1970s >> 1976 >> no-867-november-1976

The Nature of the Crisis

Can working people understand Socialist economics? A well-known contention against the case for Socialism is that learning about surplus-value is too tough for majority understanding to happen. Compared with the capitalist economics presented to the working class, it is child’s play. Newspapers and television today belabour the public with the balance of trade, the money supply, the minimum lending rate, gold reserves, the state of the pound, and the Financial Times Index.


The working class get the drift, which is that their ordinary- going-without is being intensified on account of capitalism having troubles. It is unlikely that many understand the economic mysteries beyond that point, not because of incapacity but because the economists and politicians who intone these phrases don’t themselves understand them. Most incomprehensible of all is the crisis itself. If “the country’’ is on the floor, unemployment high and bankruptcies increasing, why are many businesses doing fine? On 27th August the managing director of an engineering company wrote to The Times: “I find it difficult to comprehend the latest unemployment figures . . . my company finds it difficult to recruit personnel with skills varying widely from draughtsmen, typists, welders and salesmen.”


In the same week the Conservative mp Sir Geoffrey Rippon, in a speech to business men at Liverpool, complained that they were not grumbling about the economic situation:


Time was when the chairmen of banks and financial institutions and great companies spoke up in their annual reports about the state of the economy. Now they are mute. Is it out of fear or greed?

(Times, 1st September)


A look at the financial pages shows that very many enterprises are thriving, regardless of the Share Index. “Another company whose attractions belie its share price is Martin-Black, the wire rope specialists whose profits raced ahead from less than £400,000 in 1971 to £2.4 million last year”. (Observer City Notes, 29th August.) In the first week of October, when Edward Heath made flesh creep with his pronouncement “Britain has come to the end of the present road”, several companies announced high profits. Morgan Crucible’s pre-tax profits were 50 per cent, up at £3.8m. in the first six months of this year. Jefferson Smurfit Group’s profits rose 140 per cent, to £4.3m. Cray Electronics and Strong & Fisher (Holdings) had record profits for the year. The John Mowlem construction group doubled its profits, and Mowlem’s chairman said: “in spite of the serious economic outlook facing the country, the United Kingdom order book is in a satisfactory position”. (Times, 8th October.)


Disproportion of Production
Yet without doubt there is a serious depression. Its causes are rooted in the social system under which we live. The capitalist ownership of the means of living means that all production takes place for sale and profit, and from this basic fact arise the staggering problems of the world. To feed the hungry may sound logical, but it is not the logic of commodity production. Instead, we have a chaos in which manufacturers and distributors must estimate their markets and hope that demand will not just continue steadily but expand. When it expands generally there is a boom, and every manufacturer naturally pushes on to the utmost. Ultimately the boom ends, because demand falls off or alters. This breaking-point is the crisis.


Whether a depression follows will depend on the number of industries affected. A slump in one industry affects others, of course; but at times it is possible for profitable companies to “carry” others. However, the entire process is an anarchic one, and a crisis is anything but the universal fall-down commonly depicted. To some extent the phrase “the market” is misleading. There is not one market for all commodities, but many different ones, even within the same industry. “The car market” comprises markets for cheap and expensive cars, small and large ones; rather than all companies competing in the same market, one market may prosper when the demand in others diminishes. These vagaries of production and markets are not consequences of a crisis, but part of the cause of it. Earlier this year a Labour Minister said the British car industry had been producing an unnecessary variety of models. This can be re-stated as that during the boom period the industry had flooded markets which were now refusing to absorb it all — but, as the Labour government is well aware, no political suggestion will alter the economics of the situation.


A crisis is “serious” when a large enough section of industry is affected to produce stagnation and heavy unemployment. There are always other sections which are relatively unaffected or even benefit by it (in the nineteen-thirties’ depression chain stores such as Woolworth’s and Marks and Spencer, selling very cheap goods, were highly profitable for obvious reasons). The record unemployed figure of nearly 3 millions at the beginning of 1933 represented 23 per cent. of all insured workers. Turned round, this means that three-quarters were still in work. However, the existence of an industrial reserve army of that size provided a powerful whip over the employed and a means of enforcing low wages.


No Remedy — Except One
A similar comparison can be made today showing the naiveté of Rippon’s suggestion that capitalists should complain about the state of things. Why should they? Many of them have full order-books and rosy balance sheets, and at the same time are handsomely obliged by the Government’s having secured the trade unions’ compliance in holding wages down. Insofar as firms go to the wall following a crisis, in general they are smaller ones — a process which also took place in the nineteen-thirties. If larger companies’ profits fall they pay out a larger proportion of profits in dividends, so that the shareholders’ incomes do not fall by an equivalent amount. The British Association’s Britain in Recovery, 1938, using Colin Clark’s estimates, said: “On the whole we may, perhaps, conclude that consumption by the rich was comparatively well maintained during the depression and expanded during the recovery”.


The spectacle of the anarchy of capitalism gives rise continually to the idea that it can be subjected to economic planning. Fundamentally crises are due to the imbalances of capitalist production: the seductive thought is that these imbalances can be diagnosed and rectified. Attempts at it have patently failed, and it is worth pointing out why none can succeed. First, all capitalists and politicians would have to agree on what the faults were. Such agreement is not only unlikely in ordinary terms; it is impossible for the reason stated, that one capitalist’s catastrophe is another’s good news. But even if it were possible, what then? The owning class would still have no choice but to pursue their interests — that is, to go on producing for the available markets even though knowing this is what leads to crises.


Economic phrases cover the condition of humanity. The anarchy of production means, characteristically, a bakery closing for want of business while people are in need of bread. The balance of trade, the state of sterling etc. are pseudo-concerns; the working class is asked to understand them so that it will be complaisant in being trodden on a bit more. What all workers can and must understand is that their interests are diametrically opposed to those of capitalism. In due course there will be a recovery from the present depression, gathering momentum towards the next crisis. Is this how you want to go on? Would not a society producing for use instead of markets be immeasurably better?


Robert Barltrop