[Militant International Review, No 34, Spring 1987, p. 15-17]
Prologue: A costly trip
Last Summer, Labour’s deputy leader, Roy Hattersley, addressed a select covey of bankers and financiers at New York’s plush Waldorf Astoria Hotel. The trip was paid for by city stockbrokers, Samuel Montague (a subsidiary of Midland Bank). The aim, according to the Daily Telegraph (12 September 1986), was to „soothe the fears of American investors in Britain about the prospects of a future Labour government.“
As befits a tranquilliser, Roy Hattersley’s speech was replete with words like „realism“, „caution“, „responsibility“ … „Some of our aspirations will have to be postponed and some of our hopes will not be realised in our first five years.“
Labour’s prospective chancellor was making it clear that the next Labour government intends to work within the limits of Britain’s capitalist economy. This includes acceptance of the narrow constraints dictated by Britain’s remorseless decline. So determined to reassure the American capitalists was Roy, that he even quantified his self-denying ordinance. Firstly, while Labour would not abandon its anti-poverty programme and its commitment to improving social benefits, extra taxation would be limited to £3.6 billion. This is what the richest five per cent of tax-payers have gained from Tory hand-outs. What Roy Hattersley did not quantify, however, was the individual benefit if the £3.6 billion were shared out between the 16 million people near or below the official poverty line – about £4.30 a week!
Secondly, in pursuing a policy of reflation to promote industrial recovery, Labour would increase public borrowing. But the total borrowing would not be allowed to rise above 2 per cent of GNP. A few weeks later, in his Autumn statement, the Tory chancellor, Nigel Lawson, announced that Thatcher’s government would be allowing public borrowing to rise to 1¾ % of GNP. The difference between Tory „reflation“ and Labour „reflation“ is exactly ¼ % of GNP, currently less than £1 billion – a mere smidgen!
If Roy’s audience at the Waldorf Astoria were not reassured, it was certainly not on account of any radical economic proposals.
A dodgy approach
The deficiencies of Labour’s economic policies is the subject of a recent article in the Communist Party’s monthly, Marxism Today, by John Grahl and Bob Rowthorn. Even by the standards of this journal, for which Marxism is more of a designer label than a guide to its contents, Dodging the Taxing Questions is remarkable for its reformist candour.
The Labour leaders‘ „intentions are fine,“ says the caption, „but who is going to pay for them?“ The answer from Grahl and Rowthorn is quite clear: the working class. Far from criticising the Labour leaders for accepting the constraints of a diseased economy, the authors – rejecting any socialist temptations – urge them to embrace them even more openly. They advocate unequivocal acceptance of policies dictated by the logic of capitalist decline. If the need to „revive the economy“ places constraints on borrowing and on taxation of the capitalist class, then reforms must be paid for by the „upper working class and ordinary middle class.“ Otherwise, they plead, there will be no reforms at all.
According to Grahl and Rowthorn „a new, post-Thatcherite consensus on economic policy is emerging“, well expressed in Labour’s plans for industrial regeneration, job creation, increased expenditure on social services, and the amelioration of poverty. They have noticed, however, that the Labour leaders‘ pronouncements are „filled.. .with evasions, hesitations and ambiguities.“ Fearlessly confronting the „difficult issues“, the authors set out to put the Labour leaders back on the right track.
They deal with four main issues: (1) Nationalisation, (2) Taxation (which gets special treatment), (3) Incomes Policy, and (4) Finance.
Nationalisation: Drop it, of course
Nationalisation is summarily dismissed. „The present situation is that the very advanced demands for extended public ownership which appeared in Labour’s programme in 1982 have been jettisoned because they are correctly perceived as a vote loser. For better or worse, nationalisation on such a scale is unpopular.“
The Labour leaders may win support for „individual acts of nationalisation“, but not for „a programme of widespread nationalisation of the type followed by the hard left.“‘ This situation could „perhaps, be reversed in the future …“ But as to how, under what conditions, the authors have nothing to say. The leadership has „opted for a loose set of proposals for „social ownership“ (including re-nationalisation?), but „potentially … most radical of all“, in their view, are „plans for the expansion of existing public corporations“ (which ones, after privatisation?).
The most „fruitful direction for industrial strategy“ (and a „potential vote-winner“ in their view) is the plan „to build certain social objectives into a programme of public support for industry, channelled to enterprises of all kinds through a range of national, regional and local agencies, in the form of subsidies, public investment stakes and public purchasing. It would be directed towards job creation and all the aspects of industrial modernisation – research, investment, training, product development.“ The next Labour government, in other words, should return to the policy of the 1974/79 government – feather-bedding big business from the public purse. Grahl and Rowthorn sum up their strategy with a truly breath-taking observation: „It means, of course, accepting the continued importance of capitalist enterprise in our economy, but there really is not much alternative.“
Has socialism ever before been abandoned by „Marxists“ with such urbane understatement?
So determined are they to be „realistic“, Grahl and Rowthorn never ask themselves whether massive state investment in „capitalist enterprise“ will, in practice, successfully reverse Britain’s industrial decline. What are the lessons of past Labour governments? Or of the socialist governments in France and Spain? Unless the capitalists are convinced that conditions exist which will ensure an acceptable level of profitability, they will not invest. If there is already overcapacity, why invest in new capacity? If a Labour government offers them subsidies they will, of course, gratefully accept them, provided there are not too many strings attached. But they will simply be used to subsidise … profits.
The authors, however, do see one little problem. Massive subsidies to industry will conflict with measures to improve social provision and living standards: „These objectives cannot be achieved simultaneously. … Since Labour has rightly declared itself the party of production, investment must take precedence and some of these objectives must be abandoned for the time being, or at least scaled down …“ Once again, the working class and sections of the middle strata will be exhorted to make sacrifices on the altar of Capital – this time with the approval of Marxism Today.
Tax: The poverty of policy
Grahl and Rowthorn welcome the commitment to reduce unemployment, improve social services, introduce a minimum wage, and increase welfare benefits, as all socialists would. They also point to the lack of any clear commitment to allocate the massive funds required for these policies. The £3.6 billion extra taxation is, they correctly say, „little more than a gesture.“ There is, they concede, „some scope for squeezing the rich even further“, something of an understatement given the Thatcherite shift in property and income to the rich and super-rich.
But they reject radical measures, such as a limit on anyone receiving a post-tax income more than three times the average: „It might drive out of the country many top professionals, industrial managers and others upon whom our future prosperity depends.“ From a purely financial stand point, they say it would raise only an additional £2 billion over and above the £3.6 billion already proposed by Hattersley.
So where will the resources for reforms come from? As Grahl and Rowthorn started out by dismissing the creation of new wealth on the basis of public ownership and a plan of production, they are pushed by their own logic to go the whole way in the other direction. Reforms must be paid for by higher taxes on the workers and middle class!
These „Marxists“ have learned nothing from the past. The reforms of past Labour governments were mainly financed not by redistribution of wealth between the capitalist rich and the working class, but by a redistribution of income between the relatively better-off sections of the working class and the low paid and unemployed. Under the 1974-79 Labour government the rich actually slightly increased their share of the wealth, while the burden of taxation and insurance contributions on workers increased.
The reformist leaders themselves were long ago forced to admit the limits of their approach once boom was replaced by economic downswing. Towards the end of the 1964/70 Labour government, Richard Crossman, a leading spokesman of reformism, acknowledged that „taxes are increasingly being paid by the ordinary worker and even income tax can no longer be thought of as mainly a tax on the better-off.“ He admitted that the Labour government had reached the „limits to public expenditure“ set by „working class attitudes.“ After the defeat of the 1974-79 Labour government, some of the ideologues of reformism once again made the same admission. Writing in The Socialist Agenda: Crosland’s Legacy (1981) David Lipsey acknowledged that Tony Crosland, a leading member of the Wilson-Callaghan government, had been forced to admit that „without growth, increasing public spending logically entails increased rates of taxation … Politically it brings any government rapidly against the taxpayers‘ revolt … and to the Nemesis of electoral defeat.“
With or without the advice of Marxism Today, it is not at all unlikely that the next Labour government will resort to imposing even heavier tax burdens on working people. That is inherent in any attempt to grapple with the crisis without taking hold of the real levers of power. Roy’s £3.6 billion pledge was aimed at reassuring big business, not workers. But the additional taxation would mainly be used to underwrite the futile attempt to bail capitalism out of its crisis, not to finance improved conditions for workers. Far from being „realistic“ and „popular“, the fiscal solution advocated by Grahl and Rowthorn would only help prepare the way for an electoral massacre and political defeat for the working class.
Incomes policy: Spelling it out
„Even more crucial“ than the proposed tax policy, however, „is an effective incomes policy.“ This is because of the claim on resources by the ‚consumption‘ of wage and salary earners, especially those in the middle range.“ The greater their material consumption, the less material goods will be available for other purposes. Referring to the „upper working class and the ordinary middle class,“ Grahl and Rowthorn say: „To be realistic, the real income of this group must virtually be frozen for several years if Labour is to meet its existing targets …“
This is repeated several times. Later they go further, referring to „a virtual freeze … or even a reduction.“ The Labour leaders, they say, „are quite aware of the dangers of rapid wage growth and its possible effects,“ and wage restraint is implicit in Labour’s proposal for a so-called National Economic Assessment. But they call on Labour „to spell it out“: „Labour should be making it crystal clear to the whole population …“
The working class must be prepared for „restraint“ and „sacrifice.“ They speak of Labour’s objectives being „incompatible with unbridled individualism.“ They say the „pursuit of individual interests (must be) limited and controlled by recognition of the common good.“ The language used by these „Marxists“ is from the vocabulary of Wilson, Callaghan and Healey, Labour’s right wing leaders. If Roy Hattersley never mouths the words „incomes policy“, it is not because of a speech impediment but because he is only too aware of the deep hostility among workers, a hostility born of bitter experience in the past.
Workers are prepared to make sacrifices, enormous sacrifices – in the interests of the working class. But sermons about the „common good“ from the advocates of incomes policy inevitably fall on stony ground. The lesson of past Labour governments is that curbs on the income of higher paid workers never guarantees improvements for low paid workers and the poor. In a market economy there is no mechanism to bring about such a redistribution of wages. Anything saved by the bosses through an incomes policy is merely used to augment their profits.
Grahl and Rowthorn attempt to justify their position by pointing to the rise in living standards of some sections of the workers under Thatcher. The real income of the low paid and especially the unemployed has fallen sharply since 1979.
But the average post-tax earnings for manual workers have increased by 12 per cent in real terms, while for non-manual employees (including professional and managerial groups) the increase has been over 20 per cent. (They say this rate of increase is greater than in any other Western country; but they do not point out that in real terms British workers have fallen further behind their counterparts overseas. Taking the 1984 average pre-tax earnings of manual workers in the United States as 100, the equivalent workers‘ earnings in West Germany stood at 75, in France at 56, in Japan at 50, and in Britain at only 46.)
This gap in incomes, the authors say, has a „divisive effect on the working class.“ And it is true that potentially dangerous divisions have been opened up between different sections of workers. But it is totally false to argue that this can be overcome by an incomes policy. Pay restraint will not improve the position of the low paid and unemployed. An attempt by a Labour government to impose an incomes policy would be far more divisive than the differentials produced by the capitalist market, and could never provide a basis for unifying workers in struggle.
The pay policy of the last Labour government brought the Labour leaders into collision with large sections of the trade unions, culminating in the 1978-79 ‚Winter of Discontent‘, when thousands of public sector workers were pushed into action by poverty level wages. This had a disastrous affect on support for the Labour government, which went down to defeat in the general election of June 1979. Grahl and Rowthorn admit that it „will take some years“ for Labour’s industrial policy to bear fruit. Long before it bore any fruit, an incomes policy would produce a season of discontent, and on an even bigger scale than in 1978-79.
Finance: Softly, softly …
Grahl and Rowthorn say, quite rightly, that one of the greatest obstacles to the implementation of Labour’s plans to develop production will lay „in the financial pressures produced on a world scale by economic slow down.“ Under conditions of crisis, when there is a sharp decline in the profitability of manufacturing, the capitalists will seek the „safety of financial assets.“ The authors recognise that these are „global forces which impose constraints,“ because if a Labour government implemented policies which adversely affected financial capital, such as reducing interest rates of increased public borrowing, the financiers would switch their funds elsewhere.
But Grahl and Rowthorn do not face up to implications of this.
The authors congratulate Roy Hattersley on his „very sophisticated understanding of the problem,“ saying that he has described Britain’s position as the world’s largest international banking centre in „virtually Marxist terms.“ They rightly say that Labour’s plan for „somewhat stricter regulation on financial transactions“ and tax incentives to bring about the repatriation of some of this vast amount of British capital invested abroad will have very little effect. But they go on to accuse Hattersley of „an almost complete pessimism and defeatism in the sphere of practical policy“ because he rejects the idea of general controls.
The truth is that on this point, Roy Hattersley has a clearer understanding of the realities than his would be „Marxist“ advisers. While these lefts cling to the Utopian idea of controls, the right wing leadership has been forced to acknowledge the real situation of present day capitalism, which is dominated by the world market. The authors criticise Hattersley for implying that „an elected Labour government is so weak vis-a-vis the big banks that Labour could not deploy an elementary instrument (i.e. exchange controls) of monetary policy which exists today in several European countries.“ Again, this ignores the lessons of France: despite severe exchange controls and the nationalisation of the banks, the attempt of the Socialist-Communist government to implement massive reforms within national boundaries was undermined by international pressures within only eleven months. Grahl and Rowthorn are advocating, in a completely contradictory way, that Labour should attempt to manage a capitalist economy in which international finance capital plays a dominant part while at the same time decisively severing the international links.
They correctly reject the idea, sometimes implied by the Labour leaders, that it is impossible to control international financial transactions for purely technical reasons, because of computerised international communications. It is not a technical problem, but a class problem. National restrictions on the movement of capital would be a major attack on the interests of finance capital, and they would use all their economic and class power to undermine any government that seriously tried to impose such restrictions.
This is even implicit in the comments of Grahl and Rowthorn, though they appear unaware of the contradiction. They admit that if Labour announces in advance that it intended to impose exchange controls, this would „lead to a huge sterling crisis if it looked as though Labour was going to win the election.” In other words they acknowledge that it would be seen as a challenge to the interests of a powerful, if not the dominant, section of big business. However, they have an ingenious answer: „What is required, is for Labour to impose exchange controls as soon as it takes office, whilst denying this intention beforehand … Such denials may seem like hypocrisy … but it is normal behaviour in the realm of international finance“!
They appear to think that the hostility of the capitalists to exchange controls would miraculously evaporate once Labour came to power. In reality, the hostility of the capitalists to measures to fetter their free pursuit of profit on the world arena would result in class measures against a Labour government. All their weapons would be used: a strike of capital, manipulation of the world money markets, and the power of the bosses‘ media.
Political terminus
Grahl and Rowthorn are more reformist than the reformists themselves. They advocate total acceptance of the logic of „capitalist enterprise“. They underline the narrow limits which will be set by Britain’s decline. Their only real difference with Labour’s right wing is that they believe that the leadership should openly proclaim the harsh implications of this strategy in advance. The workers should be told they will have to make sacrifices to restore capitalism.
That is on the domestic arena. When it comes to the international economy, Grahl and Rowthorn take the opposite tack. The Labour leaders should prepare measures to isolate British capitalism from the world money market. But this intention should (somehow) be concealed. Once in office, Labour should put up the barriers, suspending the market mechanism at Dover. The only real difference between these so-called Marxists and Roy Hattersley is that they cling to the thoroughly nationalistic position that Labour’s right-wing leaders have been forced to abandon in the face of capitalist realities.
Starting out from the abandonment of Marxist policies, that is the political destination of Grahl and Rowthorn: a reformist strategy that offers even less in the way of reforms than Labour’s right-wing leadership.
Postscript
The Guardian recently featured a series on „The Crisis in the Dismal Science“. The concluding article (14 January 1987) dealt with the demise of the „Marxist“ economists of the 1970’s. Bob Rowthorn, prominent in the CP’s Euro-Communist wing and a member of Marxism Today’s editorial board, confessed: „I’ve become a left reformist. The crisis has been long and drawn out, but I can’t see the agencies of change and I’m not convinced about the socialist answers any more…“
A left reformist?
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