in order to reduce “excessive” profit margins. This of course would simply make the crisis of I profitability worse. The idea that the industrial capitalists are just “hanging around” waiting for more competition to prod them into massive investment programmes is a grotesque misrepresentation of the true situation of British capital over the last decade. Far from there having been insufficient competition, British capitalists have been manifestly unable to meet the growing competition in home and export markets from foreign capitalists. Holland gives no reason why nationalised competitors should spur them on more successfully. A nationalised competitor pouring millions into new plant which is uneconomic, because it is not used to full capacity or because it is too expensive, would not compel the private firms to follow their lead.

If the finance, the markets and the underlying profitability were present, then it would not take the leadership of nationalised firms to persuade the capitalists to invest; their own self interest and pressure from competitors overseas would be sufficient.

The NEB does have the possibility of taking over profitable manufacturing companies. The regeneration of British Industry (White Paper, August 1974) said:

“The NEB will be the instrument by which the Government ensures that the nation’s resources are deployed to the benefit of all, by extending public ownership into profitable manufacturing industry. The Government consider that suitable criteria for the acquisition of a company should include the following: danger of its passing into unacceptable foreign control; and stimulation of competition in a sector where that is weak.”

But even at that stage the potential strength of the NEB had been virtually annihilated by the phrase “holdings in companies ... should be acquired by agreement”. This was far removed from the Study Group proposal for compulsory purchase. The guideline for the NEB published in 1976, stipulated that if the NEB could not get agreement from the directors of the company it wanted to take over (which would never happen if the company was not going bankrupt) it would have to make a bid for the shares in the normal way. The chance of the NEB persuading a majority of share holders, including the financial institutions, to agree to the nationalisation of the firm against the advice of the directors is negligible. It is not simply a question of the NEB having access to “a bottomless private purse” which would mean that “prices would obviously be marked up when the Board arrived on the scene” (Study Group Report). Rather the directors, supported by the CBI, the City etc. would launch a tremendous campaign calling on shareholders to refuse to sell their shares to the government at any price in order to defend free enterprise. Such a campaign, given the interest of the big shareholders, would obviously be successful. No wonder the Economist (February 28 1976) crowed “The NEB’s guideline favour the bosses”.

In the event the NEB, under tycoon Lord Ryder, has been confined to conducting rationalisations of bankrupt or near-bankrupt firms (British Leyland, Ferranti etc. see p. 29 above) plus a few deals with small firms. With no real power, and a maximum of £1,000 million (which would not buy ICI!) it bears no relation to the original conception.

Why was there such a successful campaign from big business against the proposal of the NEB to take over 20–25 of the largest manufacturing companies? It was never suggested that full compensation should not be paid to shareholders. There was no suggestion that they would compete “unfairly” with their private competitors. Surely the power of the capitalist class in Britain was not threatened by the plan. But the fundamental point is that the nationalisation of any profitable companies is unacceptable to those who own and control industry, simply because of what it represents. The very fact that it would not revitalise the British economy, as the capitalist class must have known very well, that it would not give the government real leverage over the non-nationalised companies, would immediately raise the need for a much more thorough-going programme of nationalisation, which would give the government adequate control over the economy.

Every socialist would support the demand for nationalisation of profitable firms. But those who advocate the type of selective nationalisation outlined here have never explained how they would deal with the fundamental question of how to overcome the opposition of the capitalist class to any measure which seriously threatens to erode their position, while still leaving them with the main levers of economic power.
 

Public Ownership of the Financial Institutions

The nationalisation of major banks and insurance companies, carried overwhelmingly at Labour’s 1976 Conference, represents a major piece of unfinished business for the Labour movement. The 1931 Party Conference unanimously passed a resolution calling for the nationalisation of the banks and the direction of investment. Banking was the only major sector included for nationalisation in Labour’s 1945 programme which was left in private hands, only the Bank of England being taken over.

The most important proposal of the National Executive’s statement in 1976 was for: “A major publicly-owned stake in the financial system comprising the top seven insurance companies (sufficient to account for 30% of premium income), a merchant bank and the four major private clearing banks” (i.e. Lloyds, Barclays, Midlands, National Westminster).

The implementation of a real socialist plan of production for the economy is inconceivable without government control of the financial system. To produce for need rather than profit requires the whole financial system to be used for mobilising society’s resources wherever they can most usefully be put to work. At the moment the reverse is the case. It is production which is subjected to the search by the financiers for fatter profits. A classic example of this, as the National Executive’s statement made clear, was the property boom of the early seventies. The hysterical chase for super-profits by the City caused a boom in the price of office blocks and diverted much of the resources of the construct ton industry into quite superfluous buildings. A socialist plan, by contrast, would use the financial system to ensure that the cash was available to finance the undertaking by the construction industry of a huge housebuilding programme, expanded on the basis of the needs of workers and their families.

The weakness of the National Executive’s statement was, that it tended to exaggerate what could be achieved simply by taking over the banks. It stressed the low rate of investment in British industry, and argued that the key to success in reaching the target of doubling manufacturing investment “lies in developing a publicly owned stake in the very areas of the financial system where critical lending and investment decisions are made: the banks and the insurance companies.”

But simply channelling more funds in their direction will not cause the capitalists to invest. In their evidence to the Wilson Committee the banks pointed out that Manufacturing industry was borrowing less than one half of what the banks had made available to them. The CBI said that:

“The clear conclusion of an overwhelming majority of our members is that it has not been a shortage of external finance [for example bank credit] that has restricted industrial investment but rather a lack of confidence that industry will be able to earn a sufficient return.”

In other words they did not require even more unused borrowing facilities, but rather higher profits. The NEC’s original statement contrasted the lack of government control of finance in the UK with the situation in other major capitalist countries like France, Italy and even Japan. But over the last four years fixed investment has actually fallen or stagnated in all these countries just as in the UK (see page 15).

Nationalising the banks would in no way give the government the power to force industry to invest. You can take a capitalist to the bank but you cannot force him to borrow if he cannot see a profitable use for the cash.

It is true that the insurance companies hold large volumes of shares, so that taking over the largest seven would give the government big shareholdings in many of the monopolies (the Prudential for example holds more than 1% of the shares of 35 of the biggest 50 companies). But this is nowhere near control, and the rest of the shareholders would certainly prevent government ‘interference’. The situation is quite different from that in Portugal for example, where nationalisation of the banks gave the government control over much of industry, for in Britain the banks lend to industry rather than owning it.

The real conclusion from this is that securing the full use of society’s resources requires nationalisation and planning not only of the financial system, but of industry as well. The two sectors are inextricably linked in the economy and have 10 be combined in a socialist plan of production.

The TUC-Labour Party statement of July 1978, however, abandons nationalisation of the financial system. It calls for the Bank of England “to act on behalf of the Government in monetary affairs and not as an independent body”; for the Department of Trade and Industry to “take the lead in ensuring proper connection between the financial institutions and the industrial strategy”, both entirely vacuous suggestions while the financial system stays in private hands. It does see “a need to regroup certain institutions notably GIRO and the National Savings Bank so that a new publicly-owned bank can compete on equal terms with the big four clearing banks”. But as a concession to those who voted for the NEC’s Statement this is derisory. Look at the pathetic size of such a bank! Whilst the Clearing Banks in 1976 controlled nearly £24 billion capital, other banks £8½ billion, and Building Societies £33 billion, the National Savings Bank could muster £2 billion and the Giro a mere £176 million. Some competition!

Nationalising the banks, like a number of other elements of the Alternative Strategy, is an essential element of a real socialist programme for transforming the economy, and as such every socialist must support and fight for its inclusion in Labour’s Programme and for its implementation in a socialist fashion. But it is essential not to be misled about what it could achieve within the essentially capitalist framework which the Alternative Strategy accepts – that is with the overwhelming majority of means of production in industry in private hands.
 

Planning Agreements

The third string to the alternative industrial strategy is the proposal that the government should enter into planning agreements with the major firms. As summarised in Labour’s Programme 1973 the role of planning agreements would include:

“1. Securing up-to-date information of a systematic and continuing basis from all companies and enterprises within the system. This information will concern both past performances and advance programmes – programmes which can be checked later against results. It will cover such areas as investment, prices, product development, marketing, exports and import requirements.

2. Using this information to help the government to identify and achieve its planning objectives, and to plan for the redistribution of resources which will be needed to meet those objectives.

3. Securing the agreement of the firms and enterprises within the system – the written Planning Agreement – that they will help the government to meet certain clearly defined objectives (e.g. a certain number of new jobs in a Development Area) – while leaving the tactics needed to achieve these strategic objectives to the companies and enterprises.

4. Providing for the regular revision of the agreements in the light of experience and progress.

5. Providing a basis for channelling selective government assistance directly to those firms which agree to help meet the nations planning objectives.

6. Providing a systematic basis for making large companies and enterprises accountable for their behaviour, and for bringing into line those which refuse to cooperate – using, where necessary, the extensive powers under the proposed Industry Act as well as the activities of new and existing public enterprises and the powers of public purchasing.

7. Publishing a detailed annual report to the nation on the record of the companies and enterprises in the system, and on their progress – or lack of it – in meeting the nation’s economic objectives.”

So one aspect of the proposed agreements was the requirement on the monopolies to reveal a great deal more information to the government, and to the trade unions concerned. Holland’s list of information to be required includes details of past levels and planned trends of turnover, investment and profits for each main product (information very seldom available in published accounts), trade with subsidiaries abroad, amount of government assistance received, management salaries and all fringe benefits (including private health arrangements, mortgage benefits, stock option schemes), details on wages-by work category and plant, advertising expenditure, main supplying firms and purchasers.

The TUC’s Checklist for Trade Union Representatives included the demand for an inventory of capital equipment in the firm with age specified (Economic Review, 1976). This is just the type of information which socialists have long demanded under the slogan ‘Open the Books’, in order to reveal the manipulation of the capitalists and their incapacity to properly develop production.

But the objective of those who argue for planning agreements is not simply to expose the capitalists, but rather to enable the government to get the firms to carry out policies (notably investment programmes) which they would not otherwise do, i.e. which they consider unprofitable. There is a strong hint in the TUC’s checklist that a role for trade unionists in this type of discussion of management’s plans is to ensure that management is really acting in management’s best interests! How else can one interpret the TUC’s suggestion that union representatives should press companies to set maximum levels of investment overseas, asking “are companies satisfied that investment would not be more worthwhile (profitable presumably – AG) in the UK”. But the general drift of planning agreements is undoubtedly to pressurise firms to do things which they do not consider profitable. Holland says that the monopolies should “be required to reach deep into the kind of funds which they have been siphoning abroad through transfer pricing in meeting their future investment needs in this country” (p. 234).

One important weakness of the system as proposed by Holland (and his is the most comprehensive discussion of how the agreements might work) is that he envisages the government department playing no role in drawing up the programmes of the individual companies, but merely scrutinising them to see whether they conformed With “the government’s overall economic and social objectives” (p. 230). This is a hopeless task unless the government department concerned also has a detailed plan for the particular sector(s) where the firm operates. If the system was to achieve anything it would have to be in terms of forcing individual firms not just to conform with ‘overall objectives’ but rather with a detailed programme for the particular sector, based on an overall plan for the economy as a whole.

But the vital question is how could the government force the individual firms to conform to its requirements. Holland mentions four ways. He suggests the government could use the nationalised firm in the sector concerned to carry out the programme if a private firm refused. How this is supposed to be a- effective threat against a firm which does not consider the project profitable is quite unclear. He suggests publication of the government’s requirements, but the firm could always counter accusations that it failed to invest enough by pointing out that it did not consider it to be profitable, that it had a duty to its shareholders etc. Though the publicity would obviously be valuable in exposing what the capitalists were failing to do, it is most implausible that simply bad publicity would change their minds. Finally Holland echoes Labour’s Programme and suggests withholding government financial assistance (including presumably refusing loans from the nationalised banking sector) or in the last resort nationalising the recalcitrant company. Labour’s 1976 programme talks of power under an Industry Act to issue directives to companies “on a wide range of individual matters”, of using price controls (presumably making price increases contingent on investment levels) and of putting in an official trustee to assume “temporary control”.

But as Holland himself says “A government Bill requiring leading private companies to expand would be likely to result in at least widespread non-co-operation, if not a capital strike ...” (p. 186). Any idea that a capital strike would be frustrated by the activities of a small number of nationalised firms (how he does not say. perhaps the capitalists would fear that the nationalised firms would seize their markets?) is wildly unrealistic. The proponents of the Alternative Strategy have given no other explanation for their belief that the capitalists in the vast majority of non-nationalised firms will forego a capital strike and be prepared to accept the direction of the government. And they certainly must believe this. or putting forward the idea that the government can direct the economy via planning agreements would just be a deception. If they believe that sufficient pressure can be brought to bear on the capitalist class to force it to surrender its autonomy, what is the advantage of leaving them in control of the firms at all? Why don’t they put forward a policy for expropriating all the big monopolies which would give a socialist government the “leverage” necessary to introduce real planning?

So far nothing has come of the planning agreements proposal. The Times (February 17, 1977) reported a statement from one major company that “we would sign a planning agreement tomorrow if we could do it Our way ... We are not reassured by the way in which the government sees planning agreements and so we will not sign one”. The article speculated that by the end of this year the only companies which will have signed them would all be “seeking abnormal nourishment by the Exchequer or some favoured gain in government policy”. The Economist (November 27, 1976) reported that in its desperation the government “would now be prepared to sign quite meaningless bits of paper if only companies would be prepared to negotiate them”. A year or so later the Under Secretary of State for Industry, Bob Cryer, was bleating “in view of the massive amounts of aid to industry which this government has been giving ... it seems that industry could develop a more co-operative attitude towards planning agreements” (quoted in Tribune, by Jeff Rooker, January 13, 1978).

Despite this Labour’s 1976 Programme reiterates the need for planning agreements in similar terms to previous programmes. Nowhere in the massive document is there any analysis of why these proposals have not yet been implemented by the Labour Government. This is all it has to say on this key issue:

”In Labour’s Programme 1973 we argued that our planning strategy must be underpinned by new powers and public enterprise. The Government, we said, must be able to bargain with big companies from a position of strength. In the White Paper, The Regeneration of British Industry, however, the Government based the emphasis of its strategy upon winning the co-operation and confidence of private industry: the planning effort would be on an entirely voluntary basis. We recognise the Government has made some progress on this basis. But we believe the analysis and strategy set out in the 1973 Programme remains the right one for Britain today.”

The proponents of the Alternative Strategy have never made clear why Government was forced to “base the emphasis of its strategy” on submitting to the C.B.I. The attempt to impose the outlines of a socialist plan (production for need rather than profit) on a capitalist economy, which is what the planning agreements amount to, is bound to be hopeless while the capitalists still hold the main levers of economic power.
 

Price Control and Incomes Policy

Brian Sedgemore says that his alternative strategy will not work without an incomes policy. Now it is obvious that a socialist plan of production would have to include a plan for incomes growth, for the growth of workers’ purchasing power is a central element in such a plan. As we saw above, the “alternative industrial strategy” is designed to give a Labour government the kind of control – to decide investment, production, employment, exports, imports and prices – that a socialist plan would allow, but on the basis of the overwhelming majority of major firms which dominate the economy remaining in private hands. But as argued above we do not believe this ‘as if’ socialist plan is possible, because those who own and control the major monopolies will never consent to it. So it would be quite wrong to call on workers to sacrifice their one weapon to maintain and improve their living standards – their ability to bargain with these self-same monopolists – and to jeopardise the maintenance of the strength and independence of the trade unions.

Brian Sedgemore says in his pamphlet, The How and Why of Socialism:

“Are we to go on and agree with the extreme right that planning incomes is incompatible with a free society? And if this is the case how do we view planning generally? Surely the essential point is that planning in whatever sphere it takes place should be democratic – not that planning is wrong. What has been wrong with incomes policies to date is that they have all been used in periods of economic depression to shift resources from wages to profits ...” (p. 40).

But it’s not an abstract question of democracy; after all incomes policies have been implemented by “democratically” elected governments, and usually agreed with trade unions. The fundamental point is that under capitalism incomes policies will always have to conform to capitalist logic of maintaining profits, and no tinkering with the system removes that fact. Sedgemore never faces the fact, more of less admitted by John Grahl (Comment, April 29, 1978) that the rate of profit has fallen so low in Britain that the price controls would have to allow profits to rise, rather than fall, if there was any chance of persuading the capitalists to invest. The idea that in general there are fat monopolistic profits which can be squeezed, while at the same time forcing those self same firms to invest more by means of offering them cheap loans, just does not come to grips with the reality of how the capitalist system operates. How does Sedgemore propose to deal with the strike of capital which would certainly result?

Of course holding down of prices is essential for workers, but whilst the economy is run according to capitalist criteria price controls inevitably degenerate into the kind of farce of the last year when they are used to ensure huge profit increases. Real supervision of prices, carried out by committees of trade unionists and housewives would immediately raise the question of overall control of the economy given the incompatibility of real price controls and capitalist criteria.
 

Maintenance of Labour’s Social Programmes/Defence Cuts

No socialist could quarrel with these ideas. On the first Brian Sedgemore quotes the 1976 Cambridge Economic Policy Group Report suggesting that if the Alternative Economic Strategy were adopted there would be the possibility of increasing public spending if full employment could be maintained. The Cambridge Group’s strategy has only one thing in common with Tribune’s and that is import controls. Since Sedgemore points out that import controls do not add up to an alternative economic strategy (let alone a socialist one) why does he seek respectability behind the Cambridge academics? Does he believe his strategy is a socialist alternative or not? Also how does he feel now that in their 1977 Report the Cambridge Group say that unemployment could only be got down to 1,200,000 by 1981 if import controls were used (p. 31). They are admitting that simply using import controls will not secure enough investment to secure rapid return to full employment. Given the amount of spare capacity it is quite obvious that returning to full employment would allow an increase in social expenditure. The question is whether the Alternative Strategy add up to a viable way of achieving it.

On defence cuts socialists will want to know if the ‘alternative industrial policy’ is powerful enough to ensure alternative employment for workers in munitions industries made redundant. It is precisely one of the major advantages of a socialist plan based on real control of the economy that whenever it was necessary to run down a particular industry it would be entirely possible to convert the plants to produce commodities which were needed, or to build new factories to take on workers who leave that industry. But the NEB plus planning agreements would not give that sort of control over society’s resources, because the capitalist class would never permit it.
 

The 35-hour week

Although not one of the original demands of the Alternative Strategy the 35-hour week has effectively been incorporated into it. Stuart Holland, for example, calls for a national debate, sponsored by the NEC of the Labour Party, on the case for the 35-hour week. In Full Employment (edited by Michael Barratt Brown and others) he says “The 35-hour week could, and should, be stressed to relate to the trend of technological unemployment” (p. 135). This, whilst perfectly correct in particular industries like the Post Office, is misleading in its suggestion that the mass unemployment of recent years is primarily a technological question (see p. 10 above). The 35-hour week should not be advanced as a desperate last attempt to hang on to full employment in the face of inexorable technical trends. The justification in terms of excessively long hours of work rather gains extra force from the absurdity of these long hours coexisting with massive unemployment. In 1977 average hours worked by full-time employees were 41.3 per cent. If these were cut to 37 (by for example a cut of the ‘normal’ working week to 35, plus a reduction of average overtime from 3 to 2 hours) then at a stroke 10% more jobs would be created, enough to absorb all the unemployed registered and unregistered.

Whilst every socialist would wholeheartedly support such a reduction of the working week and elimination of unemployment the vital question posed is of wages. Any suggestion that the 35-hour week should be ‘paid for’ by a corresponding cut in the weekly pay packet is quite unacceptable, particularly in view of the cuts in living standards of recent years. Yet a reduction of say 10% in the number of hours worked weekly would lead to a corresponding increase in costs for the capitalists If the weekly wage was maintained. On a capitalist basis this would involve profits being slashed by at least half. The capitalists would then press for extreme inflationary policies of devaluing the pound and pumping up the money supply in order to allow them to recoup their profits by raising prices. This is exactly what happened in France when under the Popular Front Government of 1936 the French workers won wage increases of 30% and a cut in hours from 48 to 40. Whilst such inflationary policy at the present time would be fraught with dangers for the capitalist in terms of the bitter response it would provoke, and the possibility of hyperinflation developing, they would have no alternative.

Much of the discussion of the 35-hour week is evasive on this issue. John Hughes, in his detailed discussion of many aspects of the 35-hour week (in Full Employment), merely notes that part of the extra costs for the capitalists “is likely to be offset ... by the greater willingness of organised labour – in return for the shorter working week – to settle for more moderate advances in weekly pay” (p. 114). But in the context of continuing inflation “more moderate advances in weekly pay”, amounts to exactly the same thing as a wage cut, however much certain trade union leaders may try to disguise it.

John Hughes says that “the critics of the 35-hour week raise the danger of damage to our comparative cost position, the danger of weakening competitiveness.” His answer to this is for the TUC to press other trade union centres abroad to make the same advance, which, he says, would mean that “the transition to the 35-hour week would not be delayed by employer and government resistance based on fears of adverse effects on the competitive comparative cost position of anyone country” (p. 122). But it is completely misleading to suggest that the prime objection of the capitalists to the reduction in the working week comes from the fact that it would weaken their relative position. This is certainly an argument that each individual capitalist class will use to demonstrate the impossibility of such a demand. But their real objection, which is that their profits would be reduced because they would have less time to force their workers to produce surplus value for them, would remain just as strong if the reduction in the working week was implemented universally.

The CBI has already begun the attack on the 35-hour week by arguing that according to its calculations “a reduction in the standard working week from 40 to 38 would cut employment across the country by 100,000” (Financial Times, July 22, 1978). The answer to this and the wave of propaganda which is developing is not to delay the campaign until the cut in the working week is agreed internationally. Rather the argument must be that if the capitalist system cannot afford a rational system of sharing work and determining the length of the working week then so much more reason for replacing the profit system by a socialist plan of production. In the meantime any firm declaring redundancies on the grounds that it cannot afford the 35-hour week must be nationalised and the jobs preserved under the control of the workers’ organisations.
 

Industrial Democracy

The most important proposal under the heading of Industrial Democracy in Labour’s Programme for Britain 1976 is that companies employing over 2,000 workers must establish a Main Policy Board of which half the places “would be available for workers’ representatives, elected through the recognised trade union machinery.” This idea is also the main plank of the majority recommendation of the Bullock Committee, though in the watered down form of equal numbers (x) of workers’ and shareholders’ representatives electing an additional number (y) of other members of the Board. Fundamental to such a concept is the idea that the interests of capital and labour can be reconciled, that acceptable compromises can be reached.

The section in Labour’s Programme points out that:

“If a company decides on a five-year plan which involves running down its British operations, the first workers know about the plan is usually when the redundancies are announced. All that can be done, through collective bargaining, is to salvage a compensation agreement.”

The implication is that with workers having 50% of the votes on the Board, which would decide such things as investment programmes, then an acceptable compromise on a question of closures for example, could be reached. Lying behind this is the further assumption that with the benefits of advanced warning, and the powers implicit in the NEB and Planning Agreement, that “justified” closures could be made acceptable by the provision of alternative jobs, Stuart Holland writes in his book.

“By the same token, it is crucial that workers in those enterprises faced with rationalization should secure advance information on closures if they are to negotiate effectively through their union structures, either for the provision of new jobs in acceptable industries, or for the maintenance of the previous employment where they consider that the management’s reasons for closure are inadequate or based on short-term profit maximization against the longer-term interests of both the workers concerned and the economy at large.

In practice, the longer-term view and wider framework of Planning Agreements bargained on the tripartite basis can also benefit management itself. If the closure is considered to be justified, the government should seek advance information from the unions on the proportion of the existing labour force which would freely accept severance and redundancy pay. For the remainder of the labour force, for whom unemployment would be involuntary the government should seek to assure the provision of alternative jobs at comparable levels of pay. The government would be able to make major progress in ensuring the abolition of large-scale redundancies in the economy, provided that new public enterprise is established on a sufficient scale both to provide new jobs directly, and indirectly to lever leading firms in the private sector to cooperate with the specific location of new plant.” (pp. 274/5)

The assumption that capitalism can be planned in the interests of society, that reforms in terms of improved living standards etc. can be guaranteed, not by the free market itself, but by the free market tamed by the N.E.B. and Planning Agreements, would provide an objective basis for the class collaboration implicit these schemes. The objection to the schemes follows from the belief that such extensive clipping of the wings of free enterprise is impossible, as we have argued before. The capitalists would accept some trade union members on the Board as a way of trying to give them a sense of power, so that they will more readily take a share of responsibility and blame. This is especially clear in the minority report of the businessmen which recommends simply a Supervisory Board with workers represented. But the difficulty of achieving class collaboration in a time of crisis means that such plans would develop into demands for real workers’ management. This makes the capitalist class violently opposed to even the modest Bullock recommendations – one of their representatives on the Committee describing the majority report as leading to “bloody chaos”. But nevertheless such moves should be opposed since they do give the Illusion that class collaboration, be it on the basis of much greater planning, is in fact in the interests of workers. They arise from the unwillingness of the advocates of the alternative strategy to put forward a demand for real workers’ control, that is not collaboration with the management, but full supervision of every action the management takes. Brian Sedgemore says that the most important aspect of workers being on company boards is that “they would be able to inject arguments about their interests into the boardroom – an area where such arguments are inadequately represented at the moment.” Again this suggests that class collaboration is feasible, once the workers’ arguments are “adequately represented” no reasonable capitalist could refute them.
 

Wealth Tax

Labour’s Programme for Britain (1972) pointed to the “gross maldistribution of wealth in Britain today” and said “we shall therefore introduce a wealth tax, consisting of an annual levy on the large concentration of private wealth.” As the government’s Green Paper on the tax explained it (in August 1974) “the fundamental purpose of the wealth tax is to make the distribution of the tax burden accord more closely with taxable capacity and thereby contribute to the creation of a more equitable society in which social divisions characterised by differences of wealth are reduced and in which social and economic power created by the possession of wealth is less concentrated than at present”.

Figures provided by the Royal Commission on the Distribution of Income and Wealth give some indication of present degrees of inequality. In 1972 the top 1% of income receivers got 6% of total pre-tax income and the top 5% got 17%. Nor does taxation at present do much to reduce the share of the best off; as the report says (para. 150) “the effect of all taxes on the distribution is small, with the progressive effect of direct taxes (income tax, insurance contribution) ... largely offset by the regressive nature of indirect taxes (on commodities).” Since so many people have virtually no wealth at all the degree of inequality in this respect is even greater than for incomes. The Royal Commission calculated that in 1974 the top 1% and 5% of the population held roughly one quarter and one half respectively of total personal wealth (Table 49).

Of course the apologists of capitalism point to the fact that there has been some reduction in the degree of inequality (for example the richest 5% probably held around two thirds of total wealth in 1960). But this has been largely due to the spread of ownership of consumer durables, like cars and houses, as workers secured some improvement in their living standards (by 1973) these items accounted for more than one half of personal wealth). The rise in house prices, and fall in share prices, have reduced the value of ordinary shares. which represent control over the key sections of British capital, to not much more than 5% of total personal wealth – a sure indicator of the declining fortunes of industrial capital. But of course shares are decisive for controlling the whole economic system, and they are as unequally distributed as ever – the top 0.6% of wealth owners held 54% of privately held ordinary shares in 1973 and the proportion of land they hold is greater still.

As the Royal Commission’s Second Report shows the proportion of shares held by individuals has fallen from nearly 70% in 1963 to about 50% in 1973, with more and more shares being bought up by pension funds and insurance companies. But it would be quite wrong to see the benefit from these as evenly spread; in 1973 less than one quarter of those with incomes between £1,000 and £2,000 p.a. contributed to occupational pension schemes, whereas 60% of those with incomes above £3,000 p.a. did. In any case the fact that the pension funds and insurance companies control these huge chunks of shares in industrial firms in no way disperses control of the economy in a “democratic” fashion, but if anything concentrates it even further among the handful of directors of the( huge industrial and financial companies.

The Green Paper of 1974 proposed a wealth tax with rates beginning at 1% on wealth in excess off £100,000 rising to either 2½% or 5%, according to two alternatives, on wealth in excess of £5 million. It discussed in detail what assets might be included and how they should be valued; how trusts by which the rich have avoided taxation should be dealt with (the Inland Revenue now reckons these to stand at £6,000 million, excluding another £2,500 million in trust for wives); how to deal with problems of small businesses etc. The question was then referred to a Select Committee of the Commons to “hear the views of those directly affected and of anybody else” ...

The views of those directly affected came in thick and fast, taking up well over one thousand pages. The CBI describes the proposals as “confiscatory” because “the combined burden of income and wealth tax could, after allowing a reasonable margin (!) for living expenses, exceed the net income of the tax payer in a particular year, forcing a sale of assets”; their objection to this method of redistributing wealth is that it would redistribute wealth.

The CBI proposed that income plus wealth tax should not take more than 70% of income (considerably less than the theoretical weight of income tax on the very rich, though they contrive to avoid paying anything like this by taking their income in the form of capital gains). They tried to frighten the Committee with a horror story of how the owner of a business worth £½ million could find himself after 35 years owing more in deferred wealth tax than his business was worth (the Inland Revenue pointed out that with less ludicrous assumptions than the CBI’s he would have £900,000 left after paying the tax!).

The Stock Exchange thought that “abiding damage could be inflicted on the delicate balance of the mixed economy. The Government seeks to increase investment in industry, but it is effectively prohibiting the flow of capital through the Stock Market by the existing and proposed taxation policies.”

In the event the Government yet again bowed to the pressure of big business, and the tax was shelved, though it remains in Labour’s 1976 programme and seems likely to be revived. But in any case it would be wrong to overestimate the significance of the tax as proposed. The Treasury in fact summarised the effects in its own evidence to the Committee:

“It is unlikely that the reduction in consumption associated with the tax will be large ... it is not envisaged therefore, that the tax will provide scope for any significant increase in personal consumption (financed by reduced taxation) or for the financing of additional public expenditure (without the need to increase taxation) ... the main effect will be to increase total tax revenue in relation to government expenditure. this means that over a long period of time the National Debt will fall (or its rate of growth be lessened) as a result of the imposition of the tax.”

What this amounts to is that the tax would not be heavy enough to reduce the consumption of the rich, nor to force them to hand over part of their shares. It would simply reduce the increase in the national debt. Certainly a slower rate of increase of interest payments on the national debt would be an advantage and all socialists would support any measure which reduces the wealth of the rich. But the reduced holdings by the rich of government securities would in no way reduce their domination of the economic system through their ownership of shares; the Labour Party has not been contemplating a wealth tax sufficiently sweeping to force the capitalist class to hand over its shares to the government, and if it did their response to the modest Green Paper proposals would be as nothing to what would follow. In any case if the objective is, as it should be, to remove the power from the owners of industry there is nothing to be said for a really punitive wealth tax, which would take several years to have this effect, as against nationalisation with compensation according to need. This would go to the heart of the matter without trying to make confiscation respectable by doing it via the tax system.

* * * * *

Conclusions

Though we concentrated on the Tribunite version of the Alternative Strategy is virtually indistinguishable from other versions – with the significant exception that many who support virtually all of the Tribune demands would reject any control of wages. This goes for example for the programme advocated by the Communist Party for a future Left Labour Government (the British Road to Socialism, Draft 1977, lines 1179–1245). It contains all the Tribune demands, while on wages says “a government carrying out such a progressive programme could be assured that the unions would take this into consideration in forming their wage demands.” On the central question of capitalist resistance the draft has stern words, but muddled thinking:

“The fierce resistance to this policy which would come from the monopolists and bankers at home and abroad would have to be met by mobilising wide popular support for it on the basis of full democratic discussion at every level in society. The right of the democratically elected government to carry out its programme would be firmly maintained. Concentrating the measures of nationalisation on the main monopoly groups would create possibilities for dividing the capitalist class and preventing united capitalist counteraction.”

A programme of nationalising just the “key firms among the top firms which dominate the economy” (how many, 25?) would still leave the “great majority” of top firms in private hands, subject to “drastic controls”. But the idea that this creates a difference of interest between the capitalists singled out for immediate nationalisation, and the rest of the top firms which would simply be subject to ‘drastic control’, is ludicrous. The rest would know that the drastic controls must be the prelude to their nationalisation, and they would be as vigorously opposed to such a programme of selective nationalisation as the firms immediately threatened. Only a programme of nationalisation of all the major monopolies would remove from the capitalist class the crucial levers of economic sabotage which are at present concentrated in their hands. Attempts to play off one section of the capitalist class against another are doomed to failure, since their interests must be fundamentally the same when it is a question of the implementation of a socialist programme.

If one theme runs through the various points of the Alternative Strategy it is that they attempt to implant in a partial fashion aspects of a fully-blooded socialist plan on what would remain fundamentally a capitalist organism. Thus we have:

As already argued the character of these measures of the Alternative Strategy varies from those which, in general terms at least, represent a limitation on the power of private capital (e.g. nationalisation of the banks) to those which many agree can only be in the interests of big business if instituted while the economy remains on a capitalist basis (e.g. incomes policy). Socialists should demand that those elements of the Alternative Strategy which are in Labour’s Programmes and which do impinge on capitalists’ freedom should be implemented. But the fundamental point is that even in combination they do not form a coherent strategy for planning the economy. And there is a danger that if put forward in a piecemeal way these demands will form an easy target for the capitalist media. This was shown clearly by the opposition stirred up amongst bank workers to Labour’s ideas of nationalising the banks. But the solution is not to water down the policy – to “public control” over the banks as Brian Sedgemore suggests. But rather to mould them into a coherent and convincing programme, thoroughly argued for and explained.

By attempting to go part of the way towards a socialist programme, this strategy is not ‘transitional’ to such a programme, but is transitional to a tremendous disaster. An attempt simply to implement such a programme would be met by the capitalist using the enormous economic power left in their hands to sabotage the government’s plans. The danger is not just that the ideas of socialism would be discredited in this way, but that the economic chaos which would result would pave the way for a reactionary takeover on the basis of crushing the organisations of the working class, as the Chilean experience makes clear. From this point of view a thorough critical analysis of the alternative strategy, despite its support in the labour movement, does not constitute sectarianism. Rather it is a vitally serious question for all socialists.

The Alternative Strategy is aimed at meeting the problems of redundancies, cuts in living standards, cuts in public spending by means of government policy within the context of a capitalist economy. We do not accept that this is a coherent strategy, but this does not mean that these issues should be ignored until the conditions for implementing a socialist plan have been achieved. On the contrary the struggle for these immediate questions is essential for the interests of the working class. Rather than relying on the Alternative Strategy these interests can only be safeguarded by workers’ own struggles around the slogans of work or full pay; a minimum wage of £70; a 35-hour week; a sliding scale of wages, with the price index to be worked out by trade unionists; a crash programme of public works; open the books. The struggle for these demands by the organisations of the labour movement immediately raises the question of whether workers’ basic requirements can be guaranteed under capitalism, and the corresponding need to generalise these struggles around a programme to transform society. The transformation of society will never be achieved by the wizardry of economic tinkerers. It is a political act of the working class; the need for which will become apparent to broader and broader sections as their struggles over living standards etc. shows the inability of capitalism to provide jobs and a decent wage for all.

Analysing the Alternative Strategy in some detail has already covered, by means of the criticisms made, many of the central ideas of what we consider a real socialist programme. The next section takes up some basic issues about what a socialist plan could achieve and how it would operate.

III. A Socialist Plan of Producton

Militant campaigns for a socialist programme summarised in the slogan “Nationalise the 200 monopolies and the banks under workers’ control and management, and with compensation according to proven need”. This is not intended as a blueprint for the establishment of socialism, rather to indicate the indispensable basis for replacing production for profit, by production according to need, for replacing the blind play for market forces with conscious social control.
 

Nationalisation of the 200 monopolies plus finance

The extent to which a small number of firms dominate the economy can be demonstrated by many different statistics. The 100 largest manufacturing firms are estimated to control nearly one half of manufacturing production, and the largest 200 about 60%. Drawing the net rather wider to include commercial firms (retailers, wholesalers etc.) and property companies, the top 200 companies hold 80% of the assets held by the top 1,000. Of course there are hundreds of smaller companies (turnover less than £13½ million in 1975) which are not included In the top 1,000, so the 80% figure is an overestimate of the share of total assets owned by these companies. Yet the 80% figure is more indicative of the power of the giant companies, and the extent of control that nationalisation of them would give. In fact it manifestly understates the degree of control even for industries where smaller firm predominate. For many of the smaller firms are basically component suppliers to, or retailers for, the giant firms. So the top 200 companies are monopolies, not in the sense that each individually dominates the supply of a particular product (though many do of course), but in the sense that as a group they dominate the economy as a whole and practically every sector of it. There is nothing magical about the figure of 200; it serves to indicate that just as the giant arms dominate the economy under capitalism, so they form the basis for carrying out a socialist plan. For example the huge car firms effectively determine the operations of the smaller engineering firms supplying components, and the car distributors. The decisions of the great chain stores control numerous small producers of consumer goods (Marks and Spencers already has the reputation for exercising this control in a particularly active fashion in the case of many textile suppliers). The giant firms dominate the supply of virtually all the major inputs of fuel: metals, chemicals etc. So planning the operations of the monopolies would force the smaller firms to conform to the requirements of such a plan. There can be hardly one commodity which in whole or part does not pass through the hands of the monopolies. Even fish and chips are cooked with corn oil made by Unilevers!

Finally there is control of finance: at the end of 1974 there were 25 financial institutions (excluding insurance companies) each with capital in excess of £500 million, and in total they controlled £72 billion or more than 87½% of the assets of the top 100 financial institutions. The biggest 10 insurance companies also comprise around two thirds of the insurance industry. Nationalisation of the financial giants is necessary to gain control over the credit system which as argued earlier is essential to secure the implementation of plans to expand production and investment.

Obviously, no socialist government would simply nationalise the largest 200 in mechanical fashion; the London Brick Company which lies just outside the 200 is obviously of more central importance to a socialist plan than is the Nestlé company or Consolidated Gold Fields (which operates mainly in South Africa). The list of priority companies to be incorporated into a socialist plan would have to be drawn up on the basis of detailed information about the different sectors. This 10 turn could only be done when full access to the books. of the different companies was a achieved by the action of the workers. The demand for the nationalisation of the 200 monopolies plus finance indicates the indispensable basis for planning the economy. To attempt this on the basis of nationalising 20–25 companies would be like trying to wag the dog with its tail.

But how would a plan of production actually operate. Is it possible to plan an organism as complex as the British economy?

As Marx pointed out in Capital, the same people who extol the organisational excellence of capitalist factories and businesses and the sophistication of the planning techniques available to the individual capitalist enterprise, also deny the possibility that the same techniques can be applied to the co-ordination of production between the different giant enterprises which dominate the economy. If General Motors is capable of planning of its worldwide operations (according to its own interests of course) why could not a workers’ government in Britain apply the same systems to planning the British economy? General Motors sets production targets for its various different models produced in the various different countries and works out the implications for all its factories making the different mixes of components etc.

In broad terms, exactly the same approach applies to the implementing of a socialist plan of production. The starting point must be the broadest political decisions as to how national production should be divided up between consumption, investment and provision of social services. The implications for individual sectors of industry can be worked out using techniques of input-output analysis which show how the different industries feed into one another. From this follows output targets for the giant enterprises which dominate each of these sectors (this is exactly what did not follow when a similar approach was tried out under the conditions of capitalist competition with George Brown’s 1965 National Plan. Then, after an overall production target for the motor industry was set it was found that each of the giant producers was planning on the basis of increasing its own share of the market – a manifest impossibility of course and a clear example of the futility of trying to impose a plan on the anarchy of capitalist production). Production requirements for the giant firms would imply orders for all the smaller component suppliers. These production targets also imply labour requirements, volume of imported raw materials required etc. Investment targets would be set for the different industries to ensure a balanced growth of production; from these targets would follow production levels for the industries producing the relevant items of plant and equipment. While it would be wrong to underestimate the problems involved in working out the detailed implications of the plan, it is essentially a technical problem. The development of capitalist production itself, in terms of computers, information systems, has rendered planning possible to a level of sophistication and complexity that could hardly have been dreamed of 40 years ago. In fact the capitalist system has in a sense taken the process of planning a good way itself by the tremendous centralisation of production 10 a relatively small number of enterprises. Essentially it remains to crown the achievements in technical terms, of the giant capitalist enterprise with a rationally and democratically worked out plan of society’s resources, rather than allowing so much of its productive potential to be wasted by its subjection to the anarchy of the market.
 

Workers’ Control and Management

Workers’ management of industry refers to the fact that a socialist plan for the economy as a whole, can only be formulated by a workers’ government, that is a government subject to workers’ democracy with all representatives subject to the right of recall by, and paid no more than, those whom they represent.

What is clear from the history of attempts to plan 10 a socialist fashion are the twin dangers of an over-centralised bureaucracy on the one hand or a lack of central direction essential to planning, on the other. Obviously workers in a particular industry, workers in other industries (as consumers of the industry’s products at home or at work) and representatives of the government (who have the plan for the economy as a whole to implement) all have a role in the democratic management of a particular industry. In individual plants workers’ control means control over the technical specialists, to ensure the implementation of the plan for the plant, and control over the immediate issues of hiring and firing, safety etc. The forms of control would obviously vary from industry to industry depending on the historical traditions of the workers in those industries and how these practices, such as control over hiring and firing evolves as the struggle to dislodge the capitalists develops.

This control would naturally extend to firms not immediately nationalised and would ensure that these firms too fitted into the requirements of the plan through fulfilling their obligations to the State sector.
 

Compensation Only According to Proven Need

The capitalists accuse the Marxists in the labour movement of wanting to expropriate everything in sight, strewing the country with destitute widows, orphans and old people. Our programme is certainly to remove the vast wealth of the tiny proportion of the population who use it to control society. But the working class would pay compensation to the dispossessed owners on the basis of proven need. They would be as free to earn their living by working, or to draw social security if that was impossible, as anyone else. But small savings, pension rights etc. would be guaranteed by the state to cut through the crude propaganda of the press that the socialists would implement the immediate abolition of all private property. Workers’ control, in the factories concerned and in the financial institutions would be essential to prevent evasion by the big capitalists, a flight of capital etc.
 

What a Socialist Plan of Production could achieve

The proof of the viability of planning is demonstrated by the experience of Russia, where production grew six and a half times between 1913 and 1965. And this tremendous development of production in Russia has been despite the monstrous mismanagement and waste imposed by the totalitarian rule of the bureaucracy which ever since the mid-1920’s has been the source of interminable inefficiencies. The argument that planning inevitably leads to such a bureaucratic degeneration is just assertion, based on a crude extrapolation of the history of the USSR with no attempt to understand the historical circumstances. Ultimately too it is based on a contempt for the capacity of workers to maintain democratic control of their society.

Because it is impossible to foresee all the circumstances it is impossible to draw up a blueprint as to the precise methods of working out and implementing a socialist plan. A proper analysis of socialist planning, concentrating on the wealth of experience accumulated over the last 60 years is beyond the scope of this pamphlet. But a few general indications of the advantages of socialist planning and answers to some common objections may be helpful.

The wastes of capitalism are so pervasive that the following is a sample list:

1. Cost of capitalist competition (duplication of product ranges between different firms where specialisation would be more economical, duplication of research facilities, unnecessary model changes and differentiation of products, advertising etc.)
    
2. Costs of the capitalist financial system (the stock exchange, a good proportion of the banking system – not all of course; the banking system would become an essential part of the implementation of a socialist plan and workers would require the banking services to be available, but all the speculative activity and a tremendous amount of the duplication of facilities, the existence of numerous banks and building societies in every High Street, could be eliminated).
    
3. Costs dependent on the antagonistic relations between capital and labour. Any factory or office obviously requires people whose job it is to organise and supervise work, but under capitalism there is a further function (often performed by the same individuals) of maintaining discipline. Under workers’ control this function, as a specialised one would disappear, (as would the whole industrial relations department). It should not be forgotten of course that, modes of decision making within the factory would take time; one of the effects of the drastic shortening of the working week would be that workers would have the possibility of full involvement in the running of their firms. Similarly many of the repressive functions of the state (army, police, law) would cease, at least in, part, to be specialised functions, and costs could be drastically reduced.

It is not possible to calculate what resources would be released by the elimination of these costs of capitalism. While some of the benefits would come rapidly others would inevitably take a longer time.

Take the question of duplication of financial services. It would be foolish to immediately implement a huge rationalisation of the banking system as soon as the big banks were nationalised, involving closing thousands of branches. Widespread unemployment of bank staff would result, and the prospect of this would obviously rally this section of the working class against the prospect of a socialist transformation of society. Rather it would be necessary to work out in advance alternative employment for these people (many for example might be required in the local offices of the planning apparatus where their skills and training could be put to good use). The superiority of socialist planning lies precisely in the potential for doing this.

The difficulty of quantifying the extent and timing of the savings involved from the elimination of these wastes should not prevent socialists from stressing their importance. A similar problem of quantification arises in respect of the potential increases in productivity resulting from unleashing the creative ability of the workforce. The stories about workers suggesting improvements to the productive process and ending up with a brass handshake of a few pounds convey a basic truth about capitalist production. Bur even under what are effectively capitalist relations a recent study of technical change in the coal mining industry found that about one third of innovations patented by the NCB on coal cutting technology came from ideas of those working outside the research departments, and that more than one half of the ideas in 1973/74 came from non-professional groups of workers (i.e. not engineers).

Another cost of capitalism which would be eliminated is the production of luxury goods for the consumption of the capitalist class.

How much could be saved for society by cutting out luxury consumption? It is extraordinarily difficult to calculate this as the statistics for the consumption of the rich just are not available (the figures for their incomes are notoriously deficient, especially in respect of capital gains which is the main way of becoming wealthy; there is no adequate information on what they save rather than consume and there is no overall information about the fringe benefits supplied by their firms). But looking at the figures for total consumption, in relation to what workers, pensioners etc. have available to spend suggests that luxury consumption must be of the order of 5% of national production.

This may seem quite a small figure though it is larger than some other estimates. But one family consuming goods worth £1 million a year ‘only’ consumes 5% as much as do 10,000 families consuming £2,000 a year; there just are not that many extremely rich people – for example in 1973 less than 1 in 1,000 families had post-tax incomes estimated greater than £10,000 a year. The basic point is that the major gains from socialism will be through full utilisation and development or the productive forces, which capitalism prevent, rather than through redistributing what capitalism does produce.

The final and most glaring cost of capitalism is unemployment. As explained at the beginning of this pamphlet the full utilisation of society’s resources would allow a massive increase in production even before the longer-term advantages of a socially rational deployment of resources were realised.

But is there some elementary fallacy in this argument as to the possible increase in production? Where will the money come from? How could a socialist plan be financed? These objections are based on a very common misunderstanding about the role of money. The fundamental point is that commodities are produced by human labour working with machines etc. There is no problem about a socialist government having sufficient money to pay the increased wage bills of the nationalised firms, or for the goods and services consumed directly in the state sector. All it has to do is to print sufficient cash and distribute it where necessary through the banking system. There is no question of this being inflationary as there will be a corresponding increase in production. The extra cash will perform a purely subsidiary role in allowing the different commodities to be sold. In fact a planned expansion is definitely anti-inflationary in that inflation fundamentally reflects shortages of one sort or another. It would be necessary that the extra wages paid out should not exceed the extra production of wage goods planned. But apart from this there is no question of the “country” being “unable to afford” the extra production potentially available. The whole notion is a piece of capitalist mystification designed to conceal the fact that the reason for the waste of resources under capitalism is that the capitalists will not “afford” to produce more, in the sense that it is not profitable for them to do so. Obviously many goods might be distributed directly rather than by being purchased out of wages. The point is, though, that even money and wages perform a quite different role in the context of planning – that is tools for the social allocation of resources rather than reflections of the anarchy of the market.

But what of the balance of payments? Would there be a problem about selling sufficient exports to pay for necessary imports. The fundamental point is that control over the giant firms means a virtually automatic monopoly over foreign trade, extended to the rest of industry through state control of the banking sector. Import limitation to conserve foreign exchange would serve as one instrument of a socialist plan, rather than bolstering up backward capitalist enterprises.

It may be objected that this would provoke just the retaliation which is claimed to be the basic failing of import controls under capitalism. But the problem of retaliation, and indeed sabotage, from other capitalist countries does not revolve around the extent of limitation of imports or indeed the amount of foreign assets expropriated (26 of the top 200 companies are foreign owned – depending on the particular situation it might be expedient to leave some of them unnationalised but the nationalisation of others would probably be indispensable – for example it would be impossible to implement an effective plan of production for the motor industry while three of the big four companies remain in capitalist hands). Bob Rowthorn says “widespread confiscations, especially of European-owned property, might lead to a crippling trade boycott” (Marxism Today, August 1974) and he advocates the use of British capital’s vast overseas assets to pay off the foreign capitalists who own factories in the UK.

But this fundamentally misses the point that the opposition of world capitalism to a socialist transformation of Britain would not be based on what it stood to lose directly in the form of assets expropriated or export markets curtailed. Rather it would derive from the fear of capitalists abroad that the success of socialism in Britain would act as a beacon to the working class in their own countries. Bearing in mind the crisis in their own countries they would fear expropriation not just of their assets in Britain but of their assets in their home base. This makes any attempt to buy off the capitalists abroad an ultimately futile one, for just the same reasons as attempts to use salami tactics on the capitalists class at home – slicing off bit by bit, meanwhile appealing for support to the rest of the sausage – must be futile. The only protection against the attempts of world capitalism to sabotage a socialist Britain would lie in solidarity action from the labour movement in the rest of the world. Selling off British owned factories to foreign capitalists would hardly be the type of action designed to secure such solidarity. The only way to ensure solidarity is by a clear call for the rest of the working class on a world scale to support the expropriation of British capital and to follow suit with the expropriation of their own bourgeoisie.

Many people who support the alternative strategy of Tribune say that Militant’s programme is unrealistic in the sense that the majority of people in the labour movement do not accept the need for such a far-reaching transformation of society. This is not surprising given the enormous weight of propaganda against socialism which comes not just from the capitalist press, but from the leaders of the labour movement as well. But if the organisations of the labour movement can be won to the necessity of a thoroughgoing socialist programme this would provide the basis for a tremendous campaign to explain how the everyday problems of unemployment and living standards are caused by capitalism and can only be solved through socialism. It is not in the least unrealistic to believe in the success of such a campaign once the issues are clearly explained. To argue like the CP against an “extensive nationalisation programme” on the grounds that “it would seem to many people like out and out socialism” (Michael Bleaney, Comment, April 15, 1978) betrays a crippling pessimism about the capacity of the labour movement to swing the rest of society behind it.

What would be thoroughly unrealistic would be to suggest that the capitalist class could be dislodged from their dominating economic position simply by winning the argument and securing a parliamentary majority for a socialist programme. It is only necessary to look at the lessons of history, most recently Chile, to be convinced that no ruling class will ever surrender its power without a struggle. But such a mobilisation must be around a coherent and effective programme, not based, as we have argued in the case for the Alternative Strategy, on a failure to appreciate the necessity for definitively depriving the capitalist class of its economic power.

 
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