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From Militant, No. 272, 26 September 1975.
Transcribed by Iain Dalton.
Marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
Faced with mass unemployment, support is growing in sections of the Labour Movement for import controls to deal with the immediate situation of protecting jobs, and for various schemes to create more productive employment for the future by stimulating investment. [For example, Tribune has consistently campaigned for import controls and different ideas for increasing investment have been proposed by Tony Benn and Jack Jones.]
In support of Militant’s position that only a socialist programme, which breaks with the capitalist basis of the economy, offers a solution to the crisis, it is essential to deal with these proposals in some detail.
The basic idea of import controls is that they protect jobs by limiting the import of commodities which could be made in Britain, with the added bonus of improving the balance of payments. The first point to be clear about is that British workers would be faced with higher prices. With their sales limited, foreign capitalists would no longer have any incentive to undercut British firms. And not only would be forced to buy already dearer British goods, but these would also increase in price as British capitalists would no longer fear foreign competition. To a substantial extent then import controls are just a variant on the old capitalist theme of the necessity for workers to pay, with a wage cut, for the privilege of keeping a job.
The plan assumes that other capitalist countries would not take retaliatory action against British imports. Tribune suggests they should not worry about whether imports are held down by deflation, which cuts spending, as at present or by import controls. But this ignores the fact that whereas deflation holds down all imports, an expansionary policy buttressed by import controls would require more raw materials so that the controls would have to bite on manufactured goods. These of course are produced primarily by the major capitalist countries with the economic power to obstruct a policy which they would see as aiming to export Britain’s unemployment to them.
The experience of the 1964 Labour Government’s Temporary Import Surcharge is interesting in this respect. Harold Wilson’s memoirs (page 35) records the situation less than one month after it was introduced:
“On the night of Thursday 19th November I had an emergency, almost panic, call from Patrick Gordon Walker in Geneva. He needed my clearance for a firm assurance that the 15% import surcharge would be reduced in a matter of months. Otherwise the discussions (with EFTA) would break down and country after country would be likely to retaliate against our trade.”
Within two years Wilson was forced, first to reduce and then to remove a much milder measure than what would be required now, and this was at a time when the rest of the capitalist world was still enjoying unprecedented boom. It is not difficult to imagine what kind of response Peter Shore would get in the present situation of mass unemployment and shrinking markets all over the capitalist world if he told the EEC and the USA that a really effective set of import controls were going on. And of course the capitalist class abroad would be able to play on the fears of workers in their exporting industries in their campaign against controls. There would be no chance to counter this by a class appeal to the Labour Movement overseas for solidarity action, for the Labour Government would be seen to act on a nationalistic, not a class basis.
It is reported (Economist, August 2nd) that the Government is seriously considering the TUC’s call for ‘selective’ import controls. These would be limited to industries particularly affected by rising imports such as cars (import volume up 27% in the first half of 1975 as compared with 1974) motorcycles and clothing. Basically the selective controls are open to exactly the same objections as the more comprehensive plans. Even if exporters of clothing like Hong Kong do not have the economic muscle to retaliate as effectively as the EEC, they do import quantities of British goods; and many of them keep foreign exchange reserves in London which they could threaten to withdraw with disastrous results for the pound. But in any case the fundamental point is that such measures would just delay the re-organisation of these industries which can only be effectively carried out by nationalisation within the context of a socialist plan of production and which provides the only possibility of long-term security for those who work in the industry.
The low rate of investment in Britain has been documented many times in Militant; another sharp indicator comes from gathering together the international data for the rate of growth (per cent per year) from the early fifties to early seventies, of the stock of industrial means of production (buildings and plant):
|
USA |
|
3.3 |
|
UK |
4.2 |
|
|
Japan |
12.5 |
|
|
France |
5.8 |
|
|
Germany |
6.9 |
|
|
Italy |
6.6 |
Currently the National Institute for Economic Research forecasts that manufacturing investment will have fallen by more than one quarter between 1974 and 1976.
Obviously massive investment is required to replace the archaic plant in many factories and to install new capacity. Jack Jones’ plan (Economist, September 6th) is in two parts. The larger calls for the creation of a new fund worth about £1.3 billion per year which companies could only use to finance investment projects approved under the proposed planning agreements. Two thirds of the fund would be financed by the companies from their profits and one third by the Government contributing part of the corporation tax it receives. What is never explained is how the Department of Trade is to identify whether the projects proposed by the companies for finance by the fund would be in any sense additional to what they would have done anyway.
Apart from the minor element of further subsidy through another disguised cut in corporation tax, the whole thing boils down to an elaborate charade where companies pay money into the fund and receive permission to draw it out to finance investment they would have undertaken anyway! This may deceive Tribune which wrote on September 5th of “this crucially important investment scheme” and fulminated against the Treasury’s negative attitude and the “appalling lethargy of the Chancellor of the Exchequer himself” in pursuing the matter, but it certainly won’t make much impression in the boardrooms.
The other element of Jack Jones’ plan is reported by The Sunday Times as follows: “The Government would bring together big pension funds and other institutional investors in a consortium to channel money in to new investment, in co-operation with the NEB. A ‘modest initial target’ of £5,000 million is proposed, plus a share of all new institutional funds for the next two year.” The first point is that “bring together” is ambiguous. Tony Benn’s proposal earlier in the (The Times, April 23rd) talked of forcing the financial institutions to supply an extra £1500 million each year to manufacturing industry; their indignation at his daring to interfere with the way they run their businesses resulted in an immediate disclaimer from Wilson and contributed to Benn’s removal.
But even if they would be forced to contribute the money to the planned consortium how would they be prevented from cutting down the finance they provide to industry already by their holdings of shares? Suppose the government could actually force them to offer more money to industry, for example by threatening to nationalise them, or actually doing so as the Tribune Group’s Statement on the Economy of January 31st demands, would this actually push the industrial capitalists to invest more? The answer is quite obviously not, unless they see a satisfactory profit margin on, and a market for, the things they will produce with the investment.
And if these conditions did hold they would go ahead with the investment anyway, with the financial institutions willingly providing the necessary extra finance. Merely controlling one sector, even as central a sector as finance, would not give a Labour Government effective control of the economy while most of industry remained in private hands.
Although they partially recognise the role of profit the proponents of these schemes try to evade the issue. Thus Tony Benn said (The Times, May 8th) that “political and public opinion about inflation meant that it would be a long time – perhaps indefinitely – before the private sector could expect to attain the kind of profits to enable it to generate the kind of investment programme needed to combat the contraction of manufacturing and to protest employment.” But it is not just a question of finance, for steering funds from the financial institutions.
The increased taxation, which Benn proposed would provide the other half of his £300 million programme, would tend even to discourage investment by reducing the amount which workers could buy. Even the totally capitalist solution of increasing profitability through cutting real wages directly is subject to the same difficulty, though the capitalist class would hope to be able to more than make up for a reduction in home consumption by increasing exports on the basis of lower costs (essentially another way of exporting unemployment).
So however they may look at first sight, the various schemes for import controls and investment finance do not offer a way out of the economic crisis. The socialist programme of nationalisation and planning, far from being some long term objective to be delayed until ‘the economy’ is ‘put right’ forms the only basis on which investment can be increased with resources paid for out of increased production. This would not be at the expense of the living standards of ordinary workers, but in order to produce the goods which these workers urgently need, not on the basis of cut-throat competition with workers abroad but of socialist internationalism.
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Last updated: 29 March 2016