[Militant No. 580, 4 December 1981 p. 8 and 9]
By Lynn Walsh
The expansion and liberalisation of world trade was a vital factor in the long post-war boom of Western capitalism.
Without it, the enormous upswing could not have developed to the extent it did. Nor could it have been prolonged for over three decades.
The growth of trade was organically linked to the growth of production. Today, the virtual stagnation of trade – which is expected to increase at only 1% or perhaps 2% annually in the next couple of years – is a sure sign that the conditions which produced the postwar boom have now exhausted themselves.
Protectionist measures, introduced as each capitalist economy, to a greater or lesser extent, attempts to protect is own national interests, can only intensify the economic crisis.
The creeping protectionism of today, however, is only the prelude to more extensive measures later. It heralds the all-out trade war which will inevitably accompany the crisis as it reaches even deeper into the foundations of society. There will undoubtedly be brief periods of recovery in the world economy.
But the long-term curve of capitalist production is now moving in a downward direction.
In the last few years, the working class, especially in Britain, has been hit by a tidal wave of unemployment. Almost overwhelmed – without a bold, class alternative from the leadership of the labour movement – some workers have turned towards the idea of import controls, of protectionism, as a way out.
But an analysis of the post-war upswing shows that protectionism offers no solution. This is not to say that capitalism any longer has a future under free trade. Now that the long boom, which granted world capitalism a lengthy reprieve, has played itself out, there can be no solution within the diseased framework of capitalism.
Protectionism, if adopted by the labour movement, would cut across the fundamental internationalist interests of the working class. To take up protectionism would link the fate of the working class with the doomed crisis-policies of big business.
Analysis of the post-war upswing shows that protectionism can offer no way out for capitalism
How, then, did the long post-war boom develop?
Figures for the early postwar period, from 1953 to 1960, show that trade grew much faster than production. Mining and manufacturing output in those years increased by 54% in volume terms (i.e. discounting the effect of price increases). But world exports of manufactured goods in. creased by 83% (or by 93% in value terms).
In terms of annual average growth rates, the exports and imports of European countries grew at a rate of about 7% between 1948 and 1962. Gross national products grew at an average annual rate of about 4%. Trade itself is not an independent factor. But the expansion of trade was an essential condition of accelerated economic growth. Once it had begun and tariff barriers began to crumble, the expansion of trade had an enormously stimulating effect on industrial production.
The prolonged economic upswing which followed the second world war was rooted in a number of causes. These can only be summarised here.
Firstly, there was the post-war political settlement. After the defeat of Nazi Germany and fascist Japan, the world was divided into new ’spheres of influence‘. These were dominated respectively by the two rival super-powers: US Imperialism and Russian Stalinism. Within this political framework the economic factors came into play.
The destruction caused by the war, together with the exhaustion of plant and machinery through war production, provided enormous scope for new investment.
Initially, the reconstruction was lubricated by American aid under the Marshall Aid and other programmes.
The development of new industries opened up new fields of highly profitable investment for big business.
These were industries like aircraft, electronics, plastics, synthetic fibres, and new chemicals and pharmaceuticals. In their infancy in the 1930s, they had been given an enormous boost by the demands of war. There was also an ever-growing stream of consumer goods based on new processes. Production was continuously being revolutionised by the application of new technology.
The expansion of world trade was rooted in the new conditions of production
The growth of trade flowed from these developments. It was rooted in the new conditions of production, which demanded the liberalisation of trade.
Liberal trade policies were not simply the result of the new-found enlightenment of capitalist politicians. They were a response to the pressure of new economic conditions.
The development of production methods based on sophisticated technology was connected with an extension of the ‚division of labour.‘ There was more specialisation between firms, areas – and, of course, between countries.
Without free trade, without the ability to import specialised machine tools, special production processes, etc., and to export specialised products without tariff or ’non-tariff‘ penalties, this development could not have taken place.
From the beginning, the new industries were dominated by giant firms, the multi-national corporations, or, in other words, the big monopolies. While these giants largely carved up their own national markets between them, there was still intensive competition in international markets.
In the post-war period, competition has not just been to produce existing capital equipment and consumer goods more cheaply (through higher productivity to cheapen production). To keep ahead of their rivals they have had to strive to produce new products, based on new technology, ahead of their competitors.
The big monopolies all the time attempt to increase their share of the market and to exploit new products to the maximum benefit before their rivals get into the field and catch up. For this, free access to international markets has been essential.
West Germany, for instance, one of the worst hit by the war and its aftermath, was nevertheless one of the most successful capitalist economies in the post-war period. As a share of gross national product, its exports grew from 8.6% in 1950 to 16.6% in 1960, virtually a doubling.
ln the same decade, German exports increased on average by 12% a year (in volume terms). This contrasted with the 2% a year growth of Britain’s exports.
For Germany, the growth of exports was associated with higher levels of investment and more rapid growth of productivity and production.
While expanded trade accelerated the growth of countries like Germany and Japan, it also helped disguise the relative decline of backward British capitalism.
Britain’s share of world exports (measured by value) declined from 25.5% in 1952 (compared to West Germany’s 7.3%) to only 8.8% by the time of the 1974/75 slump (compared to West Germany’s 21.7%). Investment and growth of labour productivity in Britain also lagged way behind West Germany, Japan, and other major competitors.
Trade liberalisation enabled capitalism, partially and temporarily to overcome the limits of the nation state
Nevertheless, the absolute expansion of trade helped cushion British capitalism against the worst consequences of relative decline. Even during the boom years, however, British capitalism suffered periodic balance-of-payments crises, often brought on by trade deficits.
„Import penetration“ deepened in many key branches off industry, as more and more ailing British firms were outstripped even in their home market.
Some of the giant British monopolies, of course, managed to stay in the first division. Whatever their rank internationally, however, success for the big monopolies depended vitally on access to the biggest possible markets.
A single national capitalist state is not enough for a big monopoly, even if the country concerned was the United States. Britain, even with over 50 million people, is entirely inadequate for giant firms like ICI and AEI.
The US market, for instance, is about four times the size of the West German market – and 75 times larger than Norway’s. Huge markets are essential for big companies to achieve the necessary economies of scale and volume of sales to recoup, with a sufficient profit, the vast investment necessary to modernise production and maintain their share of the market.
The pattern of post-war trade, moreover, shows that it was overwhelmingly dominated by the industrial products of the advanced capitalist countries. Roughly speaking, the United States, Western Europe and Japan have accounted for between 60% and 70% of world exports. Between 60% and 70% of this trade consisted of the export of manufactured goods.
Overall, the underdeveloped capitalist countries‘ share of exports (dominated by primary products, i.e. agriculture and minerals) declined, as did their prices relative to prices of the West’s manufactured goods.
It is hardly surprising, in the light of this pattern, that the economically backward countries have not fully shared in the benefits of liberalised and expanded trade. Indeed, in many cases they have been deliberately excluded from the liberal measures of the advanced capitalist states.
However, for the advanced capitalist countries the expansion and liberalisation of trade provided a means of surmounting – partially and for a temporary period – the limitations imposed by the framework of the national states. Together with the private ownership of production, it is the nation state which constitutes a fundamental fetter on the development of the productive forces.
Under modern conditions, national self-sufficiency is impossible
The representatives of US imperialism realised, as the second world war drew to a close, the importance of establishing an open world economy based on free trade.
The US, in the 1950s, produced about 37% of the world’s total industrial output. Of the world’s total monetary reserves, the US held (in 1948) 74% of the gold, 40% of IMF deposits, and 70% of the dollar and other currency reserves.
Relying on this overwhelming economic power, they set out to create favourable conditions internationally for American big business. This meant a sound and stable method of financing settlements for imports and exports – and the general reduction of trade barriers, especially tariffs.
There was a very slow reduction of tariffs during the immediate post-war years. But once the world upswing was under way (and the Korean war was over) a number of countries agreed under GATT (General Agreement on Tariffs and Trade) negotiations of 1956/ 57 to unilateral reductions of their tariffs. In 1962 the so-called ‚Dillon‘ round of GATT brought a further 20% all-round reduction of tariffs.
1956 had seen the formation of the European Economic Community (EEC), which originally brought together six European states in a glorified customs union. In 1959 Britain, with a number of Scandinavian countries, formed EFTA (European Free Trade Area).
Both the EEC and EFTA rapidly reduced internal tariffs by 50%, and also reduced external tariffs even prior to the ‚Dillon‘ round . Subsequently, many other arrangements were made – under the EEC, EFTA, and GATT – to liberalise trade even further.
Socialism demands a higher level of economy than capitalism
Since 1974175, however, the trend towards liberalisation has been reversed. In response to the growing crisis, governments have moved to protect threatened sections of their own capitalist class from foreign competition.
But how can capitalism save itself by a return to autarky, to national ’self-sufficiency‘? Tariff walls will inevitably feather-bed backwardness. Behind the shield of import controls, big business would attempt to wring every last pound of profit out of its old plant and machinery – without the massive re-investment in modern equipment necessary under free international competition.
This would rebound on the working class through high (protected) prices. The further development of productive forces, the key to all social progress, would be even more retarded.
The idea put forward by the Tribunite left and the so-called ‚Communist‘ Party, that a Labour government could carry through socialist measures behind a protective wall of import controls is completely misguided.
Under modern conditions, economic self-sufficiency within a national economy is impossible. Socialist planning calls for a higher level of economy than capitalism.
Capitalism itself, as we have seen, could only develop in the post-war period by partially surmounting the limitations of the national state-through expanded, liberalised trade. Even then, growth was mainly confined to the US, Western Europe, and Japan. The under-developed capitalist world, for the most part, has experienced uninterrupted crisis.
Moreover, the anarchy of the world market forces, with giant multi-national corporations competing for profit, has produced enormous imbalances, distortions, and waste – contradictions which have eventually transformed upswing into downswing.
The adoption of major protectionist measures by advanced capitalist economy – like Britain – would inevitably provoke retaliation from the other main capitalist economies. Such a drastic step would inevitably hasten and intensify a trade war – for which, in any case, the main protagonists are already preparing, manoeuvring for position.
Free trade, as Marxists have always recognised, was indispensable to capitalism’s progressive role in developing the productive forces. But with the demise of boom conditions, free trade itself is being strangled.
Only socialist planning, in the present epoch can take the productive forces forward. Such planning must be under the conscious, democratic control of the working class, the class which labours to produce the wealth.
For us, the first step must be the nationalisation of the big monopolies which dominate the ‚commanding heights‘ of the economy, with minimum compensation on the basis of need.
But it is not enough for socialist planning to break the fetters of private ownership. It must also break through the narrow national constraints.
The inauguration of a socialist plan of production in Britain, under workers‘ control and management would of necessity have to be a first step towards world-wide socialist planning.
The socialist transformation of British society must be seen as an integral part of the fight for a Socialist United States of Europe, and for a World Socialist Federation.
Only international socialist planning can develop the world’s productive forces
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