1973

David Yaffe

The Crisis of Profitability: a Critique of the Glyn-Sutcliffe Thesis

Written:1973;
Source: Manuscript. A version of this article appeared in New Left Review I/80, July-August 1973, pp45-62.
Transcription/Markup: Steve Palmer
Copyleft: This work is licensed under a Creative Commons license permitting unrestricted copying for non-commercial use.

In a chapter on ‘Politics’ in British Capitalism, Workers and the Profit Squeeze [1], Andrew Glyn and Bob Sutcliffe express the hope that their book will make a contribution to the political struggle for socialism.[2] Towards this end they have gathered together and analysed a great deal of statistical information in an original and important study. Before we begin what will be a critical review of the book, we should say that the Left can only be very grateful to the authors for making what must be the first serious empirical contribution towards an analysis of the present crisis of British capitalism. Their claim is that the capitalist crisis in Britain is converting the fight for the rights, wages and conditions of the workers into a simultaneous fight for a revolutionary political strategy inside the labour movement. With the recent check on the tide of working-class militancy, as witnessed by the collapse of the fight against Phase II, and with the British economy now experiencing one of the fastest growth rates since the war, the present time is a suitable one to examine critically the central arguments of the book.

Scientific socialism differs from other ‘socialisms’ in that for Marxists the historical ‘necessity’ of the new society (socialism) is shown in the contradictory development of the old society (capitalism). This is what we mean by the materialist basis of the revolutionary standpoint. We can put our argument in another way. If the capitalist mode of production can ensure, with or without government intervention, continued growth and full employment, then the most objective argument in support of the revolutionary socialist position breaks down. The reformist perspective then becomes a reasonable one.

The revival and remarkable growth of capitalist production since the Second World War has given impetus and apparent support to those who reject the Marxist perspective. The prospect of a capitalist system developing and functioning without serious interruption seemed to such reformists a real possibility. Social and economic stability was to be maintained by state intervention in the economy and with suitable government policies the last pockets of poverty and despair could be slowly reformed away. However, the last few years have given this perspective a severe blow. The intensification of international competition, the international monetary crisis, chronic rates of inflation approaching the levels of the Korean War and the trend towards increasing unemployment with the crisis of profitability, indicate that the post-war boom is rapidly coming to an end.

The question remains, do the recent inflationary-led booms in most capitalist countries alter this view? Was the crisis of the last few years merely the preparation for a new expansion of production? Or did it signify, once again, the extremely crisis-ridden nature of capitalist production, that is, of capitalism as a decaying system and one that has long outlived its historical ‘mission’. What perspective does a Marxist analysis of ‘late’ capitalism hold for the revolutionary movement in the next period? These are critical questions.

It is against such a background that we must judge this book. Does it in any way adequately combat the reformist perspective? Will it bring home to the trade union leaders the ‘contradictions between the workers’ demands and the ability of the system to meet them’?[3] What perspective does it offer for a revolutionary strategy in the coming period?

Unfortunately, where the book offers a consistent position, its central thesis is quite compatible with reformism. It does nothing to combat the ideological offensive of the ruling-class on the issue of inflation. On the contrary, it gives credence to the view that high wages are a primary cause of inflation. That the authors support the union drive for higher wage demands [4] in no way mitigates this failing. Radical reformism is reformism nonetheless. Wage constraint is only the other side of the radical coin. From the left side we have Glyn and Sutcliffe’s position: ‘but when the wage struggle does threaten the survival of the capitalist system . . . it is time for workers not to moderate their wage demands but to destroy the system which exploits them.’[5] From the other side of the debate, we have the right-wing social democratic response. In the words of Wilfred Beckerman: ‘as the inflationary threat is greater (than ever) so never before has the need for restraint been so vital.’[6] Both positions share common ground but diverge in evaluating the capitalist system. Neither position, in any coherent sense, is able adequately to invalidate the other; it is a matter of attitude.

Glyn and Sutcliffe underestimate the strength of reformism. Their exhortation that workers ‘must see through the argument that they should reduce their wage claims in the national interest’ [7] is too simple. The leadership of the TUC believes that the ‘national interest’ can be satisfied through a ‘high growth, high incomes’ government strategy. That is why they are once more engaging in talks with the Conservative government. They have never challenged outright the simple equation; large wage increases necessitate price increases. All that the TUC leaders want, is a ‘fairer’ policy, which they, and most trade unionists, believe to be possible with changed government policies, or for that matter, a changed government.

It is precisely against such points of view, and Beckerman is only an extreme example, that a Marxist analysis of inflation would be directed. It should show that the working-class is in no way responsible for inflation. It should indicate how price rises far from being due to workers’ attempts to increase their wages, are the result of the intervention of the capitalist state in its attempt to maintain and preserve a system that has long outlived its stay. The remainder of this article will attempt to show that the theoretical inadequacy of Glyn and Sutcliffe’s position stems from their failure to understand Marxist political economy. Further, we shall illustrate how the ‘facts’ of the present period fully vindicate the Marxist view. Finally, we shall briefly indicate a revolutionary strategy for the working-class that flows from such an analysis.

 The Crisis of Profitability and the Falling Rate of Profit

The crisis developed, according to Glyn and Sutcliffe, because the mounting demands from the working-class for a faster growth in living standards coincided with the growing competition between capitalist countries. [8] Wage increases could not so easily be passed on as price increases if British firms were to remain competitive. While we fully accept the significance and effect of the growing competition between capitalist countries it is the first part of the explanation that we challenge. Indeed, a great deal of material in their own book contradicts their own point of view. The key factor that plays no theoretical central role in their position, and which they often mention in their discussion of statistical data, is the growth of the productivity of labour. That productivity has been doubling every 10 years in Japan, every 15 years or so in the major EEC countries and about every 30 years or so in the US and UK is a fact of enormous importance. Yet they cannot locate this in their analysis. [9]

Confused about the basic relationships, they state in one place: ‘Profitability is connected with the expansion of output through its effect on the rate of accumulation of capital (investment), which in turn is important in determining the rate at which productivity increases.’[10] In another place, they state that stagnation had relatively little to do with the decline of profitability. [11] Their consistently argued position would run something like this. The decline of profitability, given the intensification of international competition, is primarily due to increasing wage demands. This in turn slows down investment and therefore the growth of productivity which only makes the problem worse. While for Marx, ‘the rate of accumulation is the independent not the dependent variable; the rate of wages the dependent, not the independent, variable’ [12] the position for Glyn and Sutcliffe is reversed. The decline of profitability and the falling rate of profit is due to increasing wage demands. The impulse behind such wage demands is the expectations of the working class, moulded in the period of economic expansion, being thwarted by the slow growth in living standards in the late sixties. And adding fuel to this fire is the realization of increased bargaining strength which has contributed to the growth of working-class militancy.[13] Political economy is replaced by social psychology, Marxism by a version of Ricardianism.

While we cannot ignore the factors which Glyn and Sutcliffe stress, they are in no sense primary in determining the crisis of profitability. Marx makes the point admirably clear. ‘The rise and fall in the rate of profit in so far as it is determined by the rise and fall of wages resulting from the conditions of demand and supply (in the labour market) . . . has as little to do with the general law of the rise or fall in the profit rate as the rise or fall in the market prices of commodities has to do with the determination of value in general.’[14] That Glyn and Sutcliffe’s position is quite consistent with their interpretation of Marxist political economy can be seen in Appendix B, ‘Marx’s view of exploitation and capitalist crisis’. It is summed up by their statement: ‘The dramatically falling rate of profit in Britain does not seem to have been caused to any significant extent by the increasing organic composition of capital but rather by an increase in labour’s share of the product (very roughly the equivalent of a decrease in the rate of exploitation). Logically this possibility is allowed for in Marx’s analysis.’[15] Unfortunately this is not the case. It is worth quoting in full a passage where Marx spells out the general law. ‘This mode of production produces a progressive relative decrease of the variable capital as compared to the constant capital, and consequently a continuously rising organic composition of the total capital. The immediate result of this is that the rate of surplus-value, at the same or even a rising, degree of labour exploitation, is represented by a continually falling rate of profit . . . The progressive tendency of the general rate of profit to fall is, therefore, just an expression peculiar to the capitalist mode of production of the progressive development of the social productivity of labour. This does not mean to say that the rate of profit may not fall temporarily for other reasons. But proceeding from the nature of the capitalist mode of production, it is thereby proved a logical necessity that in its development the general average rate of surplus-value must express itself in a falling general rate of profit.’[16]

It is just this indispensable basis of the Marxist theory of capital accumulation that Glyn and Sutcliffe have rejected. [17] In doing this they return to a Ricardian framework so fashionable at the present time. For them the most fundamental question is how the income generated by production is shared between capitalists and workers. Marx also had something to say about this. ‘The habit of representing surplus-value and value of labour power as fractions of the value created—a habit that originates in the capitalist mode of production itself . . . conceals the very transaction that characterizes capital, namely the exchange of variable capital for living labour power and the consequent exclusion of the labourer from the product.’[18] It also conceals the central dynamic of capitalist production. It is not the antagonism for the share of the net product that underlies the contradictions of capitalist production, as the radical Ricardians would have it. It is the constant requirement to increase the exploitation of labour as investment takes place in order that sufficient profits can be produced to compensate for the tendency of the rate of profit to fall. ‘The progress of the process of production and accumulation must, therefore, be accompanied by a growth of the mass available and appropriate surplus labour and consequently by a growth of the absolute mass of profit appropriated by the social capital . . . The same laws, then, produce for the social capital an increase in the absolute mass of profit and a falling rate of profit. [19] It is such a process that explains the growing international competition. Competition does not harm everyone’s profits (shades of Adam Smith!) but it is only the large, firmly placed capitals which can compensate for a fall in the rate of profit by a rise in the mass of profits. [20] It is the world-wide search for additional profits to compensate for the falling rate of profit that explains the growing intensity of international competition between large corporations, and the fight to divide and invest in the markets of the capitalist world. This is the effect of capital accumulation on a world scale. It is an effect that Glyn and Sutcliffe never manage to explain. [21]

The key factor, as far as profitability is concerned, is a rising productivity of labour, and hence a rising rate of exploitation. Both profits and wages can rise absolutely if productivity increases given the expansion of investment. After all, the ‘novelty’ of so-called ‘scientific’ management was to be that it makes ‘high wages and low labour costs . . . not only compatible, but . . . in the majority of cases, mutually conditional.’[22] This was why, in the 1960s, firms were prepared to offer large incentives in order to introduce productivity deals.

The view that there has been a decrease in the rate of exploitation over the 1960s period, is based on an equally incorrect theoretical analysis. The rate of exploitation has to be understood as a ratio of the surplus-value produced overall by productive workers to the wage of such workers. With the large increase of the public, financial and commercial sectors, a smaller and smaller proportion of workers may be regarded as productive in Marx’s sense. [23] It is just this point that is ignored by Glyn and Sutcliffe in interpreting their statistical data. This is all the more inexcusable when we take into account the fact that in Britain, for example, half of the labour force work in public services, the nationalized industries, or ancillary jobs in the public sector. Taxation would have to be counted as part of the surplus-value produced by productive workers and only the net real wages after tax of productive workers could be regarded as variable capital. Such a calculation would give us some indication of the enormous increase of the rate of exploitation since the Second World War. [24]

State Expenditure and the Crisis of Profitability

It is the growth of state expenditure that must be seen as one of the key factors in an explanation of inflation. Glyn and Sutcliffe do give some significance to the growth of government spending. They make the point: ‘As it became more difficult to maintain a high level of private investment, government spending has almost everywhere become more necessary to maintain high levels of demand and employment; but this does not solve the profitability problem.’[25] Indeed, in discussing the immediate period up to 1917 in Britain, they even attribute creeping inflation to government spending. [26] This proposition is in no way developed. What they fail to show is how ‘all the methods of state interference on behalf of capitalism contain their contradictions.’[27] In arguing that the state can only avert the pressure on profitability if it can neutralize its causes—wage increases and international competition —they confuse ‘cause’ with ‘effect’.[28] It is precisely the crisis of profitability that makes a growing state expenditure necessary. The contradictions of state intervention have to be located at the point of production of surplus-value and not in the distribution of national income. It is to such an explanation that we now turn.

State expenditure has played a significant role in maintaining social and political stability since the Second World War. State intervention proved necessary in the reorganization and expansion of capitalist production after the war. This process could not be carried out by private capital alone and nationalizations of basic industries and government subsidies to private producers, state expenditures on military and space programmes, as well as on welfare, education and social security have been a necessary feature of the post-war boom and the ensuing stability. The nature and limits of this kind of expenditure, therefore, is a vital question for Marxist theory.

The point about state expenditures is that they are financed and paid for out of taxes or by budget deficit financing and government borrowings. The latter contribute enormously to inflationary pressures as the money supply has to be increased and credit advanced to finance these expenditures. As interest on government debt has to be paid back, state expenditures financed in this way presuppose ‘future’ taxes and hence future profitability. In both cases, present or ‘future’ surplus-value is appropriated from private capital by the state in the form of taxes or loans to pay for these expenditures. This represents a decline in surplus-value available for private capital accumulation. This is so because state-induced production is ‘unproductive’ from the point of view of capitalism as a whole. Although state expenditure ‘realizes’ surplus-value, the products bought by the state do not function, in general, as capital, and therefore do not produce additional surplus-value or profits from the standpoint of society or total social capital. The finished products that the state buys are acquired with already produced surplus-value. The individual private capitalist producing for the state quite clearly gets the average rate of profit and ‘surplus-value’ is produced by his exploited workers. But from the standpoint of society, of total social capital, ‘unproductive’ state-expenditure constitutes a drain on capital. So the profit acquired by the individual capitalist producing for the state comes to him only out of a redistribution of the already produced surplus-value. The mass of profits produced is spread over a larger base and, therefore, the rate of exploitation must be increased faster than before such expenditure, in order to maintain the overall rate of profit.

We have as a consequence, the following mechanism. Private capitalist investment is insufficient to maintain full employment and social stability. The government must supplement production for the market with its ‘non-productive’ expenditure in order to take up the slack and reduce unemployment. But this is a capitalist expense indicating a latent tendency towards crisis, for government expenditure requires, indeed necessitates, deficit financing and increased borrowing which leads to inflation. This is because it is, in general, ‘non-productive’ expenditure and so increases the purchasing power in the economy without a simultaneous increase in profitable production. It has the same effect as that of too much money chasing too few goods. The price of commodities will rise and this includes that of labour power itself, which is, after all, a commodity. The inevitable increase of taxation in this period means that there will have to be a further rise in money wages in order that real wages can be at least maintained. In order that state expenditure can be financed out of surplus-value produced in the private sector of the economy, the rate of exploitation must be increased faster than before to prevent an actual fall in the rate of profit and a faster rate of inflation. The inflationary pressures are a necessary, albeit contradictory, part of the attempt to solve the crisis of profitability and stave off the tendency of the rate of profit to fall.

It is clear, therefore, that there are limitations to ‘unproductive’ expenditure and other government-induced demands in a capitalist economy. If production grows faster in the ‘non-productive’ sector of the economy than in the ‘private’ sector, the production of profit, or surplus-value, relative to total production, declines more rapidly than before. More surplus-value must be produced from a smaller base of productive workers in order that the tendency of the rate of profit to fall is checked. As long as the productivity of labour can be sufficiently increased so as to maintain the rate of profit and finance the non-productive sector, government-induced expenditure will indeed be the ‘cause’ of high employment and social stability. But this process is self-defeating: to cope with the expense of the non-productive sector the exploitability of labour must be steadily raised. This means a higher organic composition of capital and a decline in the exploitable labour force relative to the growing capital. To maintain a state of high employment indefinitely, the non-productive sector must increase faster than total production. But this implies a slow deterioration of private capital expansion which can only be halted by halting the expansion of the non-productive sector.

The increasing concentration and centralization of capital is, therefore, essential for increasing the social productivity of labour. Government induced production helps in this respect because the sheer size of the ‘state’s orders’ leads to a restructuring of capital in private industry. The enormous extension of credit facilities is necessary to finance the very large investment now needed to bring about the necessary and competitive increases in the productivity of labour. This extension of credit is based on expected future profitability. This has led to recurring liquidity problems now affecting large corporations, and in Britain, nationalized industries. (In the case of UCS this was a shortage of working-capital that had little relation to future profitability.) Nevertheless, this investment must continue on an ever-increasing scale if the mass of surplus-value to finance both the private and state sectors of the economy is to be forthcoming. If it is not, or if state-induced expenditure grows too rapidly and the necessary restructuring of capital is not achieved, then we can expect the latent crisis conditions to take the form of an actual crisis.

The increasing inflation in all capitalist countries is an indication of how far the problems have developed. In Britain this has resulted in an increasing role of the state in giving the lead to private industry in the process of rationalizations. The large expenditure programme on the nationalized industries involves the loss of thousands of jobs and there are State subsidies to private enterprise to encourage it to follow suit. The direct attempt by capitalist States to control labour relations through incomes policies, industrial relations acts, and other methods, are the political counter-part of the process. A ‘disciplined’ labour force and co-operative trade unions are considered essential if the rationalizations and increase in profitability necessary for the survival of capitalism are to be carried through. The continuing attempt to integrate the trades unions into the state apparatus represents a central part of this strategy.

In such a context we can understand British entry into the EEC. It is far from astonishing that ‘British capitalists (are) clamouring for entry into the market.’[29] It is essential for British capital to have full access to the markets of Europe if the restructuring of capital and rationalization programmes necessary for British capitalism to survive are to be carried through. Competition will not go away. There is no choice for British capitalism but to become part of Europe in a world of growing imperialist struggle. Only Europe can hope to compete with Japan and the United States in the new division of the markets of the world. It is the large efficient capitals alone that can survive. The EEC represents a further attempt of capitalism to break down the barriers that capitalism itself has created. The contradiction between social production and private appropriation finds its expression in the total inability of any European nation state to provide a framework for the expansion and accumulation of capital. The British ruling-class had no choice but to integrate and share the fate of European capitalism.

The Crisis of British Capitalism and the Crisis of Profitability

In this section we intend to indicate briefly how, for Britain, the facts give support to our analysis. Since its decline as a major imperialist power, the British economy has lagged behind the development of the other major industrial powers. It has therefore been at the forefront of the crisis of profitability. The entry into the EEC and the present Conservative offensive against the working-class, as we have said above, represent a last ditch effort of the ruling-class to stave off the present decline. One of the key factors in the relative decline of British capitalism can be seen in the small amount of gross domestic fixed capital formation (capital investment) as a percentage of the gross national product in comparison with other countries between 1960 and 1972.

The investment in plant and machinery in Britain was only about two fifths of total investment, that is, about 7 per cent of GNP. Investment in the private sector as a share of total investment fell from 58·5 per cent in 1962 to 53·4 per cent in 1969, with the public sector increasing its share.[31] As most public investment is ‘unproductive’ this would only increase inflationary pressures.

If we look at British investment overseas, we see a completely different picture. The outward movement of British capital was massive. Between 1962 and 1969 there was an increase of £3,425 million in direct investment abroad, £2,500 million in portfolio investment and £12,575 million in financial claims, the latter indicating the enormous role of the City in international financial affairs. Although foreign investment in the UK was also substantial, British interests invested abroad were nearly 70 per cent more than foreign interests invested here. This explains the great pressure on the British balance of payments. [32] The ‘stop-go’ policies of succeeding British governments in their attempts to solve the balance of payments problems only contributed to the relative decline of British capitalism and led to a very small rate of growth throughout the whole period. Table 2 gives the comparisons.

With this relative decline of British capitalism in the face of increasing international competition, it was necessary to increase government expenditure continually during the whole period in order to maintain full employment. This was accompanied by an increase in taxation and the rate of inflation.

So far we do not differ substantially from Glyn and Sutcliffe in seeing the main structural causes of the decline of British capitalism. It is from this point onwards that the differences in analysis become clear. Thus, Glyn and Sutcliffe say: ‘Leaving aside the post-war devaluation year of 1968, the faster fall (of the share of profit) between 1964 and 1970 can be almost entirely explained by the combination of changes in wages and world export prices and the continuation of the tendency for the wages increases to have a greater and greater effect as international competition intensified. Stagnation had little to do with it.’[34] Stagnation had everything to do with it. It necessitated an increase in state expenditure, an increase in taxation and a decline in the share of net real wages and salaries (after tax) in national income due to the rising inflation. The following statistics indicate this.

After 1968 government expenditure was more than half the gross domestic product and by far the largest part of that expenditure was on social services (around 42 per cent). Taxation had increased from 32·6 per cent in 1957 to 45 per cent in 1970. Net take home pay (after tax, insurance, etc.) as a proportion of national income, has actually fallen.

The figures for the growth of gross money, gross real and net real income (after tax) for men manual workers, are equally instructive.

This indicates how important it is to say exactly what is meant by an increase in wages or the share of wages in the national income. [38]

If we now look at the increase of productivity per man over the period we can see that net wages after tax grew at a slower rate than productivity in Britain.

Since 1962 the average has been about 3·8 per cent per annum. On the other hand, the average real net income increase per year for male manual workers in the same period was about 1·3 per cent and for all employees about 2 per cent. During this period the increase in inflation rates can be seen in Table 7.

Unemployment between 1954 and 1964 was reasonably low ranging from 1 to 2 per cent but since 1966 it has never been below half a million and by 1972 had risen to over one million (nearly 4 per cent of the labour force).[41]

What these figures show is that from the mid-1950s there has been rising government expenditure,[42] increasing taxation, a rising productivity of labour, rising inflation, rising unemployment and a redistribution of national income away from wage and salary earners (this in terms of net take home pay). In spite of this, the crisis of profitability has continued. Figures given by Glyn and Sutcliffe for the pre-tax rate of profit show a decrease from 16·5 per cent in 1950–4 to 9·7 per cent in 1970 and the post-tax rate of profit fell from 7·1 per cent to 4·1 per cent between 1964 and 1970. [43] Although these figures should not be confused with the rate of profit as defined by Marx, they do give an indication of the general tendency. Far from higher wages being the cause of the present crisis of profitability, it is an insufficient increase in the productivity of labour to finance profitably the private and growing state sector. Further, our figures suggest that an increase in the organic composition has taken place and a rise in the rate of exploitation. The former is indicated by the growing need to increase state expenditure to take up some of the increase in unemployment resulting from productivity increases. In spite of this unemployment has grown. The rise in the rate of exploitation is indicated by the productivity increases, the increase in the state and ‘non-productive’ sector, and the fall in net take home pay as a percentage of national income. The crisis of profitability [44], far from being caused by large wage increases, results from the contradictions of capitalist production itself which has its expression in the tendency of the rate of profit to fall. This tendency is indicated today by the rising state expenditure, the growing trend of unemployment and the increase in the rate of inflation.

When the Conservatives came to power they promised to ‘reduce prices at a stroke’. Their strategy was to cut government expenditure and reduce overall taxation. Their aim was to bring about a shake-out of labour from British industry in a process of ‘forced’ rationalizations at the expense of the working-class. They soon learnt to their cost that the contradictions of capitalist production cannot be removed at a stroke. The Conservative government which set out to cut public spending is now paying out £1·67 extra for every £1 it cut back on in October 1970. It is also paying out £1·30 in aid to industry for every £1 that Labour spent in its last year of office. Direct assistance to the shipbuilding industry alone on the past year was more than Labour spent in its last year helping all industry through the now defunct Industrial Reorganization Corporation. [45] All this was forced on the present government because a rising unemployment, together with inflation, threatened social stability.

The Conservative reduction in taxation made it the more necessary to increase government borrowing to finance the increase in government expenditure required. The total government borrowing needed in the year to April 1973 was £1,810 million, slightly lower than expected and in the year to April 1974 it is assessed at the huge sum of £4,423 million. [46] Such borrowing requirements lead to very high interest rates which only make matters worse by putting up the cost of private and local authority investment, house purchase, etc., and so adding to the pressure on prices. Part of this borrowing will not be met by increased saving and will therefore require an increase in the money supply and advances of bank credit, so contributing further to inflationary pressures. At the present time the rise in the money supply is still of the order of 30 per cent per year. Finally, the inflationary based expansions elsewhere in other capitalist countries has increased the demand for, and hence the prices of, basic commodities and raw materials. This has meant for Britain, a country that imports a large proportion of its requirements, another contribution to inflationary pressures.

The government’s strategy after the change in policy forced on it by the working-class response to its initial policies (UCS, the miners struggle), has been to turn to an incomes policy. Both the wage freeze and Phase II are an attempt of British capitalism to restore profitability at the expense of the working-class. The aim is to create a climate that will encourage private capitalists to invest and bring about a restructuring of British capital which will allow it to hold its own in the EEC.

The recent period has only confirmed the tendencies we have indicated. The freeze and incomes policy have brought a further redistribution of income away from wage and salary earners. Real wages have actually been falling for a considerable time as a result of rising prices, especially for food and housing (including rents). The government is also contributing to a restoration of profitability in another way, that is by its expenditure programmes for the nationalized industries.

Throughout the period the state has attempted directly to give a lead to private industry in the process of rationalization while at the same time supplying the basic inputs to private industry at a ‘reasonable’ cost. The massive reduction of the work force in the nationalized industries in spite of the large expenditures involved is the indication of this. The new expenditure programmes for the steel and coal industries only continue the general trend. The result of the enormous expenditure programme for the steel industry (£3,000 million) will be a loss of about 50,000 jobs and similar reductions are considered necessary in the coal industry. This is an attempt to make the working-class pay for problems inherent in capitalist production. The freeze on prices in the nationalized industries has left nearly all of them with large deficits. The government actually subsidizes them to the tune of over £500 million a year at the present time.[47] This, together with the increase in borrowing necessary to finance these industries’ new investment, only contributes to the inflationary surge. It is not surprising that, already, at the first sign of an expansion of the economy, cuts in government expenditure are planned.

There is, indeed, no better indication of the contradictions of capitalist production than the fact that with one of the fastest yearly growth rates of the British economy since the war and a 9 per cent increase in productivity in manufacturing industry, unemployment is still extremely high (over 600,000) and the real wages of the working class are actually falling.[48] With the balance of payment problems looming ahead this inflationary-led mini-boom only reinforces the latent crisis conditions. The imperative is to increase the rate of exploitation. Whether this can succeed depends on the response of the working-class.

 Strategy for the Working-class

 Unfortunately, what the recent period clearly indicates is that ‘militancy’ is not enough if the response to the offensive against the working-class is to be turned in the direction of a struggle about the system of production itself.[49] Economism, and the trade union struggle share the same ideological foundation as that held by the ruling-class. It is precisely this that has to be combatted politically. And, it is therefore not surprising that the faulty analysis in British Capitalism, Workers and the Profits Squeeze offers us little more than increased militancy as a way forward for the working-class.

We have shown that the working-class is in no way responsible for inflation. On the contrary, inflation together with increased taxation [50] has re-distributed net take-home pay as a percentage of national income away from the working-class. A demand that has real relevance in this situation and needs to be raised generally is that for ‘a rising-scale of wages regulated by housewife and trade union committees’. Such a demand calls for automatic cost-of-living increases on the basis of a working-class index drawn up by housewives and trade unionists. It not only ensures that the working-class is not made to pay for inflation, but it also begins to raise the issue of ‘control’ in a concrete way. It says that the working-class will decide, through its own representatives who experience the problem directly, what is the rise in the working-class cost-of-living. It would involve housewives directly in the struggle. And it suggests that the function of such committees should be extended to continued surveillance over prices. This could lead to investigations as to how and why price rises occur. It would show how the anarchy of capitalist production is the source of rising prices. From this the way forward points to the need to establish a society where the consumer is not faced with the continual struggle for existence that such anarchy dictates.

The rising-scale of wages clearly does not preclude fighting for increases in working-class living standards, e.g. claims for £10, etc, as at Fords, but is additional to them in the sense that it is a means for preventing the erosion of such gains by inflation. The demand should not be confused with threshold agreements which allow certain increases only after a certain rise in the cost of living (e.g. 5 per cent), and then are based on the government’s own price index. The working-class must not be deceived by such agreements which still put the main burden for price rises on the working-class. So long as the battle remains on a purely monetary level the working-class cannot win. No matter how militant the fight, any wage increase will be rapidly eroded so long as inflation occurs. Nevertheless to extract the demand for a rising-scale of wages . . . from the capitalists will involve the fiercest struggle which will necessitate the active involvement of wide layers of the class if it is to be successful. For it is a concession that the capitalist class will give only as a last resort. For what is posed is the struggle for control, the control of the working-class over the capitalists to the extent of preventing them running the economy the way they choose. It poses concretely the fact that the working-class are not prepared to take responsibility for capitalism’s problems. They want a stable and improving standard of living regardless.

We have shown how the cooperation of the trade-union leaders and their integration in the state apparatus becomes a necessity for capitalism in the present crisis. The Industrial Relations Act and incomes policies together with the ‘tripartite’ talks between the Government, the TUC and the CBI are all parts of this process. They represent capitalism’s attempt to solve its problems at the expense of, and possibly with the agreement of, the working-class. The State is no ‘neutral’ body but represents, as the present crisis has so clearly shown, the interests of the ruling-class. In the epoch of monopoly capitalism it is impossible for the unions to remain politically neutral or ignore the decisive role of the state. Therefore, the most important political demand that can be raised in relation to trade unions at the present time is for ‘the complete and unconditional independence of the trade unions from the capitalist state’. It is only on the basis of a strategy that incorporates this demand that the trade unions can be turned into instruments serving the interests of the socialist revolution.

It is in the light of this perspective that the demand for democracy in the unions requires a political significance. The trade union leaders do not involve themselves in talks with the employers and the Government to defend their privileges from the rank and file. Rather if their reformist political relations with the capitalist class are to survive, then the freedom of the rank and file must be curtailed. The very same shop floor militants who often share the reformist illusions of the Trade Union bureaucracy are driven by the material conditions of their lives to man the flying pickets and occupy factories. Their activity, especially with the development of factory occupations, raises practically, if not consciously, the whole question of private property. To set strict limits on this struggle is therefore a political necessity for a reformist trade union leadership.

To raise the social productivity of labour is an imperative for British capital if it is to survive in the EEC. The State has already begun the process of rationalizations in the nationalized industries and other investment programmes are planned or suggested which will mean large reductions in the work force elsewhere. The shipbuilding industry is the latest example. [51] The demand for ‘work or full pay’ is the only one that can seriously tackle rationalizations. It insists, once again, that whatever the problems of the ruling class, the solutions will not be at the expense of the working-class. The demand is, of course, not an alternative to militant struggles on the shop floor, e.g. occupations. Rather, it is an element which revolutionaries should seek to introduce into that arena.

Work or full pay cannot be fulfilled by the individual employer. In as much as the necessity for such a solution becomes rooted in the minds of the working-class it raises the question as to what form the solution should take. The demand is one which points to the capitalist class as a whole, through its agency the state, as those capable of fulfilling the demand, and thus directs the attention of the class to the true nature of the enemy—as a class that wields state power. It is not difficult to argue that any society worth a light would be able to provide such a minimum need. And if their society cannot provide it a socialist state would.

We indicate by raising this demand that we are not against an efficient organization of production as such, just as we are not against machines as such—we are against the effects of rationalization under capitalism. The question is: who benefits from rationalizations? Why do increases in the social productivity of labour lead to redundancies and not to an overall reduction in the time necessary to work and so on? The demand allows the alternative of planned production for needs to be discussed and raised. It is only demands such as those discussed above that can carry the class struggle forward in the direction of a political struggle about the system of production itself.

What we have tried to show in this review is how a Marxist analysis of capitalism has vital implications for the class-struggle. If we have been extremely critical of Glyn and Sutcliffe’s book, it is because of the seriousness of the task they set themselves. Their book had the great merit of making a discussion of the capitalist crisis an essential part of the search for a socialist political strategy. The information they gathered together in their book will be indispensable for future work. If this review can contribute to a discussion of the central ideas they have raised, they will hopefully appreciate its critical tone. May 1973

Notes

[1] Penguin Books 1972, 40p.

[2] Ibid., p. 215.

[3] Ibid., p. 214.

[4] Ibid., p. 201.

[5] Ibid.

[6] Wilfred Beckerman ‘Inflation and the Class Struggle’ in the New Statesman, 8 December 1972, p. 858.

[7] Glyn and Sutcliffe, op. cit., p. 201.

[8] Ibid., p. 10.

[9] Ibid., p. 98.

[10] Ibid.

[11] Ibid., p. 65.

[12] Karl Marx, Capital, Vol. I., Lawrence and Wishart, 1961, p. 620.

[13] Glyn and Sutcliffe, op. cit., p. 180 and pp. 209-10.

[14] Karl Marx, Theories of Surplus Value, Volume 111, Lawrence and Wishart, 1972, p. 312.

[15] Glyn and Sutcliffe, op. cit., p. 231.

[16] Karl Marx, Capital, Vol. III, Lawrence and Wishart, 1962, pp. 208–9. For a detailed discussion of this question see my article ‘The Marxian Theory of Crisis, Capital and the State’ in the Bulletin of the Conference of Socialist Economists (CSE), Winter 1972, pp. 5–58, especially pp. 15–32. The article is reprinted in Economy and Society, Vol. 2, no. 2, May 1973, pp. 186–232.

[17] Andrew Glyn has, in fact, written an article which attempts to show on the basis of a ‘corn’ model that the organic composition need not necessarily rise with increases of the productivity of labour. See CSE Bulletin, op. cit., pp. 93–104. For a criticism of this model see an article by Robin Murray in the CSE Bulletin, Spring 1973, pp. 53–5.

[18] Capital, Vol. I, op. cit., p. 533. While Glyn and Sutcliffe do not deduce ‘a false semblance of association’ from their method, nevertheless in seeing in the division of income between capital and labour the most fundamental question they obscure the central issue, op. cit., p. 54 and p. 57.

[19] Capital, Vol. III, op. cit., p. 214 (translation taken from C. H. Kerr, ed., Chicago, 1909, p. 256).

[20] Ibid., p. 251.

[21] It surely must be regarded as a piece of outright impudence that Beckerman, clearly no expert in Marxist political economy, is able to get away with pointing out to the authors the ABC of Marxism on the question of competition and the rate of profit. It underlies the weaknesses that exist throughout the book. See New Statesman, 5 January 1973, p. 16. Glyn’s reply to Beckerman (New Statesman, 12 January 1973, p. 51) shows he has still not understood this point.

[22] F. W. Taylor, Sbop Management, 1903, pp. 21–2. Cited in Alfred Sohn-Retel ‘The Dual Economics of Transition’ in the CSE Bulletin 2,2 Autumn 1972, p. 43.

[23] See my article, op. cit., for a brief discussion on productive and unproductive labour. pp. 11–14. See also Ian Gough ‘Productive and Unproductive Labour in Marx’, New Left Review 76, November–December 1972.

[24] As I pointed out in my article I consider the practical difficulties involved in making the separation of productive and unproductive labour well nigh impossible, op. cit., p. 14.

[25] Glyn and Sutcliffe, op. cit., p. 73 and pp. 100–101.

[26] Ibid., p. 22.

[27] Ibid., p. 49.

[28] Ibid., p. 176 ff.

[29] Ibid., p. 172.

[30] These figures are approximate and are taken from the Economist, 31 March 1973, Survey on Japan, p. 15.

[31] Taken from Politics and Money, Vol. 2, no. 2, April–May 1971, p. 11.

[32] Ibid., pp. 7–8.

[33] OECD, The Growth of Output 1960–1980, 1970, p. 220. Cited in Andrew Gamble and Paul Walton ‘Late Capitalism in Crisis’, Issac Deutscher Memorial Lecture, Manuscript p. 21.

[34] Glyn and Sutcliffe, op. cit., p. 65.

[35] Taken from National Income and Expenditure, CSO Office, 1957–72.

[36] Cited in Politics and Money, Vol. 4, no. 1, January–March 1973, p. 30. National income is defined as gross national product less capital consumption.

[37] Taken from Dudley Jackson, H.A. Turner, and Frank Wilkinson, Do The Trade Unions Cause Inflation? Cambridge University Press, 1972, p. 66.

[38] The figures for all employees show a higher real net income growth (1964–8, 1·2 per cent; 1968–70, 3·4 per cent). This is an increase of nearly one third as much again over the period as increase for male manual workers. The difference is due to the price index used. The one for male manual workers reflecting the cost of wage earners consumption which includes a greater proportion of food and housing expenditure, ibid., p. 67.

[39] F. W. Paish ‘The Prospects for Increasing Output’ in Lloyds Bank Review, January 1973, no. 107, p. 1.

[40] Jackson, Turner and Wilkinson, op. cit., p. 122

[41] Glyn and Sutcliffe, op. cit., p. 178.

[42] It should be remarked that although a great deal of government expenditure is on social services, this still has to be regarded as coming out of gross profits. It is the real net wage of productive workers that constitutes variable capital. The rest is a cost that private capital must pay for social stability, etc. As such goods are paid for out of surplus value already produced (taxation, etc.) their production does not add to total social capital and hence to surplus-value from the standpoint of society. They are a capitalist expense even if unemployed workers and others benefit from such expenditure.

[43] Glyn and Sutcliffe, op. cit., p. 66.

[44] The authors acknowledge in the postscript of the book that in the recent period ‘part of the gain in profitability came from the large increases in productivity (6 per cent in 1971) which was a result of the continued surge of redundancies’, op. cit, p. 217. The recent rise in the rate of profit (in the sense used by the authors) is clearly due to large productivity increases.

[45] Economist, 7 April 1973, p. 11.

[46] Politics and Money, Vol. 4, no. 1, op. cit., p. 10. and the Economist, 12. May 1973, p. 65.

[47] Economist, 5 May 1973, p. 73–4.

[48] Economist, 5 May 1973, p. 73, and 12 May 1973, p. 65. Already for December 1972 The Times reported a slight fall in average pay for manual workers (22 February 1973). While the retail price index has increased by 3·4% from October 1972 to March 1973 (and by 4·7% to April 1973), basic hourly earnings over the same period have increased by 1·3%. Average earnings from October 1972 to February 1973 increase by 2·1%. (See Labour Research Bulletin, vol. 62, no. 6, June 1973, p. 143.) The Economist (26 May 1973, p. 67) confirms this view. Retail prices increased by 4·7% in the six months after the freeze whereas average earnings to March were up by only 3% since the freeze. This is to be compared with the real rise in take home pay in the previous year due to the overall reduction of taxation in 1972. Many workers, however, did not benefit from this rise as they were caught in the freeze at the time their wage increase was due. In a recent contribution A. Glyn suggests that the rise in living standards for 1972 was nearly 7% although he holds the view that a fall in workers’ living standards of the order of 1% or 2% is likely in 1973 (CSE Bulletin, Spring 1973, p. 52). It is too early to assess the significance of these changes although the general trend of increasing labour productivity, well above the rise of real wages, is clear.

[49] It should be noted that as far as militancy goes the British working-class, if strike statistics are anything to go by, was not exceptional. See Anthony Barnett ‘Heath, the Unions and the State’ in New Left Review 77, p. 24ff.

[50] Marginal tax rates for the working-class have also risen because tax-free allowances have not grown as fast as inflation.

[51] See article by John Fryer in the Sunday Times, 20 May 1973, p. 60. The possible redundancies run from a level of 23,000 jobs to 11,000 depending on the level of support the industry receives.

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