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International Socialism, April-June 1972

Hugo Radice

Survey:

Prospects for British Capitalism

From International Socialism (1st series), No.51, April-June 1972, p.31.
Transcribed & marked up by Einde O’Callaghan for ETOL.

On Thursday, 20th January unemployment officially topped 1,000,000 for Great Britain and Northern Ireland. The six o’clock news on Radio 4 described a ‘demonstration’ by Labour members in the House of Commons, leading to the suspension of business by the Speaker. Unemployment, the news continued, had risen by 57,000 over the previous month. The figure for Great Britain was 977,500, or 4.3 per cent of the insured working population. Because of exceptionally mild weather, the rise was not as great as anticipated, but the underlying trend, after allowing for ‘seasonal’ influences, was still upward. The Government’s budgetary measures to reflate the economy were evidently not working through yet; 335,000 redundancies had been officially notified to the Department of Employment in 1971, an increase of about 50 per cent over the 1970 figure. Mr Davies of the lame duck brigade was interviewed. The measures, he said, were indeed taking longer than expected to bear fruit, but there were hopeful signs. The volume of retail sales were rising, and some ‘hard indicators’ (?) suggested expansion; jobs would begin to be created soon. Mr Feather chastised the government for its ineptitude, and said how shocked he was. Finally, it was reported from the City that share prices had continued to rise, and the Financial Times index had broken through the magic 500 level – to 500.1; the reason – high profit-expectations due to the ‘streamlining of the labour force’. Throughout 1971, the figure of 1,000,000 seemed to symbolise economic catastrophe; now that it has been reached, there is near-unanimity among the economic ‘experts’ that things are looking up. The National Institute for Economic and Social Research, for example, finds that the Tory government’s reflationary measures have led to a significant recovery in consumer spending which will, after some delay, begin to affect output – although unemployment is expected barely to fall at all, because increased output will come from increased ‘productivity’ at least for the next six months or so. Is this a correct judgment? And how long will the delays really be?
 

A Structural Crisis

The most obvious fact about the present crisis is that it is not simply a cyclical recession. Despite the talk for so many years about shake-outs and ‘rationalisation’, there is probably a greater need for a restructuring of British capital than at any time since the war; a restructuring which must be paid for by the working class if the capitalists are going to undertake it. Restructuring capital involves shifting it into new areas of activity so as to raise the overall rate of profit as high as possible. Under competitive capitalism, this process was accomplished by the success or failure of different capitals in the market. Economic crisis destroyed those capitals in declining and unprofitable sectors. As monopoly capitalism developed, this process became more and more protracted and costly as capitalists came increasingly to control markets and to acquire the economic and political power to thwart the competitive process. In the period from 1870 to 1945, the problem was contained only through imperial expansion, ever-deeper crises, and wars between the imperial rivals. State intervention became more and more widespread and far-reaching. At the same time, the increasingly international nature of economic life led to an increasing number of links between the different capitalist economies, and hence to an increasing simultaneity of crisis; witness the immediate and disastrous effect of the Great Crash in the USA on the German economy in 1929-33, a crucial factor in the rise of Nazism. The postwar years saw a reduction in this simultaneity, as well as an apparent solution to the problem itself. Keynesian reformist policies and arms and other state expenditure stabilised the system and maintained an expansion whose momentum originated in war production and in recovery from wartime destruction. In addition, the retreat into national economic self-sufficiency in the 1930s reduced the linkages between economies, so that it was feasible to apply the reformist policies on a national level. But in the ‘60s, the trends have once more asserted themselves. Post-war expansion has slowed down throughout the capitalist world; and the rapid growth of world trade, and even more rapid growth of international firms controlling that trade, has increased the integration of world capitalism, so that the central contradiction of capitalism, expressed in economic crisis, tends to operate with simultaneous effect throughout the system.
 

The World Economy

This means that it is impossible to view the prospects for the British economy in isolation from the rest of the world. And it is clear that the current crisis is world-wide. The eruption of the international monetary crisis last August is symptomatic of this. Not only did this represent a significant erosion of the economic superiority of the USA; it also showed that the apparent economic success of the surplus countries, especially Japan and Germany, was only temporarily suppressing the contradictions in that successful growth. Not only had the Marshall Aid programme rebounded; so had the ‘economic miracles’ so long pointed to by apologists as proof that capitalism worked. In Japan, economic growth slowed very considerably last year, from 11 per cent in 1963-70 to only 5 per cent. Even that growth could only be maintained by a massive increase in exports to the USA, with the inevitable consequence in Nixon’s August measures and a big yen revaluation. In Germany, a similar pattern has led to rising unemployment, while high wage levels are leading to a widespread ‘migration’ of labour-intensive industries to South-East Asia as well as to Southern Europe. The steel firm, Hoesch, has been forced to merge with Dutch Hoogovens in what its chairman agreed could accurately be described as an ‘anti-Japanese cartel’. In Italy, as a recent headline put it, ‘industries are queueing up for nationalisation’, and industrial output fell in 1971 to below the 1969 level. Unemployment is rising in France – and even in Switzerland – although it is masked, as in Germany, by the reserve army of immigrant workers from southern Europe, which for the first time in years is actually showing a net flow back to the home countries.

Any recovery in the British economy is clearly dependent on a similar recovery in the world economy. In fact, only in the USA is there any optimism, and even there the continued efforts of the Nixon administration to improve its competitive position in world markets shows how tenuous the US recovery is as yet. Overall, the increasing generality of the crisis means that the dog-eats-dog atmosphere epitomised by the monetary squabbles is going to continue; methods of competition are becoming less gentlemanly (the management of exchange rates in the period before the December agreements was aptly described as a system of ‘dirty floating’). On the other hand, there is widespread awareness that retreat behind tariff barriers on the scale of the 1930s – let alone depression on that scale – is politically suicidal. What is likely is a prolonged process of jockeying for position, as the different national capitalist classes, and international groupings such as the EEC, each try to secure for themselves the most advantageous position in any new ground-rules that are drawn up to regulate the system. Meanwhile, it is unlikely, to say the least, that there will be much of a recovery in the world economy overall in 1972: for as well as facing each other, the different ruling classes face, as in this country, greater resistance from the working class.
 

A British Recovery?

Even if the prospects for world capitalism in general were good from a capitalist point of view, we should not expect the British economy to perform any less appallingly in relative terms than it did in the ‘50s and ‘60s. Until very recently, restructuring was half-hearted. British capitalists preferred to wait for an opportunity for rapid economic growth, in the course of which structural changes could be accomplished without demanding too much from the relatively well-organised British working class. This was the policy behind George Brown’s National Plan, and the devaluation of 1967. Devaluation did not do the trick because the initial cut in living standards, which was said to be necessary in order to finance the growth in exports and investment, was successfully resisted in the accelerating wage demands from 1968 onwards. At the same time, the benefits of devaluation were reduced by the worsening world market conditions. It was this failure of traditional Keynesian policies which necessitated the attack on the unions and the savage rationalisation programme that the Labour Government initiated and the Tories stepped up. Yet it is clear that, even with a million unemployed and profits recovering slightly, the battle has only just begun. Compared to other advanced capitalist countries, especially in the EEC, capitalists in Britain have persistently under-invested in their ‘home’ economy, while remaining second only to the USA in investment overseas. And in 1971, while investment at home fell slightly, the flow overseas continued to boom: the estimate for the year is nearly £900m, 20 per cent up on the year before. One consequence of the continued stagnation of investment at home is that the machine-tool industry is on its last legs. In volume terms, orders were down by about 40 per cent over the year 1971. Alfred Herbert, the biggest firm in the industry, has cut its labour force by a third. Yet a very recent survey of the machine-tool population in British industry showed that the age-structure of these vital pieces of equipment was far worse in Britain than in other countries (apart from the USA), and had not changed at all in ten years. In shipbuilding, despite millions of state money, only 25 per cent of machine tools were less than ten years old in 1971 – almost the same figure as in 1961 (see table 1). Meanwhile, the steel industry is in trouble too. The International Iron and Steel Institute reported recently that its 24 member countries showed a fall of 5.9 per cent in steel production in 1972. The biggest fall, of 13 per cent, was in Britain. In December, indeed, the fall over the previous year was 20.7 per cent. No wonder there is no longer any talk about denationalising the steel industry. That British capitalists are taking the situation seriously is evidenced not only by Tory policies and their effects in the aggregate, but also by the geographical incidence of sackings and unemployment. In the past, the response to business recession, in terms of cut-backs, tended to hit the peripheral areas of the country, the so-called development areas, ‘the hardest. Production would be concentrated in the ‘centre’, where the unions were tougher; higher capacity utilisation in those plants could offset in part the higher wages won by the unions. But today, male unemployment is hitting the centre too (table 2): the south-east still gets off lightly because of the predominance of non-industrial jobs in that area, but Coventry and parts of Birmingham now have rates of 10 per cent and more.

What about the recent rise in retail sales? It is heavily concentrated on consumer durables, and it is restricted to those in a position to take advantage of the easy credit policy – ie those who are not likely to be made redundant, and are likely to benefit from a further tax cut in March. (The same applies to another ‘boom’ area – private house-building.) Secondly, even if the rise begins to affect output, and not simply levels of stocks, the output increase is expected to be met from increased productivity – i.e. increased exploitation. No fall in unemployment of any significance can be expected in 1972: indeed, real unemployment will rise, as more and more people do not bother to register (which explains, incidentally, why the figure for female unemployment is so low, and why employment has shrunk by more than the rise in unemployment: 10 per cent would not be far out as an estimate of real unemployment). At the same tune, levels of capacity utilisation are very low, so that output can be increased without increasing investment. This suits the capitalists very well, since so long as the long-term outlook remains uncertain, the profits that are beginning to roll in from tax cuts and ‘shake-outs’ will not be put at risk. And uncertain the prospects undoubtedly remain. The recent profits recovery may have elated the City slickers; and while rationalisation is the path to glory, there are plenty of smart operators able to make a quick profit by buying up small companies and sorting them out – a type of operation made respectable by the Slater-Walker firm (yes, that’s Peter Walker). But investment, which is the most accurate signal of a recovery, still hangs fire. The big boys remain as cautious in London as they are in Tokyo or New York, where a similar stock market boom is taking place. The reason for this is all too clear as the struggle continues. The rise in profits which will consolidate their position and lead them to start accumulating once more depends crucially on one factor: whether the working class can refuse to pay for their own increased exploitation.

Given the present state of British capital, and the likely degree of competition in the world market, the price demanded by the ruling class will be very high.

 
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