The great flourish with which "The National Plan" was brought forth by George Brow has, duite rightly, been greeted with some caustic comments, and indeed even vulgar raspberries in certain quarters. That this should happen is not surprising, because any careful reading of the document shows that it is easily faulted. However, despite the fairly obvious failings that most of the professional commentators have seized upon, this plan will make sense , given an insight into its underlying strategy. Behint the rhetoric about "getting Britain moving", modernisation", and all that, there is one very plain fact. It is thisthat the Wilson Government does not intend to take even one small, tiny step towards a socialist solution to the problems facing Britain,
This journal has consistently warned about the dangers inherent in a prices and incomes policy within the context of a market economy. What the plan reveals is that this policy is central to the neo-capitalist strategy of the Labour Government. Therefore, discussion of the plan is not possible without also reviewing — connected aspects of government policy up to the present.
British capital today is in the grip of a profound crisis of situation and. orientation, the elements of which have been developing since at least 1945. Firstly, it suffers a crisis of empire, as a result of the loss of direct control of large areas of the colonial world, and also the gradual loss of trading preference in most of the Commonwealth and other Sterling area countries, This has been highlighted by a decline in Britain's share in world trade, and a decline in the volume of Sterling area trade. Secondly, there has been a failure to maintain Sterling as a really viable reserve .currency in its ow right. Keynes, in 1945, spoke about the pound, looking the dollar in the eye. For this to happen, it was necessary to build up the British gold and dollar reserves. Pre- var, Britain's short-term liabilitfés overseas could be matched by its reserves, Post-war, these short-term liabilites have been running to about 4- 1 against the reserves. This has egendered perilous instability, the fruits of which were seen last November, when, far from looking the dollar in the eye, the pound was abjectly cringing at its feet. Thirdly, there has been a continuation of long term structural changes in the British economy; These have two aspects. The first one is that of regional stagnation and decline, which was initially somewhat masked by the immediate: post-war boom, but which since has emerged as a persistent factor. The second aspect is the concentration and centralisation of the ownership and control of wealth, This is expressed in the growth of the giant firms, with an attendant monoPlisation of industries, and an integration between industrial and financial capital. This process is, of course, intimately connected with the growth sectors of the economy. Fourthly, there has been a clear cycle of production, Cycles have been approximately of four years duration, which indicates a speeding up of this process within the capitalist economy. This can be attributed to a combination of state intervention, via monetary, fiscal measures, and increased public expenditure, with the accelerated rapidity of technological obsolescence in the newer and advanced industries, particularly those connected with defence, The speeding up of the cycle has had the effect of smoothing it out to some extent, because of the time lags involved bet¥een investment decisions and their coming to fruition,
This has produced the stop-go economy, which has been, not one of boom and deep=going slump, but one of boom and stegnation or mild recession,
However, all this has led to a sluggish economy, persistent inflation, private opulence(for some) and public squalor. The use of Keynesian measures to rectify this process came home, with its brood of problem , to roost last autumn, At the same time as we consider this story we must underline another aspect of the problem, While, on a world scale imperialism has been in retreat and decay, and on a national scale, certain sectors of the economy are stagnating, other sectors are growing and developing. Capitalism has a dynamic of its own, even in decay, and this engenders its own problems and also its own solutions,
Unless socialists pose socialist solutions, neo-capitalist ones will be imposed, This is the essence of the present debate around Labour's policies. What had the Labour Government done up to the publication of the Plan? If we itemise the economic measures, they will help to map out the line of march that the plan projects forward in detail.
1. Raised the Bank rate to 7&(since reduced to6%) and initiated a
credit squeeze,
2. Raised the standard rate of income-tax by 6d.
3. Raised the tax on petrol by 6d.
4. Introduced Capital gains tax.
5e Brought in Corporation tax,
6. Raised National Insurance contributions.
7eRaised the tax on tobacco.
8. Increased tax on wine, spirits and beer, .
Imposed 15% surcharge on imports(since reduced to 10%)
9e Extended export credit facilities
10. Abolished tax relief on business entertainments,
11 Raised pensions and other welfare benefits(belatedly)
12. Cancelled the TSR2,.
13. Taken some steps to curtail the outflow of capital.
14. Raised loans from overseas banks, and put the economy in pawn,
Taken together these measures represent a hefty deflation of demand especially if we also take into account Mr. Callaghan's July measures, which put a squeeze on consumer credit and rephrased public investment(which is a polite term for cutting it). Th se who argued that the April budget was not deflationary will soom be eating their words, Taken together, aptinieee measures add up to a net withdrawal of approximately £500 of demand from the economy, which, by anyone's book, is a large amount. It is even larger if we take into consideration its miltipler effects, which could give an ultimate deflation of something in the region of £7-900 million, (Ultimate, because the full effects of the tex changes won't be operating until next year.)
In assessing what has happened it is important to remember the sequence of events. When Babour assumed office there was already a very heavy deficit on the balance of payments, which was running in the order
of £800 million a year. Moreover, there was a more-than-usual aggravation of the problem, partly due to wage increases and partly due to rising import prices, What has to be noted is that a large part of the deficit was made up by the export of long-term capital. This was around £400 million, being nearly double that of previous years. No doubt the prospect of a RBabour Government being elected in October helps to account for this.
The raising of the petrol tax and the imposition of the 154% import surcharge were the first measures which the Labour Government took to help remedy the situation, However, far from gaining the confidence of the 'Gnomes of Zurich!, they seem to have precipitated a flight from Sterling. This has been compared to the bankers! ramp of 1931 in some quarters. But the difference in the two situations is very marked, Whilst private speculative funds moved out, the Central banks of Europe and the U.S, came to the aid of Sterling, There have been sone lessons learned since 1931. The collapse of the pound could have, and almost certainly would have, led to a collapse of the dollar, which would have engendered a crisis of tremendous magnitude throughout the capitalist world, This is the difference from the 1931 situations whilst it is true that intercapitelist rivalry and competition is increasing on an international scale, it is also true that there is now a great fear of any repetition of the type of collapse witnessed in 1929-33, Therefore we have the spectacle of Britain's competitors and rivals coming to her aid on an unprecedented scale.
It has been suggested that what the Labour Government should have done to have righted the balance of payments was to have devalued the pound. This seems, at first sight, to have considerable merit in the eyes of those who wish for a vigorous assault on the 'City'= and hence on the bastion of British capitalism. Devaluation, it is suggested, would have ended the dominance of the 'City' and given British exports a competitive edge in world markets, But the truth is that there is no longer a sharp division between financial and industrial capital. The 'City', today, is only one of many bastions that have to be stormed. AS to the'effects of devaluation on exports, these would be two-sided. Firstly, it would lower the price of exports to overseas buyers, But secondly, it would raise the price of imports, The idea of the advocates of devaluation is to stimulate exports and cut imports, and in the process close the deficit gape It might have been possible to have mitigated the rise in the cost of living that this would have entailed, by price controls and subsidies for essential foods, but these measures cannot be introduced overnight, and there would necessarily have been a time-lag, This would have entailed a bigger assault on living standards than has already taken place, There were other crucial reasons for not devaluing last October, It might have had only marginal effects on exports, The success of devaluation depends on two things. One is the elasticity of demand for the goods and services supplied by Britain. Devaluation would presuppose that it would have been possible to sell sufficient goods abroad to cover the difference between the old value and the new lower one, plus enough to cover the trade-gape Even if we grant that there were sufficient buyers, there remains the supply position. In a situation where the economy is running at full, or near full, capacity, the problem of increasing the quantity of goods for export is not an easy one to solve in the short-run. And this was just the position that Britain was in last October. Had devaluation been undertaken it was quite likely to have worsened the
position of the balance of payments.
The 15% import surcharge was the most direct method that the Labour Government took to remedy the crisis in the balance of payments, and it does seem to have had some effect on imports, But was this the right choice? There are a number of reasons to think not, It would have been much preferable to have imposed import quotas. Such a step would have involved physical planning. The fact that the surcharge was chosen gave some clear indication as to the Labour Government's predilections, The use of the surcharge can be sharply faulted, because it is a blanket -regulator, making no distinction between essential and inessential imports(leaving aside those food and raw materials which are not affected) ~falling indiscrininately on manufactured and semi-manufactured goods. These are the categories of imports which have been rising the fastest over the last few years. Ever so many of them are essential, since British firms are unable to meet the demand, for example, for computorse Those that do come in now, allowing for the check in their import, are helping to push up costs, and thus prices, Uncertainty has also been introduced for many importers, beaause they don't know how long the surcharge is to continue. This has produced some very unfavourable reactions from Britain's trading partners, especially those in the EFTA countries, which can be explained by the fact that they become uncertain as to whether or not they should try to absorb the surcharge, or part of it, instead of passing it on to their customers, If they absorb, this means that the surcharge is having no effect upon the British balance of payments, but of course it also eats into profit margins. Socialists may shrug at this, but the fact remains that so long as Britain has to trade with other capitalist nations(indeed any other nation) it needs to do so in a way that will not invite discriminatory retaliation. This has not happened so far, but no-one says it won't if the surcharge is maintained for very long. Indeed the French attitude to: the recent loan cannot wholly be put at the feet of an obstinate old man,
The use of import quotas would have been much more effective from all points of view, It could have been the first step towards effective planning. Such quotas could have been applied in a discriminatory way, so that essential materials would not have been affected. Furthermore, with price controls enforced, quotas need not have pushed up costs in Britain. Lastly, they would have probably not distressed the EFTA countries.
The next item that needs to be looked at is the Bank rate, and the credit squeeze. i/e have been told that the original 7% Bank rate was necessary to engender confidence abroad, but the plain fact is that this confidence was not, and still is not, forthcoming from the holders of thot money',i.@.private, speculative, shorteterm funds. Why else is it still necessary for Wilson to make threatening noises about speculators and then immediately go dashing off to see the Lord Mayor of the City of London? The use of this discredited method of controlling investment, the ineffectiveness of which was amply demonstrated in the Radcliffe report of over six years ago, is a continuation of Tory policy, Moreover, as socialists, we are bound to oppose a method that substitutes the priorities of the market-place, that is, those with the biggest purse, for those ef social need. The famous promise for lower interest rates for house purchasers, seems to have been quietly interred, along with
many of Labour's other el@ction promises. It is of little use talking about expanding house-building by local authorities, when at the same time present interest rates are placing a crippling burden on such projects. The present rent-struggles in the London area are the fruits of long years of high interest rates, and this policy continues the trend We mentioned earlier the reasons why the foreign Central Banks came to the aid of Sterling. These very reasons gave the Wilson Government a a ver¥trong hand, holding which they could have refused to follow the dreary deflationist path they have chosen. However, to play it also needed a strong nerve! In the event, whilst Mr. Brown has been chirping about expansion, all the foundations for growth have been undermined by the policies that Mr. Callaghan has pursued at the Treasurye
The April budget was thus a deflationary one, as is clearly being borne out by events, It is true that a capital gains tax has been introduced, but at a lower rate that the standard rate of income-tax. This is not a partictlarly socialist measure, and despite weeping and wailing, the more far-sighted of the capitalist sections class probably see it as a necessary price to pay for an incomes policy. The Corporation tax will probably only bring in a little more than existing company taxation, Neither of these taxes are in amy way an assault on property incomes. They are merely a rationalisatim of the existing tax structure, In the same way, the hesitant steps that have been taken to put a mild curb on overseas investMent easily come within the ambience of the present framework, They place no control over the direction of the flow of investment, but merely moderate it to help the current balance of payments problem, What will have to be seen is how such policies affect the development of the Third World, and what the result will be for Britain's trading position. The emphasis, now prevalent, upon quick returns for overseas investment, could probably lead to further distortions of the economies of the underdeveloped countries, All in all, these add up to a bad set of measures, sickening in their timidity in the face of the interests of the property ownerse The imposition of more taxes on beer and tobacco was extremely regressive, and follows the worst traditions of the Tory Chancellors. This type of tax falls heavily on the low-wage worker and the pensioner. However, the budget was presented as being 'fait!, in order to sweeten the pill of the incomes policy. This is the crucial core of the whole complex of neo-capitalist solutions which have been reve@ted in the ‘National Plan',
In this context, we may turn to consider 'The Plan'. The idea that this document is a plan in any meaningful sense of the word Sissolves at once on inspection. ‘hat we have is a whole series of projections based very larg®ly on present trends. Such forecasts the NEDC has attempted in the past with only minimal success, ‘at is presented is a model of indicative planning, "indicative" in the extreme, in which there is little or no hint of any real attempt to control the ecomomy, still less give it new goals, The principle element of the work is the shallow hope that by 1970 there will have been a 25% growth in the national income. The whole document is burdened by a narrow ‘national! teconomict rationale which shunts around global figures, and in the process sweeps the class nature of the economy under a corner of Mr. Brown's rug. There is no single hint in the whole document of a socialist challenge to the present capitalist social priorities, Just the reverse={"Most manufacturing
verned by the
and will continue to be, —— the complex
t 2). “Care will be taken not to oe ener inne
peer EE AE ey economy is repels wf ae nF couniakt~ mechanism ; the market economy is an 4 adic thosede pig ae eng oe Brn + seem very bewildering to
2-2" (page 3)2 This mus ea of socialist pes tbo Frey who had previously agg os aee pacar s market economy" Scsulpaueran'SeTiEae "aie talbe ease Gatlin ican ties bee pepbiead the hone Surely it is reliance upon these very are A UL geet eagtenadli the country is in today? Yet we are to =- "Sometimes
oes further fe)
ment is to preserve them! But Mr. Brow g the forces of competi tion; Government action may be required to strengthen toeed® tee
nst restrictive practices.
eset ope Bhd Thales Suitedes ieee — that one! We have the spectacle
och Powell must have chuc
on an allegedly socialist government marching forward under ee i competition, when the whole concept of competition is at varian i abintelitnes elementary socialist concept of co-operation. The idee that soci en can be left to the mercy of market forces is an anathema to this i " °
"The first stage in making a plan is to find out the facts, not simply about the past but about the future intentions, potentialities and problems", With this we might agree = but did the Department of Economic Affairs really find out the facts? Did it go to the Old Age Pensioners and ask them what their requirements are? Did it g0 to the homeless, the newly married, the overcrowded, and ask them what their requirements and needs are? Did it g0 to the parents of children who suffer slum schools) Did it s to the dockers and ask them how they thought the docks should be reorga= nised? Did it go to the isteelworkers for their opinions on the failings of the steel industry? Did it? Did it hell! To have undertaken such an approach would have required a determination to. overthrow "the complex mechanisms of the market economy.e" Instead, the whole approach has been an
industry and commerce iS,
controllers of wealth and Property in this country, and asking them what needs to be don> for them. Who, for instance, has decided that there ought to be 18 million vehicles on the roads of Britain in 1970? We all know that the giant car firms want to sell that many. That's what they are in business for, But do we need that many? of course, if your vision of socialism is that of every family in the land sitting in Mini's, in traffic jams, on Bank Holidays, then such items won't unduly concern youe Even if such an increase in vehicles was desirable, the plan only allows for a 40% increase in road building, while the road traffic will have increased by 50%. We might ask, what sort of planning is this? We pick such items at random to illustrate the type of thought that has gone into this compilation,
However, we said earlier that there is &@ certain logic in this document. This comes most clearly in those secti isation, investment and labour, RATIONALISATION
"British industry faces the problem of its production units compared with those in the countries,...The scale of operations is very important to competitive survival and this seems likely to involve @ considerable reorganisation of the size of the units of which British industry is comprised, While the
the small size of many of
United States and some other
initiative in helpin against greater effi be asked is for what
& to bring them about" (p.8)
ciency on technical gr
ends is it Sought,
« Now no-one will argue
“pus but surely what has to
who benefits? Since most of the ct ll — in private hands what is projected here can only cient Ages ee and centralisation of Capital, with all the control, Such mergers of the market economy", but they will greater expl ation and intensified The idea here is that the oligopolies s edge outwards to overseas markets, but will in fact have a captive market at home. Should we as socialists oppose these type of mergers? Obviously not, but we must demand that benefits from this process be channelled to the community. Only social ownership and control can do this.
Coupled with this scheme of rationalisation, it is proposed that investment in manufacturing industry will be stepped up at the rate of 7% a year, Slotted in with this as a projected rise in productivity, but this will be at a greater rate than the investment 4 allows for, Even allowing for the increase in the labour force that is envisaged, this means that what is intended is a rise in profit rates to cover this, Two things need to be said here. Firstly, that ne projected rate of growth in productivity, 3.2% per head per me s i much faster than the rate of growth over the last decade. sou achieve both the projected rate of investm@t and productivity Re a oe mean that there will have to be considerable speed up and etna . of labour in industr, The dilemma that is posed is highlig oe the expectation that there will still be a labour shortage FE a po Leaving aside the extreme doubts that there are that these proj
i r the working-class in such a will be achieved, the central question fo Sin Aeon ad situation will be, given that 08 on th fe Hee Ried eee
safeguards established in the past, wha ‘ editpaedt The plan is silent on ah the ieek cotiee enigpeee 1
tion, but apparently on the 7
pa menadianemviersstnaey et pad will be getting even richer and more ee is at this point that the in mes policy oF ft Sev Reeee 0 becomes of vital importance to its plams. Without . ey EEE Me docile and hamstrung, one that is prepared to accep gp
: j e shooting up, there can be no hope of . wages while profits ar has threatened to introduce legislation to bo pepe scene, *het throughout all the discussion ayia eee regi no mention of profit or dividend Tiere ioe SF c2 Panis +
‘ n the
soins age ee SS at oe een, e> cajole them into doing so, the pon i will have to be emasculated. : proutbo ates poe this light it becomes clear that, for the unions, oe s lled 'Han' is nothing but a hoax, “gr from paving the gerd es
: rm
re ae pS wo taneccp coMaTReN WEtetaatt wat to the neo-capitalist Fortunately, there are sefly, we set them out in outline. ones offered: ‘by the Government. "Brier ty tart of the process of These immediately practical s eps would be the sta
do so in a way that enables a
alienation of the worker/consumer,
hould turn their competitive
carrying out the social transformation of Britain, TO SOLVE THE BALANCE OF PAYYENTS
es
1, A drastic cut must be made in overseas militry commitments, and
en end put to the "East of Suez folly.
2. It is necessary to make wide import quotas, and to bring about
an expansion on a wide scale of government overseas tradin
based on long-term contract both with buyers and sellers,
3. Compulsory acquisition of British overseas assets ly the Government
is required to enable it to mc ilise adequate reserves.
4. We must put an end to private overseas investment- when we talk
about use of resources let the government really control or direct
their use,