It is in the nature of governments to promise to eradicate evils and make things better for the voters who elected them. It is also in the nature of capitalism to go on being an exploiting system and to be subject to periodical crises and depressions. In the life of any government therefore there is always an even chance that things will get worse instead of better. When this happens, the politicians who masterminded the policy and the economists who advised them look round for an excuse—the workers who didn’t work hard enough, the strikers who didn’t work at all, (even occasionally the workers who worked too hard and produced unsaleable surpluses), the speculators, the greedy bankers who pushed up interest rates, or the capitalists who didn’t invest enough (one of Heath’s excuses).
Now, and probably for several years, a lot of blame is going to be laid on the oil-producing countries which banded together to get a monopoly price for their oil, an action branded as “blackmail”—as if every government which controlled a much-needed commodity did not always get a monopoly price for it if possible.
This excuse is going to be used to obscure the fact that the Heath government’s policies were already in deep trouble before the latest blow from the oil capitalists, and that in many countries there had been for months growing signs of crisis and recession: notably the widespread falls in stock-exchange prices, latterly drastic falls but themselves from levels below those of recent years. What the Financial Times (28 November 1973) found particularly disturbing was that “there is a growing tendency in the market places of the world” to recall that the depression between the wars began with the great fall of share prices in 1929 on Wall Street:
For the message is clear enough. It is that the pace-setting countries must demonstrate that they are planning meaningful measures to halt the long-term drift towards chaos in international economic and financial affairs which serves to give such new bugbears as the oil crisis an even more devastating impact. Indeed, unless this happens, we may soon be in even greater danger of travelling down the world recession path than we are already.
Professor Alan Day (Observer, 25 November) also fears that there may be a world depression, firstly because “the industrial world as a whole has enjoyed a boom in the last couple of years” and all may now move into depression together. His second reason is concerned with unemployment and inflation:
Another reason to fear a world recession is the worldwide struggle against inflation. Our great and universal problem is to achieve reasonably full employment along with reasonable price stability. Indeed taking the world as a whole, this problem is further from a solution than it has ever been.
It is of some interest to note how his views have been modified since, in 1959, he wrote The Economics of Money. There he thought that the cycle of boom and depression “may now have been mastered as a result of the insight into economic processes which has been acquired in the last generation” (p. 66); though he still evidently half believes (against the evidence) that full employment can be achieved by accepting inflation as the price to be paid.
Here is one of the dilemmas of capitalism. In the past twenty-five years every election has been won by a party which promised full employment and no inflation and which then, without a mandate, futilely tried to enforce a “prices and incomes policy” to stop inflation. So where do they go from here. It seems highly unlikely that an election could be won on a policy of “more inflation and full employment” or on a policy of “no inflation and more unemployment”, though of course there is nothing more certain than that they will go on promising one thing and doing another until such time as the workers get wise to it.
Among the possibilities being canvassed is the formation of a coalition government, which, until in due course it falls apart, can ignore what the separate parties promised when elected. Peregrine Worsthorne (who recently scored a bull for silliness by attributing inflation to “the spirit of evil”) hopefully counts on the dissension in the Labour Party as a possible means of enabling the Tory Party to be elected with so large a majority that it can take “authoritative powers including presumably the power to direct labour” (Sunday Telegraph 2 December 1973).
In the meantime Enoch Powell has been gathering support for his policy of going back to nineteenth-century free-for-all, no government control of prices or wages but with the definite commitment to halt inflation. Those who are attracted by the notion that capitalism really would be all right if only inflation is halted should take note of what did happen when, in 1920, inflation was halted by stopping the issue of additional currency notes. Prices did come down with a run; so did wages notwithstanding a big increase in strikes, and unemployment jumped and remained at well over the million mark for years and jumped again when in 1929 a Labour government came into power pledged to reduce it.
Half a century has passed since then. It would seem that most of the non-Marxist economists have learned nothing and forgotten everything, and the trade unions and Labour Party (not to mention the so-called “left- wing” organizations) are still bemused with nationalisation and the other irrelevancies which make up their impossible schemes for improving capitalism.