In recent weeks a vast campaign against Tony Benn has taken place. His economic proposals are denounced as 'Red Socialism'. In the first of a series of articles, ALAN JONES looks at Benn's policies Until the Second World War the policy of virtually everv capitalist country when faced with a slump was the same: wages were cut, public expenditure was cut, and money was taken out of the economy. The explanation given for this policy was that goods would become more competitive internationally and the cut in working class living standards would allow profits, and therefore investment, to increase.
There is no doubt that in certain countnes at certain ames these poncies aa prod uce short term success for capitalism -the expense of vastly increased misery for the working class. Where, however, these policies were disastrous even from the point of view of capitalism was when every economy morco uto a stump, waen taere was a world recession.
Then deflating the economy in every country leads not to an increase in exports and an expansion of investment but to a massive contraction of the world economy 3nG market Every country is then catapulted deeper into recession as a vicious downward economic spiral is created. For example, it was these policies which helped to make we great stump or te 1yous develop with its extreme rapidity and force.
KEYNESIAN
Following the Second World War various of the more intelligent representatives of the ruling class attempted to correct the policies which had prevailed up until the 1930s. Enese new poucies were known as Keynes jan' after the main bourgeois theorist who advocated them. While the details of these Doncies unreree in many countres men essence was very simple - when a government was faced with a slump it should not cur expenditure but on une contrary Dumno funds into the economy through tax cuts, increased government spending etc.
This finance would increase the demand for goods and put unused economic capacment was that this would lead in turn to turner increases in demand ror coods and production as the spending power of reemployed workers came onto the market, as government expenditure increased, and so on. This increased output would then sumulate investment and long term expan sion or ine economy. Inis is tne poncy which virtually every capitalist government followed in the post-war period when it was faced with a slump.
tere is no doubt that tor a period or years Keynesian policies did help the capitThey could not stop slumps starting, but they could be used to check the depth of the decline.
CONTRADICTIONS But it is not possible to cheat the underIving contradictions or capitalsm or long Keynesian solutions run up against an insupcrable barrier in the rate of profit. The increased investment necessary to increase output by any serious amount will only take place if the profit rate is high enough. under capitalism there is a long term tendency wilch works liseu out, notin a direct tashion but as an underlying process, for the rate of profit to fall - for example, the rate of profit in British industry has fallen from around 15% in the 1950s to around 7 - 8%% now Under these circumstances it becomes harder and harder to force capitalism to inorcasc mvestments, and wire each mechon of money into the economy does generate some increase in demand, and some increase in profit, it is less and less able to counteract the long term decline of profit rates..
Under these conditions 1970s the rate of profit at the height of the booms was much lower than at the bottom of the recessions of the 1950s - Keynesian policies produce very different effects to Larger and larger sums have to be pumped into the economy but are less and less succ essEul in mercasmne mvestment and taererore no basis exists for a serious long term increase in investment.
The result of pouring money into an economy where increased production is confined to consumer goods and not investment goods, and where no basis exists for long term expansion, is absolutely inevitable - at - it produces soaring inflation. For the individual least competitive economies it also means huge balance of payments crises as tner goods become uncompetitive on the world market and imported goods are sucked in to make up for the lack of production in the home market. these effects it is necessary to put Keynesian policies into reverse by taking funds out ol the economy, creating unemployment and forcing down production.
Keith Joseph-deflation the answer Faced with the increasing inflationary impasse of Keynesian economic policies, two solutions are put forward by the ruling class.
The first, supported in this country by the natcher joseon wine or une or rart. te Financial Times and most banking interests, is to go back to the policies of the 1930s Working class living standards must be driven down, and profit thereby raised, through deflation of the economy and the creation of mass unemployment.
ity in machines and men to work. The argu- INCOMES POLICY The second solution is proposed by those sections of tne ruling class - for example the Heath wing of the Tory Party, the Libcrals, une Jenkinsites and tne Economist magazine - who point out that the Thatcner/Josepn poucies not only treaten to bring about a greater slump than the 1930s, our more importanty would lead to a massive anti-capitalist revolt by the working class. Is second rumng class strategy therefore suggests that working class living standards should be driven down through alist economies to avoid a repeat of the 1930s. incomes policy instead of through mass While no socialist has much trouble in working out that neither incomes policy nor unemployment spells good news for the working class - there are only disagreements on now to drive down working class living standards - - one apparently new solution Which does gain wide support is that repres ented by Tony Benn. It is argued that Benn makes many 'mistakes' - for example, supporting the use of troops in Glasgow, voting for the budget, calling for steel workers nor to push une ware cam on the decisive questions - rejection of inDUL comes policy, and opposition to unemployment as a somnon to the economic crisis then he has the right position.
In a certain sense it is true that Benn does unemployment/incomes policy debate with wun tae rune class. ne essence oral position is that both the deflationary and the Keynesian views are wrong as they start with the 'wrong end' of the economy. The real problem, it is argued, is not just to exp and demand in the economy, although that is necessary, but also to ensure a dramatic mcrease in investment. Il inis can be done ion of the economy to overcone is increased regardless of the short term rate or pront. of tnis sort of economic policy it was introduced for rather different one. was the policy of Allende in Chile. This an economic recession which meant that utilised, while unemployment, even on official figures, stood at over 6%.
consumption through increasing wages, ase investment through a policy of state directives and some not unimportant strict analogy between Britain and Chile omic policies is clear. nation ora ranster orresources to une working class - the famous, irreversible up the economic policy of Allende. term transfer of rescurces to the working class and the contror or investment takin: place is firstly through state intervention in private industry, and secondly through the extension of the public sector of the Benn has already spelt out his proposal in the creation of the National Enterprise - out unal for Industry set-up, and the proposals for instrucing various mancal insitutions £1,000 - 11.500 million in manufacturing industry.
accounts for nearly 60% of the economy, with the nationalised industries alone the economy.
specific one which has been clearly spelt out by Benn - to double investment in manufacturing industry from £3,000 million to £6,000 million a year. Once the basic economic strategy of Benn is grasped then the other details of his and how they fit into the crisis of the capitalist economy. demand will lead to a real long term expansThe policy that follows from this analysis is firstly that unemployment should not oe massively mercasca. musicaa consumption must be increased by upping public spending and expanding demand for goods from the working class and this must be accompan ied by measures to ensure that investment The classic example of the application - although we nave outa Government came to office at the peak of 25-40% of industrial capacity was not being Popular Unity immediately attempted to overcome the effects of the recession in transferring finance to the workers through taxes, increasing social expenditure and so Economy on, and simultaneously attempted to increThe short term effect of by around a third and bring about a real improvement in the living standards of the While it would be wrong to make any and Benn is not anything like as radical as Aulenge nevertnciess une simiariv in econBenn's are a comb- itself.
shift of wealth' - and attempts to contro investment, partly through nationalisation This is the same combination which made INVESTMENT Cent consistency.
Ine way in which benn sees the short In relation to private industry Board and its £1,000 million of funds, the £1,000 million raised through the Finance investment. notably in pensions and insurance, to invest As for the public sector, this already accounting for quarter of total investment. The aim is to extend this still further thro ugh a series of nationalisations, and to use the public sector as a decisive regulator of The aim of all these measures is a very proposal on the deliberate creation of mass unemp loyment are not purely rhetorical - unemployment simply does not make sense in Benn's policy. His opposition to incomes policy as a central economic pouc is not just words, as his economic orient allon does not demand a cutting back o working class expenditure. He must clearly oppose any major cut back in the public sector - as tnis removes weight from what is seen as the decisive regulator of the INFLATIONARY The support for important controls comes not simply from little Englandism although that is naturally a factor, but from the fact that the initial phase of the Benn strategy, even in his terms, must be extremely inflationary and would create a massIve balance or payments casis ur let to The aim is therefore to use import contros as a measure to broicet me coon omy until the expected increase in investFinally, as such economic and trade policies are clearly contrary to the rules of the EEC, it is necessary to withdraw from the Common Market.
If Benn's policies are taken as a whol there is no doubt that they have an appar evertneress mey too are wracked by insuperable contradictions ane or very much unc same sorr as Los that hit the Allende Government in Chile Firstly. the short term transter of resources to the working class necessary to create an expansion of consumption has an initial effect of leading to a decline in profits - which discourages investment secondy. ine atmosonere or boltica instability created by such radical econOne measures would lad to a rurne collapse of investment. The limited nationalisations and state planning are not sufficient to force up the rate of TWO CHOICES Two choices are then faced: either the workers take increasing direct control over the whole economy, or inflation takes off at record levels. Thus for exampic in chie, where Allende rerused to let the workers take control of the economy inflation reached 114% in 1972 and was running at nearly 500% during 1973.
The application of any radical Bennite' policies in Britain would have exactly the same result as Chile, and would lead to a standards begin to tall under the impact o soaring prices, but to control the raging inflation the economic processes would have to be put into reverse and massive unemployment created. In short the final effect of Benn's policies, if they were ever put into effect, would be to arrive by a different route at the mass unemployment which his strategy is supposed to avoid The attitude which the working class movement ms to ake come anderen economic policies put forward by the ruling class and reformists is therefor very clear. The policy of creating mass unemployment through wage cuts and cutting public expenditure not only means vast misery for the working class but rovees no suron wiatever to the econ omic crisis. It leads the world economy at a rapid pace towards a repeat of the The proposals for incomes policy which is merely another way of cutting workle cuss vine standards. must be rejected for the same reason..
Benn's policies must also be rejected as provume no rear answer to me economa problems facing the working class. However, while Benn's policies must be rejected socialists must note that they are in many •ways senumen aurerent pondes to mos of the incomes policy/unemployment merchants. In next week's Red Weekly we will look at the implications for the working class movement of these differen ces and will examine what attitude
red weekly 22 may 1975
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DIFFERENT SOLUTION