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Andrew Glynn

Review

The Socialist Challenge

(March 1976)


From Militant International Review, No. 10, March 1976, pp. 33–35.
Transcribed by Iain Dalton.
Marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).



The Socialist Challenge
by Stuart Holland
Quartet Books £5.95

This is an important book because it attempts to justify in detail the Strategy for Socialism contained in Labour’s 1973 programme and subsequent manifestos. Moreover, it carries some authority since Stuart Holland was involved in drawing up the programme and, as he says, his arguments found “extensive reflection in Labour Party policy.” The fact that the Labour Government has retreated further and further from the ideas of selective nationalisation and ‘planning’ contained in the programme-discussed in this book-does not diminish their relevance, for they remain the core of the platform of the ‘Tribune’ left.

Holland has no theory of the nature of the present crisis in the capitalist system. Certainly, he does discuss some aspects of Marxist theory, but in a superficial way. For example, he interprets the tendency of the rate of profit to fall in terms of insufficient demand for commodities as machines replace labour; this leaves out the fundamental aspect of the increasing difficulty of producing, rather than just realising, sufficient surplus value to maintain the profit rate. But in any case, his attempt to relate the crisis to the development of the conditions for producing (and accumulating) value is not only inadequate but is tacked on to the end of the book as an appendix. For almost the whole of the book, it is the trend towards increased monopolisation which is identified as the central cause of the crisis. The very first sentences of the book read:

“The current crisis of capitalism is not simply a matter of inflation. It reflects fundamental changes in the structure of power which have undermined conventional post-war orthodoxies on society, the state, and economic management. Recent acceleration in the trend to monopoly and multinational capital has eroded Keynesian economic policies and undermined the sovereignty of the nation state.” (page 9)

Now increasing centralisation is an important feature of recent capitalist accumulation. Holland quotes National Institute calculations that the top 100 manufacturing companies controlled one fifth of British production in 1950, one half in 1970 and are expected to control two thirds by 1985. But to blame the low industrial investment, which would be generally agreed to be a central aspect of British capital’s crisis, on this trend is quite unconvincing. He says that the management of the monopolies do not have confidence that the Keynesian methods of demand management (tax changes etc.) will ensure that demand will be high enough for their products over “the increasing length of time which it takes to payoff major projects which fully employ available technical progress and innovation”. (page 28) This is typical of his method of argumentation. No evidence is presented that major projects have increasingly long lives; in fact any tendency towards an acceleration in the rate of technical progress works in the opposite direction. Secondly, to the extent that managements do not foresee a sustained high level of demand, this is not the cause of the crisis, nor a result of the fact that the firms are monopolies. It is a reflection of the lack of competitiveness and the inflationary tendencies of British capitalism. Just the same confusion of cause of crisis with reflection applies to Holland’s other reason for low investment in the UK “easier (sic) investment opportunities in faster or lower wage-cost economies” (page 187) and the power of multinationals:

“There is a crucial contradiction between the facts that Britain ranks first in the European top 500 league with 140 firms, yet has an economic performance lower and worse than any of our European competitors. The reason (our emphasis) lies substantially in the extent to which such multinationals have written Britain off as the main location of their expansion and are shunting investment and jobs in modern industry abroad.” (page 77)

Holland never really tries to get below these reflections of the crisis and in fact he tries to deny that there are any fundamental problems for capital accumulation in Britain. For example he tries to play down the fall in the rate of profit by suggesting that:

  1. It was substantially a short-term phenomenon. This is just incorrect, because the downward trend has persisted for a decade and was hardly checked by the ‘boomlet’ of 1973.
     
  2. “There is surplus little doubt that not all firms in the upper half of British industry were in a profits crisis” (page 57). This is true, but in no sense implies that many of the major monopolies did not suffer a dramatic fall in their profit rate on their UK operations especially, as the string of major bankruptcies itself shows.
     
  3. The multinational companies have the power to conceal the extent of their profits in the UK by transferring them abroad through the use of excessive ‘transfer’ prices charged when they import from their subsidiaries and too low prices charged on exports to subsidiaries abroad. No doubt this happens and may be reflected to a certain extent in the official aggregate profit figures. But Holland gives no reason for believing that this has increased in such a way as to explain away the apparent downward trend in profits.
     

Holland’s solution to British Capital’s “investment hesitation” is as follows: “What we need is to transform the private dominance of the mesoeconomic leaders who at the present command the rest of the economy. In the case of the top 100 manufacturing companies this is the case for twenty five new public enterprise leaders.” (page 179) Now the vital point in Holland’s analysis is that this group of nationalised manufacturing companies would not merely carry out expanded investment programmes of their own. They would also exert a “pull effect on other big firms,” based on “oligopoly leadership, or the situation in which one of the few firms at the top end of an industry breaks from the pack and pioneers a new product or technique on a major scale. While the remaining leading firms might otherwise have hung around and delayed introducing a similar project or process, they cannot any longer afford to do so without risk of losing sales, profits and market share to the pioneer firm.” (page 185)

Here we have the essence of Holland’s economic case for selective nationalisation-that the extra competition, which the nationalised firms with the expanded investment programmes would represent, would force a higher rate of investment on the majority of large firms left in private hands. But leaving the political implications of selective nationalisation aside for the moment, for the competitive pressure proposed by Holland to work, the private firms would have to have, or be able to get, sufficient cash to invest. But in the existing situation, with the long-term decline in profitability over the last decade, the stock market pressures which make it impossible to reduce dividends and interest, and the tremendous increase in borrowing (which has gone beyond viable limits in the case of many firms) the private monopolies would not be in a position to respond to competitive prodding by stepping up investment. Holland also wants the nationalised firms to be used to get more information on costs which would “increase government capacity to levy effective taxation on real profits” (page 201) and to act as price cutters themselves in order to reduce “excessive” profit margins.

Of course, nationalisation of the financial sector could help to provide extra finance but, as Holland says himself, the financial institutions cannot “actually start or run those things in the economy which are directly concerned with investment, trade, jobs”. (page 212) Simply nationalising the financial institutions will not generate productive investment. The idea that the industrial capitalists are just “hanging around” waiting for more competition to prod them into massive investment programmes is a grotesque misrepresentation of the true situation of British capital over the last decade. Far from there having been insufficient competition, British capitalists have been manifestly unable to meet the growing competition in home and export markets from foreign capitalists. Holland gives no reason why nationalised competitors should spur them on more successfully. A nationalised competitor pouring millions into new plant which is uneconomic because it is not used to full capacity or because it is too expensive, will not stimulate its private competitors to invest. If the techniques, the finance, the markets and the underlying profitability were present, then it would not take the leadership of nationalised firms to persuade the capitalists to invest; their own self interest and pressure from competitors overseas will be sufficient.

If the competitive pressure from nationalised firms could “withhold government financial assistance” and, in the planning agreements between government and private firms, which Holland sees as buttressing the “market mechanism”? The major firms would be required to reveal “main features of their corporate activity over the past four or five years, and their future programmes as already decided, or in the process of implementation”. (page 227) If the government reckoned the firm was failing the nation “through inadequate provision of investment, jobs or exports” (page 231), it could ‘withhold government financial assistance’ and, in the last resort, threaten to take it over. (page 234) This, of course, is the nub of the whole question. While Holland sometimes suggests that sufficient government prodding will chivvy the capitalist system in the direction of a socialist plan of production, even he concedes that this will not always be the case. The capitalists would have to be forced to act in a way which they considered to be unprofitable. All he says, however, about opposition from the capitalist class is that:

“Initially the framework in which progress can be achieved will be opposed by some sections of the capitalist class in the strict sense-the pressure groups of both business and private capital embodied in the Confederation of British Industry and such backwoods propagandists as Aims of Industry. But if it is properly presented in the framework of a positive transformation of society as a whole, there is no reason why executive management at large should be expected to oppose a socialist transformation.” (page 312)

This attitude reveal an almost unbelievable innocence about the likely reaction of the capitalist class to any attempt to nationalise profitable firms. It completely ignores the actual experience of recent years.

Even In the case of basic heavy industries, which had been ruined by ‘private enterprise’, but were essential to service the rest of private industry and therefore required state control even from a capitalist point of view, the capitalist class nevertheless resisted nationalisation because of the political implications involved. Thus, a Tory government reversed the steel nationalisation measures of the 1945-50 Labour government, though big business was later forced to allow a subsequent Labour government to take over the loss-making sectors of the industry because of the utter dilapidation of iron and steel production.

More recently, sections of big business and the Tories have vigorously resisted the nationalisation of the ports, shipbuilding, the aircraft industry, etc., in spite of the fact that they are not longer viable under ‘private enterprise’ and that Labour governments have always paid compensation, usually much greater than even the notional book value of the firms concerned.

Big business also intransigently opposed the attempts of the 1964–70 Labour government to “interfere” or introduce “creeping nationalisation” through the Industrial Reorganisation Corporation, even though big companies unashamedly demanded state assistance with no strings attached. Later, the Tory government under Heath produced an Industry Act which allowed for unprecedented state intervention in the private sector. The Heath government also carried through the instant nationalisation of Rolls Royce. Big business hardly raised a word of protest. But what big business will accept from their class brothers, they would not tolerate from a Labour government. The recent, at times hysterical campaign, against Tony Benn’s proposals (contained in the election manifesto) for intervention in industry, access to books of big firms, and ‘planning agreements’ between big firms and the government, made this clear. Proposals for the nationalisation of profitable industries, such as pharmaceuticals, included in the Manifesto, have been completely dropped by the Labour leaders.

The economic policies of the post-war Labour governments have in some ways tended to favour big monopolies even more than those of the Tories, who have been influenced by doctrinaire ‘laissez faire’ ideas. Yet the capitalist class nevertheless fears the potential threat posed by a Labour government because of the pressure which the organised working class will exert on the Labour leaders at a time of sharpened conflict and mass radicalisation. They fear that the appetite of the working class for public ownership will grow with eating, especially as the effects of capitalist failure are felt in inflation, unemployment and cuts. It is for these fundamental political, class reasons that the Stuart Holland’s proposals are completely utopian.

Nationalisation of a couple of dozen firms would not provide adequate means of controlling and planning the economy. On the other hand, the “limited” nature of such measures would not for a moment placate the capitalist class, which would resist such moves with all the economic and political means at its disposal. Holland says his strategy is for “revolutionary reforms” but “within a democratic framework and not an undermining or overthrow of democratic processes” (page 158). The actual experience of Labour governments shows the limited room for even “reformist reforms” within the existing “democratic processes. Of In practice, the economy dictates to the government and the needs of big business will always, inevitably dictate to any government which accepts the existing framework of society.

In the very brief section entitled Against Violence, the only place in the book where he attempts to deal with the vital question of state power, Holland attempts to counterpose “revolutionary reforms” to violence. But when has the capitalist class ever hesitated to throw aside democratic forms when its vital interests were threatened? The real alternative from a socialist point of view is not violence, but the mobilisation of the Labour movement for the implementation of a socialist programme. If the Labour leaders gave a clear political lead and mobilised the enormous power of the movement, a socialist transformation could be carried through rapidly and peacefully. The experience of the Popular Unity government in Chile shows that hesitation and half measures are no insurance against reaction and violence. The ruling class of Chile and its military henchmen had no hesitation in crushing a democratically elected government when they feared it threatened their position. Yet the whole of the Labour Movement, which includes the great majority of producers and, including families, a majority of society, together with sympathetic sections of the middle class, could be won to socialism if presented with a credible prospect of social transformation. But only the nationalisation of all the 200 companies which Holland shows control half of the country’s output could provide adequate means of developing the productive forces in the interests of a majority of society.


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