The “Crisis” — from Cripps to Selwyn Lloyd

The workers, whose wages and jobs are involved, view the latest “crisis” as a serious matter, as also do the employers who are fearful about their falling profits, but in every other respect it has the appearance of a farce, represented almost every other year since the end of the war. The Opposition, forgetting that crises also happened when they were the government, say that the thing itself and Selwyn Lloyd’s methods of handling it are evidence of Tory ineptitude and viciousness. The Tories, embarrassed by their promises that it would not happen again when the people were “set free” from Labour government planning and controls, now find themselves committed to the idea of planning, though this time it is to be by a national economic council, representing government employers and trade unions instead of planning from Whitehall. Except for variations of detail and emphasis there isn’t a single original idea in the new Tory policy and no indication that they are any better at smoothing out capitalism than were the Labour government. Most of Selwyn Lloyd’s speeches and actions might have come straight from the late Sir Stafford Cripps.


The elements of the problem are fairly simple. The manufacturer, if he is to sell his goods, has to offer them at competitive prices, “as high as the market will bear,” but not so high as to leave the market to cheaper competitors. But he also has to worry about his wage costs. If wages increase too much his profit suffers so he needs something to act as a brake on wage-claims and at present the unemployment brake is missing. As the purpose of capitalism is making profit, what are the employers and the government to do in a situation like this? Fight the unions over all wage claims? But that means bringing factories and transport to a temporary standstill, at enormous cost in the shape of lost production and profits, and with the risk that the government would lose the next election. Two policies that had looked promising for a time were Cripps’ appeal to the workers not to claim higher wages, and the policy of raising the price level by currency inflation. If manufacturers know they can count on steadily rising prices for what they sell they do not have to be adamant about wage increases induced by the rising cost of living. But while this is workable inside the country it cannot help the exporter, selling abroad: he cannot put up his prices. Cripps was eventually persuaded to devalue the pound in order to make it cheaper for the foreigner to “buy British”; but in the nature of things this is a remedy that cannot be safely repeated every few years.


The other part of the Cripps plan that has been copied by all his successors is to ask for more output per worker. The idea behind this is that provided all the additional output is sold, it would permit wages to rise without cutting into profit.


Where Cripps Left Off
The present government has carried on from the wage restraint policy of the late Sir Stafford Cripps when he was Chancellor in the post-war Labour government. It was his White Paper on Personal Incomes, Costs and Prices, 1948, which laid down the policy that “there should be no further general increase in the level of personal incomes without at least a corresponding increase in the volume of production.” There should be no increase of income from profits and rent, and rises of wages should only be asked for either when productivity was increased or to attract workers to industries short of labour. In particular he objected to workers in one industry demanding increases to keep up with workers in another industry, and in 1949 when the devaluation of the pound again put up the cost of living he condemned wage increases aimed at keeping up with the rise of prices.


Cripps was helped to some extent by the fact that the T.U.C. endorsed his wage restraint policy and the result was that wage rates were falling behind the increased cost of living from 1947 to 1951. The present government has no hope of getting T.U.C. support for a wage freeze, but it calculated that the T.U.C. would be unable to resist the bait of “planning,” because that has long been one of their demands.


In one respect—the pay of teachers and civil servants—Selwyn Lloyd has been more drastic than was Cripps. When the latter was in control all wage-fixing bodies, including the civil service arbitration tribunal, were urged to take note of government policy on wage-restraint: this time the government has imposed its own, over-riding, “pause” on civil service pay and has cut by several million pounds the recommendations on teachers’ pay. (The police have been luckier, their big pay increase was already in operation).


This isn’t the first time a government has exercised its power to withhold agreement and thus delay wage increases proposed by wages councils. It was done in 1957 in respect of National Health Service workers, and back in 1948/9 the same delaying tactics were used by the Minister of Labour in the Labour Government. It took nearly a year for the retail food council and the hairdressing council to reach agreement in 1948 on proposed pay increases but the Minister, Mr. Isaacs, referred back certain of the proposals. The councils sent them back to him again almost unaltered and the Minister rejected them again in August, 1949. The T.U.C. reported (1950 Report, p. 167) that after a meeting with the Minister the difficulties were removed, and the increases were put into operation in October, 1949, after nearly a year’s hold-up. According to Press reports at the time, the Shop Assistants Union had threatened to embarrass the Labour Government by putting down an emergency resolution for the Trades Union Congress.


The tough talk from the government about the “pause” on wage increases aroused similar tough talk from trade union officials declaring that they would have none of it; that they were not going to be dictated to and that “legitimate” wage claims would go on as usual. The unions are quite right to continue the wage struggle but they are only deceiving themselves if they think that there would be no restriction on wage increases if Selwyn Lloyd had not put it there. Wages are always restricted; basically by the fact that they represent the value of the mental and physical energies the worker sells, and at any given moment by the demand, and the amount of unemployment The employers have to aim at keeping wages down to a level which leaves a surplus for profit. This is capitalism, and it is idle to pretend that it can be made to operate as if its purpose was to provide constantly rising real wages without regard to profit In practice, trade unions are forced to recognise this fact hence their almost invariable practice of having to settle at some figure far less than they claim; railway unions in 1958 claiming 10 per cent. and accepting 3 per cent., and the same unions under the Labour Government claiming 12s. 6d. in 1948 and eventually being put off with a few shillings for the lowest paid only. And anyone who thinks that a future Labour Government would or could run capitalism differently when they get another chance should take note of the declaration by Mr. Harold Wilson that ‘’for a future Labour Government no less than for the Conservatives success or failure in the battle against inflation would depend on the ability to secure an understanding with the unions which would make wage restraint possible” (“Remedies for Inflation.” by Harold Wilson. M.P., with a foreword by Hugh Gaitskell, 1957).


And what if the Unions do not agree? The present government obviously hopes that the imposed standstill on government employees will stiffen the resistance of employers in private industry. They doubtless share the envious eye the economist, Mr. Paul Bareau, casts on de Gaulle’s “strong man” government which was able to secure that “to a modest degree . . .  real wages in France were for a time reduced” (Sunday Telegraph, 3 Sept, 1961). And how much better still it might be for the capitalists if instead of trade unions there could be, as there are in Russia, Yugoslavia and elsewhere, government controlled so-called unions that are in fact little more than agencies for imposing discipline and stimulating production.


The Prospect
While the unions are anxiously watching what the government does, other indicators may turn out to be more important Some of the economists think that if unemployment rose to about 2 per cent. —2½ per cent., the unions’ ability to press for higher wages would be curbed. It is at present about 1¼ per cent. or 300,000, but has been rising. Mr. Samuel Brittan, economic editor of The Observer, has this to say:—


  The Government’s hand will be enormously strengthened in the coming months by a marked change of tread in the labour market which actually began as early as June. Disregarding merely seasonal changes, unemployment has since been creeping up and unfilled vacancies have been declining. There will not of course be large-scale unemployment or anything remotely resembling it but labour should become a good deal easier to obtain in the coming months.


If the present crisis follows the pattern of the others since the war the pressure will last for a few months. Profits which have recently been falling will start to go up again because wage increases win be harder to get. The Chancellor will then announce that we have “turned the comer” and the workers will be invited to rejoice. And so it will go on until the next time.


One final comment on the farcical aspects of the crisis. The unions of government workers and workers in nationalised industries are incensed because, they say, they are singled out for worse treatment than that given to workers in private industry; these are the unions that go on record in favour of nationalisation!


Edgar Hardcastle