1960s >> 1963 >> no-701-january-1963

Finance and Industry: The Planning Myth

The crowning delusion of present day politics is the belief that capitalism can be planned. Labourites in particular imagine that by a judicious use of financial checks and stimuli the ups and downs of the system can be eliminated.

When the economy is booming, for example, what simpler than to apply the brakes a little to save the boom getting out of hand? And when it looks like dropping into a slump could anything be easier than to inject some extra fuel into the engine to keep it ticking over and eventually get it turning faster again?

The Tories are now faced with the second problem: the economy is in trouble and could go from bad to worse. What better than adopt the economists’ solution and get things moving again by encouraging the capitalists to invest and the consumer to buy more? So industry has been tempted to expand by increased investment allowances, consumers to buy by a reduced purchase tax on cars, and the economy generally to get into top gear again by easier and freer loans from the banks.

But unfortunately for the planners, they are not seated at a switchboard pulling levers and turning knobs. They are dealing with human beings, with capitalists having to live with capitalism. It sounds the easiest thing in the world to get capitalists to buy more plant and machinery by giving them better tax allowances; the only thing that has been forgotten is that the actions of company chairmen and boards of directors are not governed by concern over production as such, but over whether the products can make them profit. And this is where all the wonderful efforts of the planners come unstuck.

They come unstuck because all the encouragement in the world, even if it takes the form of government financial incentive, will cut no ice with a capitalist who has to think first and foremost of selling his products in a market that becomes more and more competitive. What is the use to him of improved investment allowances for new plant if his chief worry is whether he will be able to sell the goods produced by his extra machines?

All the recent efforts of the Government to stimulate the economy have in fact been useless. The capitalists have not rushed to invest in new machinery; people have not fallen over themselves to buy more cars; and the banks have not been swamped by demands for loans.

A good example of this new attitude of caution has been the recent decision of the steel firm, Stewarts and Lloyds, not to proceed with plans for their new iron-making plant at Corby. After saying that the change of policy comes only a few weeks after the Chancellor of the Exchequer’s announcement on special tax incentives, the Guardian commented that it

. . . reinforces the general belief that a real revival of industrial capital expenditure will only set in when companies can see increasing demand for their products ahead.

In other words, planners and governments may propose. But it is capitalism that will dispose.

Wrong again

Our planners have recently been made to look foolish in another sphere.

Bemused by the experts’ tales of the glittering prospects of power from atomic energy, successive governments have built seven immense power stations in this country at a cost of about £500 million. It is now reckoned that no less than £350 million of this has been uselessly spent.

The reasons?

First, the experts thought that coal would stay as scarce as it was in the days of chronic shortage after the war. They were wrong, so wrong that large areas of the countryside were being covered with embarrassingly large stocks of the stuff last year.

Second, the experts thought it would remain dear. Instead, mechanisation has made it relatively cheap compared with other fuels. They also overlooked that other countries also produce coal, often more cheaply than in this country. The United States, in particular, is now exporting large quantities of coal to Britain’s European competitors at prices that have just forced this country to reduce its coal costs.

Third, they made no allowance for increased oil production which has also come down in price so as to make it sharply competitive with atomic energy.

In short, the atomic power stations built at such colossal expense have proved to be hopelessly uneconomic, and the experts and planners hopelessly wrong on almost every point of importance. Most damning of all, they apparently persisted with their wrong plans and policies when it had become abundantly clear that they were wrong.

Still more waste

A few months ago the British Government shamefacedly reported that something like £150 million had been lost on Blue Streak, this country’s nuclear missile. They need not have worried incidentally: the news was received with hardly a murmur.

Now comes the news that the Americans have wasted something like the same amount on their air-launched missile, though they are hardly disposed to go on spending more. President Kennedy let us know that the original sum set aside for this project was a staggering £1,000 million, so that £8,000,000 remained to be spent before second thoughts set in.

This is yet one more horrifying reminder of the vast quantities of society’s wealth that are being uselessly squandered on war preparations. All the nations under capitalism, big and small, devote fantastic proportions of their resources on these activities, at the same time as two-thirds of the world’s population go hungry, large numbers have no roof over their heads, millions die early of disease which could be prevented given the resources to deal with it.

Instead, there will be a lot of high level diplomatic wrangling between the representatives of British and American capitalism, eventually settled by some sort of mutually acceptable compromise, and the whole affair will be forgotten.

American capitalism will in the meantime proceed to write off the £180 million as the fleabite it is in their total outlay on destruction and the preparations for it.

Stan Hampson