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Nigel Harris

No end in sight

(January 1983)

From Socialist Review, No.50, January 1983, pp.2-8.
Illustrations by Tim Sanders.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

1982 was the grimmest year so far in what will soon be a full decade of world economic stagnation. It seemed last winter that the low point must have been reached – ‘upturn’ just round the corner was the favourite comfort of Ministers. Even as late as July, the OECD (the club of advanced industrial powers) predicted a 2.25 percent rate of growth for the full year. But the prospect of upturn retreated like a mirage. The strategies – including monetarism – could no longer be justified without revival, and faded. All the sacrifices made because growth was just round the corner, became just sacrifices, a self-flagellation to ensure the survival, if not prosperity, of capital.

The revised estimates for the growth of gross products in the OECD group for 1982 now range from −¼ to +½ percent. For 1983, a rate of growth is proposed of 1½ to 2 percent, and for 1984, 2½ to 3. However, there is no more assurance than before that these figures will remain firm – they will possibly shrink, the closer we get.

In any case, whatever the figure, everyone freely admits it will not affect unemployment. Unemployment in Europe will increase by one million every six months up to 1984. The OECD Outlook notes:

‘It is not clear on present trends and policies, that the prospects for Europe would improve thereafter. Unemployment in Europe has risen every year since the first oil shock in 1973-74’.

And for the OECD group as a whole, unemployment should reach 35 million by 1985, or 9½ percent of the labour force (as against 5½ percent in 1979).

Customarily, it is assumed that a failure to revive in the OECD group is the stalling of the ‘engine of world growth’, which, in other words, implies that the world profit rate is primarily detetermined in this group. The rate will not rise despite the years of ransacking the ‘factors of production’, as represented in the level of unemployment, of bankruptcies and the reduction in the capacity of industry. The destruction is still not enough; the great overhang of decaying capital still holds down the profit rate. The longer this persists, the more stagnation spreads outwards from the oldest heavy industry to the newest, from there to the newest growth industries, from the geographical heartlands of the system in Europe and North America to those areas that continue to expand. Even as late as 1981, Mexico had a growth rate of over 8 percent, down in 1982 to possibly 3 percent.

The mechanism for the spread of contraction is seen through trade. The OECD markets are the largest in the world, taking some two thirds of world exports. As those markets contract, the demand for the exports of other areas falls, inflicting contraction upon them. The export revenue earned by the Third World fell by $40 billion between 1980 and 1982, both because markets contracted and because commodity prices collapsed. Payments made by the Third World to service medium and long term debt increased in the same two years by $37 billion. That turnaround of $77 billion is sufficient to end much of the growth that has persisted.
 

Activity continues

However, the picture is much more complicated than this. Slow or negative growth should not conceal that rapid. reshuffling of activity continues – between different sectors (say, industry and services), industries, types of operation (black and white economies; large scale direct production and subcontracted or cottage production) and geographical area. Even within countries the picture is mixed – between the devastation of the north of the United States and the southern States, between Glasgow and Slough. Slump does not depress all activities equally; it discriminates, forcing some activities to grow disproportionately. In the deepest slump, some activities boom – even if it is only scrap dealing, pawnbroking, second hand clothes.

Since a country is an area providing the basis for the production of a unique combination of output and services, the effect of slump will vary according to the commodity composition of national output. The OECD markets as a whole may stagnate, but some sectors will grow rapidly. For example, since 1973 the demand for cars in the United States has stagnated, but the demand for small cars soared – favouring those countries specialised in manufacturing small cars (Japan and Europe).

Indeed, some of the processes of change are accelerated by slump, as capital is obliged to redouble efforts to search out lower cost opportunities as the condition of survival. A more elaborate division of labour results. Quite often the statistics do not permit us to detect the processes, for they are organised to exhibit national shares of some crude output. For example, US statistics record only ‘domestic production’ and ‘imports’ of tyres, as if all tyres were interchangeable; in fact, the US manufactures heavy, special duty and aircraft tyres, makes and imports from Europe vehicle tyres; imports entirely bicycle and motor cycle tyres from the Third World. If the effect of slump is to contract the capital goods industries (using heavy and special duty tyres) but expand the use of bicycles and motor cycles, then it is clear how contraction in the US can produce a boom – or at least, growth – in those parts of a Third World country producing light tyres. Thus, the idea of the industrialised countries as an ‘engine of growth’ to the world is not at all a simple one – the effects of the relationship can be perverse (slump producing boom, not slump).

It is this reshuffling of a more elaborate division of labour that underlies the different growth performance of the world since the first slump (1973-74). There are at the moment four rough types, identified geographically although in practice each type is represented somewhere in the other three:

1. the ‘Atlantic economy’ (Western Europe and North America), the original ‘engine of growth’ of the world system. It is here that we can speak most accurately of the two slumps and intervening stagnation. In relative terms, the devastation of this area as the result of the last nine years has been most extreme, particularly in its core industrial regions, although the scale of sheer impoverishment still does not match that in parts of the Third World (but the seasonal features on the scale of homelessness, absolute destitution, suggest the First World is catching up with the Third).
    
2. The effects of the second slump from 1981 have been to drag down a major part of the high growth sectors of the seventies (that is, countries that maintained or accelerated growth when Europe and North America went into slump, followed by stagnation) – Latin America (particularly Brazil, Mexico, Venezuela), the Mediterranean (Yugoslavia, Spain, Greece), Eastern Europe (particularly Hungary and Poland) and South Africa. We could also include here the special case of the oil-producing countries.
    
3. However, the second slump has not reduced all the growth sectors equally. East and South-east Asia continue to grow, even if at reduced rates. The estimates for growth in gross domestic products in 1982 (excluding Japan) are as follows:

4. Hong Kong		(3.5 percent);
   South Korea		(4.9);
   Malaysia		(3.7);
   Singapore		(5.0);
   Taiwan		(4.0);
   Indonesia		(4.0);
   Philippines		(2.5);
   Thailand		(4.8);
   China		(4.0).

   Despite some problems of cumulative debt – particularly South Korea and the Philippines – the growth figures do not indicate slump. They are in part related to the relative strength of the heart of the industrial region, Japan.

5. Finally, the rest, including the mass of countries of south Asia and subsaharan Africa. Many of these countries are the poorest in the world, participated imperfectly in the long boom (1947 to 1974) and have experienced continuous decline in the seventies, punctuated by the threat of famine. But it is a mixed bag, because, as we will see below, some of the countries, have also begun to accelerate the pace of capital accumulation.
    

National product

It should be noted in passing that the concern here is with ‘economic growth’, the expansion of national product, an indirect measure of the rapidity of capital accumulation, not with the increase in employment, incomes or consumption. In the context of the system, those elements are merely ‘accidental byproducts’ of the process of capital accumulation, not its essence. Thus, one can imagine the rapid growth of a sparsely populated oil-producing power that generated a complex of automated industry with very few direct byproducts in terms of employment or incomes for the mass of the population.

This is important since it is too frequently assumed that high growth produces high levels of employment and consumption. Take the interesting case of Sri Lanka which, after many years of relative stagnation through the long boom, has been swept into the wake of growth in south-east Asia. Per capita investment has increased 60 percent, and net capital inflows from abroad have soared – foreign capital inflow as a percent of Gross Domestic Product registered 4.2 percent in 1960, 3.1 percent in 1970 and 22.0 percent in 1980. But over the same period, per capita consumption has stagnated or declined.

Of more substance for the world system than Sri Lanka is the relative opening up of two giant Asian economies – China and India. China’s rate of growth seems to be reaching a fairly regular four to six percent per year, slump or not (and the only economic factor likely to drag this down, is a run of disasters in agriculture). Between 1974 and 1979, India averaged a 4.3 percent annual growth rate. Over the past twenty years, Indian investment as a proportion of Gross National Product has increased from 17 to 24 percent, and China’s from 23 to 31 percent, indicating for countries that are both very poor but, by world standards, possess very large industrial sectors (both would be among the top dozen industrial powers in the world), a remarkable increase in the pace of accumulation. The figures make no difference for the mass of the poor of both countries whose existence shows no tangible improvements whatever the rate of growth (and indeed, whose consumption is squeezed to sustain such high rates of accumulation). However, for the future of world capitalism the figures are instructive, again indicating a shifting balance in a world division of labour.
 

Impact is offset

Between the first (1973-74) and second (1981- )slumps, the Third World and Eastern Europe offset the impact of depression in the heartlands of the system, the OECD group. Rates of growth in the Third World fell – from 5.8 percent (1968-72) to 4.6 percent (1972-80) – but they were still roughly twice as high as in the industrialised countries (where growth fell from 5.1 to 2.4 percent). From this increased differentiation in performance, we can infer that the relative profit rate in what we are calling the Third World (in fact, it is only a small part of it) became very high. This high profit rate was the basis for a rapid increase in local capital accumulation – many Third World countries increased investment as a percent of Gross National Product up to 25 percent (usually at the cost of consumption) – and a rapid inflow of foreign capital.

How could this happen when the most important market for the output of the Third World, the First, was stagnating? Of course, as we have noted, lower growth of output can go with rapid increases for some sectors (that is, the commodity composition of output changes), and lower growth of OECD imports does not rule out rapid expansion for some imports. Thus, stagnating markets in Europe and North America can mean also accelerated import penetration by those Third World countries with the capacity to exploit the opportunities.

In part, this happened – while total Third World exports to the OECD group increased relatively slightly in volume terms (although much more in money terms), in particular sectors the growth was much more rapid. But there were other factors that compensated for stagnating markets:

1. increased borrowing from banks in the OECD group, themselves with excess funds available to lend both because of the contraction in the demand for funds within the OECD group as the result of stagnation, and through the ‘recycling’ of OECD surpluses. The World Bank estimates that between 1975 and 1978, some 14 percent of total investment in the ‘ oil-importing Developing Countries came from borrowing abroad,
    
2. migrant remittances – that is, funds returned home by nationals working overseas. The total of officially recorded migrant remittances (a considerable underestimate of the total flow) rose from $2.6 billion in 1968-69 to $23.8 billion in 1978-79 (in the same period, the Middle East, a growth area in the seventies, increased its share of world remittance flows from four to 20 percent). By now, the value of remittances received is a large element in the overseas earnings of a number of countries – as a ratio, for example, of the value of merchandise exports, in Turkey remittances were 77 percent; Portugal 70; Egypt 89; Jordan 175; Pakistan 77 percent.

These factors allowed a group of Third World countries to expand their imports from the industrialised countries, so offsetting the impact of slump (that is, far from Third World exports to Europe destroying jobs, Third World imports from Europe created jobs). Industrialised countries’ exports to the Third World increased in value from $53 billion in 1973 to $117 billion in 1979; exports of engineering goods increased from $23 billion to $73 billion (the export surplus of the OECD group on the enaineering trade rose from $20 billion to $56 billion).
 

Shift of trade

Finally, there was a slight shift of trade away from the industrialised countries to faster growing markets – the oil producing powers, other Newly Industrialising Countries etc. ... 64 percent of Third World exports went to the industrialised countries in 1972, 62 percent in 1980.

Contraction or stagnation in the industrialised countries, with continued relatively high growth in parts of the Third World, accelerated a process of the redistribution of world manufacturing processes between different types of countries (the highly industrialised, industrialised, semi-industrialised, low industrialised etc). The redistribution was made possible by the cumulative effects of changes over the preceding two decades that, in effect, eliminated or reduced the differences in labour productivity in selected processes in the First and Third World – for example, the quality of labour (education, skills etc.); the quality and maintenance of equipment; the quantity and quality of associated services (power, transport, air freight, water supplies etc.).

Although still quite small, the process of redistribution of a growing output between the old and new centres of capital accumulation has been sufficient to register on a world scale. In terms of shares of world manufacturing output, the table shows how the picture changed.

On the World Bank’s ‘best scenario’ (that is, assuming the highest realistic rate of growth in the OECD group), the redistribution is projected to 1990: by then, the share of the first two areas (Western Europe and North America) will have fallen in thirty years (1960-90) from around two thirds of world output to under half; the share of the third (a and c) will have risen from about one twelfth to over a quarter. The change constitutes an unprecedented structural reorganisation of capital, of which geographical location is only one element, without the re-organisation giving any assurance that the world profit rate will be restored to a level sufficient to recreate sustained world growth.
 

‘Globalisation’

It would be misleading to see the shift as taking place between states, so that the process is tied to the viability of particular states. The ‘Newly Industrialising Countries’ are only a convenient label for the front runners, and whether Mexico or Brazil or South Korea survive financially does not determine the process of redistribution. Once the ‘globalisation’ of certain processes in manufacturing becomes possible, those processes are no longer tied to particular locations, old or new. Indeed, there are already signs of certain sections of manufacturing leaving the Newly Industrialising Countries were labour costs are already becoming ‘uncompetitive’ for these types of production – Korean electronics are tending to move on to Malaysia; a number of low cost activities are leaving Mexico for the Caribbean and, particularly, Haiti; already an estimated 50 percent of the manufacturing capacity of Hong Kong textile companies is operating outside Hong Kong (in Sri Lanka, Mauritius and elsewhere).

The world market in slump forces an ever more specialised division of labour, leaving the Newly Industrialising Countries as, for the moment, ‘middle skill’ manufacturing powers, while low skill operations are located in a widening ring of Third World countries. Thus, a world production system has become intrinsic to the structure, not tied to the fate of either one or all of the Newly Industrialising Countries.

In sum, a series of factors operated after the first slump of 1973-74 to offset the impact of depression in Europe and North America, and thus to keep up the demand for the exports of the industrialised countries. However, many of these factors ceased to operate or, indeed, operated in a perverse manner during the second slump (1981- ). High interest rates and an unusually strong US dollar drove upwards the value of cumulative debts to the point where the largest borrowing countries were threatened by a possible default (Poland, Mexico, Argentina and Brazil). But many lesser borrowers came within striking distance of default and were obliged to seek the renegotiation of their debts (in 1981, Central African Republic, Liberia, Madagascar, Pakistan, Senegal, Togo, Uganda, Zaire; others reached special agreements with the banks – Bolivia, Jamaica, Sudan, Turkey). At the peak of interest rates in mid-1982, debts escalated with fearful speed – a one percent increase in interest rates cost Mexico or Brazil an extra £750 million.

The problem was compounded by the collapse in commodity prices (ironically, a key factor in declining inflation rates in the OECD group), so that the export earning capacity of big borrowers was affected, and so their ability to service debts. The most striking example was the collapse of the oil market, producing the beginning of the disintegration of OPEC, and increasing difficulties for major oil powers – Mexico, Venezuela, Nigeria, Indonesia. So dangerous became the increase on cumulative debt, that the slight pretext of the Falkland dispute set alarm bells ringing and led to a sharp cutback in the volume of new loans. The Eurocurrency credits advanced in the first nine months of 1982 were £62 billion, compared to £98 billion in the same period of 1981. The cutback increased through the year, and was increasingly harsh on the Third World – whereas the Third World took 50 percent of net lending in 1980 and 1981, in 1982 their share was 20 percent. The cuts were of maximum severity for Eastern Europe and Latin America, but relatively mild for East and South-east Asia (the rest of the Thrid World had never had much access to the commercial banks anyway).

Thus the compensating mechanisms of the 1970s are now lacking, and the full force of slump is being felt both in the industrialised, countries and a major part of the Third World. However, there are some changes that damp down the effect of sudden shocks, even if they cannot produce an upturn. The financial system has learned to live with large cumulative debts, discounted by larger reserves for default. Whereas the Polish crisis required more than a year’s negotiations to absorb, Mexico was saved from sudden collapse over little more than a weekend!

Reagan who had considered pushing Poland over the edge into default in the first major debt crisis, completely reversed his position for Mexico and Brazil – swift action by the US Government, the Federal Reserve Bank (sweetened by long-term contracts for Mexico’s oil at prices below the world market), and the Bank of International Settlements gave sufficient guarantees of Mexico’s credit to get the country through to October and an IMF deal; furthermore, the IMF has now made itself responsible for bullying the commercial banks into lending more to Mexico to prevent a default. On Reagan’s visit to Brazil in early December, he tossed a £1.2 billion credit to his hosts to reassure the commercial banks.
 

The oil market

Finally, Reagan who had originally opposed efforts to increase the reserves of the IMF (to increase its capacity to salvage debtors) swung into the opposite position as the result of the financial crises of Latin America. Of course, the turnround cannot be unrelated to the discovery that US banks were most exposed in Latin America – loans to Mexico by the nine largest US banks alone are said to equal fifty percent of their capital and reserves. Any default in the south by a major debtor would certainly devastate Wall Street, and through the interbank lending system, Europe as well.

However, the system is so unstable – and its systematic interrelationships so ill understood – that there is ultimately no way to offset all conceivable shocks. The turnround in the oil market was completely unexpected, and the time required to absorb the change sufficient to make possible a major default. Even the mild winter in North America can produce panic among the bankers – since the seasonal increase in oil prices as a result of cold weather is less than normal, cutting the capacity of the oil powers to service their debts. Indeed, the bankers now lose whether oil prices go up or down.

The attrition in the heartlands of the system generates waves of hysteria both against foreigners – immigrants – and now, most shrilly, against imports, against a world which is the source of domestic ills. In practice, governments recognise through their public adherence to free trade that their own ‘fate depends upon the survival of a global economy, but they constantly need to reassure their own inhabitants and voters that their fate is more important than some abstract world beyond the borders. This contradiction underlies the persistent wobbling between Scylla and Charybdis. Crumbs of protection must be thrown from time to time to marginal constituencies or to that minority of companies, the bulk of whose profit comes from the domestic market. With the crumbs go an elaborate structure of hypocrisy, lying and open cheating – whether it is Mitterrand’s instructions to video tape imports only to enter France through the tiny control point at Poiters, or the US House of Representatives Domestic Content Bill that instructs all sellers of 900,000 or more vehicles in the US market to use 90 percent US-manufactured parts by 1986 (the Bill is expected to be killed in. the Senate). The US Bill was actively supported by the car workers’ union, UAW, and actively opposed by the big car manufacturing companies who desperately need to import cheaper components to compete with imports and, overseas, with their rivals.
 

Protectionism

The contradictions in each campaign are painfully evident to governments. A ban on coal imports increases the cost of coal to BSC, and thus the price of steel; a ban on steel imports to protect BSC increases the cost of steel for the components for British Leyland and thus reduced its capacity to compete. In this case, on the government’s ledger the red figures are merely transferred from one corporation to the next. Only complete control of all imports would avoid such problems, but that would be a declaration of war on all those who have hitherto purchased British exports. Furthermore, insofar as import controls are effective they accelerate the ‘globalisation’ of production – to escape the closure of British export markets, British capital must invest abroad. The world market is not to be defeated by such manoeuvres.

Nonetheless, the political survival of governments now requires an increasingly dangerous flirtation with protectionism. The November meeting of trade ministers at GATT ended in confusion. The US and Europe are engaged in almost continuous economic warfare, currently at its most bitter over the trade in agricultural goods. US farmers are deep in debt and still ‘overproducing’, but US exports to third markets are constantly undercut by subsidised European exports. So desperate is Washington that, in the middle of a supposed trade embargo with the Soviet Union, it sold 100,000 tonnes of butter to a major butter exporter, New Zealand, presumably for onward transhipment to Russia. The Americans want to break into the European market; the Europeans want a cosy cartel with the Americans to divide up the world market without touching their home base.

At the Common Market Copenhagen summit in early December, the premiers were for the first time overtly protectionist, presumably as the only way of restraining the nationalism of Mitterrand’s France. All could unite in the attack on Japan for its wonderfully cheap machine tools, videos, stereos and colour television sets, as the prelude to blocking South Korea, Hong Kong and Brazil. The united abuse of Japan drowned the shouting over Spanish cars, Danish fish, French apples and the rest, The hypocrisy of the participants is best illustrated in steel – on the same day that the Financial Times published a major report on the new efforts by Brussels to eliminate illegal price discounts on the sales of steel within the Common Market, it reported elsewhere that BSC was about to offer special secret discounts on steel purchases by loyal customers.

The measures to control imports have effects in increasing the costs of goods, in reducing the level of activity, but at the end of the day, they do not control imports. Indeed, short of the introduction of a full seige economy, it is not clear that states can any longer control the trade flows that cross their territories. They may control the official movement, but only with the effect of expanding the unofficial – West Germany complains that, despite the supposed tight control of garment imports, 47 million illegal garments entered the country last year; the British, supposedly controlling South Korea with a firm hand, find half a million extra pairs of South Korean gloves in the British market. Or, if one element is controlled, it reappears in another form – the US controlled leather shoe imports from East Asia, only to be inundated by sneakers (rubber shoes), and when they were controlled, by soles and uppers, and if it is not these, it will be something else. The effect of controls is to reshape the output of the exporters to beat the controls, or to relocate the exporters so they dodge the control on their original country.

Thus the growth of protectionism neither hits the target nor assists world capital accumulation. It is part of the growing ‘irrationality’ of the system – that is, the pursuit of strategies that make the resumption of growth more unlikely but make the position of states more politically secure. The Falklands war is a vivid example of the willingness of a state to risk financial catastrophe (given the involvement of British banks in Argentina’s cumulative debt) for the sake of political advantage. A more impressive example would be Reagan’s dash for military superiority without increasing taxation. The resulting budget deficit – to be covered by borrowing – was great, it drove interest rates up just as slump hit the US economy. High interest rates drove into, or close to, bankruptcy a number of major US companies – International Harvesters, Braniff Airlines, Chrysler, and in Europe, AEG-Telefunken. Furthermore, high interest rates made the US dollar unusually strong, as the result of which US manufacturing became unusually uncompetitive, and imports unusually cheap – the trade war with Europe was one by-product. American manufacturing has been devastated, part of it fleeing abroad to escape the high costs. Finally, a strong dollar and high interest rates pushed up the debts of Mexico and Brazil, raising the possibility of the collapse of a major US bank and of Wall Street. Those whom the gods propose to destroy they first make mad.
 

Regional economies

It is utopian today to think any of the industrialised countries could recreate independent national economies. There is a growing realisation of this which has affected the case for import control as it has undercut the case for the control of the local money supply (in a financially integrated world). But if national economies have gone, there is still some political mileage to be made out of the idea of regional economies – North and South America, Europe, the Eastern Bloc, the Pacific seaboard. Economically, such units could not survive on their domestic markets alone, but the creation of political authorities to govern such regions could act as cartels to negotiate entry for selected imports from outside and for the division of undemarcated markets outside the regions. Politically, this seems to be one of the few things on offer at the moment; it escapes some of the objections to national protectionism, and offers fertile opportunities for geopolitical speculation.

However, it is least plausible for Europe, the largest single trading entity in the world system. It is perhaps slightly more plausible for the Pacific seaboard where, it seems, the impact of slump has produced a growth in internal trade between the countries of east and south east Asia and a relative decline in trade with Europe and North America.

However, again the case lacks realism. In order to dispense with the rest of the world, the region would have to inflict on itself a major slump. Japan, without the US and European markets, could not survive in its present form. And all this is to restrict the case to the simply economic. Politically, it is impossible to see how all the countries of the region – including China – would accept the hegemony of Japan, a revival of the prewar Co-Prosperity Sphere. The evidence is that the manufacturig powers of East Asia have bent much effort to escaping from dependence upon Japan – the proportion of South Korea’s exports going to the US and Japan has fallen from 74.3 percent in 1971 to 42.9 percent in 1981; and of imports, from 68.1 to 47.6 percent. In fact the shift by East Asia and South-east Asia away from markets in the old heartlands of the system is less a growth in regional self-reliance and rather more yet another aspect of the ‘globalisation’ of production that is also affecting the old heartlands.

Thus, in each region, the political contest jeopardizes the possibility of establishing effective regional organisations, and the more severe the slump, the greater the jeopardy. Direct conquest and military control still remains the only means to create .and hold larger effective entities than existing states. Furthermore, the point of

national protection was to secure the loyalty of the local population, regardless of its economic sense. But – as has been seen with Britain in the Common Market – regionalism is a poor substitute for old-fashioned nationalism. Indeed, in the common ruin of all, nationalism is a better bet in securing the survival of the power of the national ruling class, even if it simultaneously pulls down on their heads the temple of the economy.
 

Impotent state

The second slump has, more than the first, exhibited the impotence of the state. The state controls neither the world market nor that part’ of it which lies within its national boundaries – or rather, the state has the power to destroy it, but not to expand it. The answer – supranational regions – has little political reality in it, and even if it did, reducing the scale of capital to one region will only make the slump worse. Thus regions offer no hope of a restoration of employment. The only other proposal is to reduce the wages of the heartlands to the level of the Third World so that world profits are then restored The Economist (27 November 1982) has recently revived this ancient proposal, arguing that to increase the profit rate to 30 percent requires a cut in British wages of 19 percent and of Japanese wages by seven percent. The figures are, as one might suppose, suspect, and it may be that British wages need to be cut by 87.953 percent. However, whatever games are played with the figures, it is difficult to see how any such reductions could be achieved, short of a British version of General Pinochet or Jaruzelski. But to do that would be to risk the political survival of the ruling class.

In sum, the prospects remain grimmer than at any time during the period of stagnation since 1974. There will be some upturn – possibly in North America in 1983 – but it is likely to be so slight, it will not be noticed by the growing army of unemployed. If interest rates continue to decline, the financial pressure on companies will be eased. If the dollar continues to weaken, it will relieve the possibility of an open trade war across the Atlantic. And both factors will ease the possibility of a major default by a sovereign borrower. Such small changes may reduce some of the immediate dangers, but they give no asurance for a medium term future.

The system however has no self-destruct mechanism, despite the alarms and hysterical talk. If slump continues on present lines, there must be a sovereign default, but that will not produce the destruction of the system, only increased immiserization. Without a class capable of and comitted to the seizure of power, the ruling order will survive in whatever attenuated form. Thus, the discussion of the effects of an upturn are not of interest for their likely economic consequences, but rather for their implications in terms of worker confidence. The accumulation of silent bitterness through these years could make such a return of confidence a rapid and dramatic reversal of the trend.

 
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