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From The Notebook, International Socialism (1st series), No.26, Autumn 1966, pp.6-7.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
John Palmer writes: The balancing act has failed. Wilson has sent the economy spinning from its perilous high-rope poise into what might prove to be the sharpest of the postwar recessions. Faced with relentless pressure from the bankers – and latterly commercial and industrial holders of sterling – Wilson has sanctioned savage deflationary measures which, coupled with the Selective Employment Tax and the liquidity squeeze on the banks, could take £1,000 million out of the economy. This is in addition to the £500 millions already subtracted in the three previous ‘tough’ budgets since Labour came to power in 1964.
It is worth recalling that the one main reason for continuing ‘pressure on the pound’ was – and is – awareness that there is still a balance-of-payments deficit and that it will not be righted until the end of next year, even on an optimistic assumption. As long as the deficit persists, holders of sterling – British and foreign, and the central banks who lent Wilson about £1,450 million to help maintain the parity of sterling – fear that the Government may at last surrender to pressure for the ‘easy way out’ – devaluation.
Indeed, there are voices in the Labour leadership that have argued the case for a long time and now fear that if the present measures do not work, the Government may have to devalue in any case by the end of the year and have to devalue more radically than would have been necessary at an earlier date. It is also worth recalling that the deficit this year will be considerably smaller than two of the biggest contributing factors to the deficit – military expenditure abroad in foreign currencies (currently at £258 million) and private investment (currently at £160 million). The Labour leadership – like the Tories before them – have concentrated purely on the export/import gap. The expansionists among the leadership believed that export incentives plus wages planning would in the end produce a big enough increase in exports to cover the bill for imports, private investment and military spending. The bankers were not happy however to wait for that indefinitely, especially since the date for balancing payments is being put further into the future by Callaghan. Wilson has now adopted the alternative strategy for increasing exports – the same strategy which, in the hands of the Tory Government, he so viciously attacked – squeezing the home markets until a section of manufacturing employers find it even less profitable to produce for domestic consumption than for export markets.
Thus we face two to three years of stagnation/recession with this time (unlike 1961) the odds on an actual loss in gross national product. The initial impact on employment will put about 500,000 on the dole by next February. There is every indication after then of a secondary wave of deflation, as investment and expansion plans are cut back – particularly as a result of the Selective Employment Tax and the credit squeeze. The Department of Economic Affairs officials and TUC economic department are, apparently, convinced that this could take unemployment within spitting distance of one million by the winter of 1967/68.
This means that the Labour leadership has contradicted its major election promises and on its prime article of faith – the maintenance of full employment. Although the plans for modernising and rationalising British capitalism will now have to proceed at a slower pace, the Government and the employers will exploit to the full the stronger strategic position they will find themselves in as unemployment rises. Already reports are coming in of a new and much tougher stand by the employers on the questions of rates, manning and productivity. They even feel confident enough at a militant and highly organised factory like ENV in North London to seek a showdown with the stewards and attempt to get all the agreements of recent years completely scrapped. As the impact of the recession begins to bite, the tempo of political and industrial struggle is significantly sharpening. More than ever the premium will be on demands and organisations which will transcend the debilitating fragmentation of much working-class opposition to Government policy. Central to any programme of opposition must be the demand that the Labour Government provides jobs for all those put on the dole by the employers – or else provides full pay and free retraining. At present Wilson’s talk of redeploying Labour is a deceit since there are only places for about 38,000 in Government retraining centres. We must also unite tenants and others fighting the housing effects of the credit squeeze and high interest rates. We must demand that the payments gap be closed by withdrawal from (not economies in) Britain’s imperialist military commitments abroad, and by bans on the export of private investment capital. Nationalisation of the City and the exporting industries is a corollary of this. British capitalists own £11,000 million in private investment abroad – £3,000 millions of this in shares (mainly in the US). This latter should be sequestered by Labour to meet our surplus import bill and stop working-class people paying for the present crisis, for which they bear no responsibility.
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Last updated: 21.12.2007