Friday 11 October 2019

The Rule of Unelected Ruling Class Judges - Part 9 - Conservative Social Democracy v Progressive Social Democracy (1)

Conservative Social Democracy v Progressive Social Democracy (1) 


In the period between WWII and 1974, the long wave uptrend saw an expansion of large-scale socialised capital. It went in hand with a growth of the social-democratic state at both the national and international level. The social-democratic state expanded to increase the extent of planning and regulation of the macro economy, both nationally and internationally. The growth of socialised capital also involved a significant increase in planning and regulation at an enterprise level. On the one hand, the process of creating conglomerates brought together the productive-capital of a range of associated industries, often as part of a process of vertical integration, so that productive-capitals bought out their suppliers, and their industrial and commercial customers, not only, thereby appropriating the profits of these other capitals, but also facilitating the planning of required inputs, and sale of outputs. 

This latter process is itself only possible when capital, at an enterprise level, reaches very large sizes. Otherwise, as Marx describes in Capital, the benefits gained from taking over a supplier, in terms of the additional profit, is more than lost, in the fact that economies of scale for that supplier may be lost. In many spheres, this requirement to produce at scale is another reason that the social-democratic state must itself expand so as to take on, or organise production in new technological spheres, where the market initially does not exist to encourage individual capitals to enter production. In the US, the state, via NASA, promotes the development of the space industry, in Europe, the EEC/EU promotes the atomic energy industry, and so on. 

At an enterprise level, it is also manifest in the creation of the multinational corporation. The development of MNC's was conditional on a number of factors. Firstly, corporations had to grow to a sufficiently large size, with multiple plants, that they could develop the form in which a central headquarters acts as a bank, allocating capital, to its associated units, and thereby also acts to plan investment and production. Secondly, it requires the sufficient development of global telecommunications systems so as to be able to coordinate these activities across the globe. Thirdly, it requires that capital is able to become rootless, separated from the nation state, and able to be invested anywhere on the same terms, as any other capital, and with the same property laws, and protections as provided by the nation state. This is one reason that the US, after WWII, insists on the dismantling of the colonial empires of Britain, France, Spain, Portugal etc., and the systems of colonial privilege and market access that went with them. It is what establishes imperialism as a global hierarchy of states, based upon rules that these states then enforce. 

As the period of long wave uptrend came to an end in the 1970's, these conditions came under strain. The US, had amassed large budget and trade deficits. Part of that was its spending on the Vietnam War, another part was the spending on expanding its welfare state, as part of Johnson's Great Society. The global currency system was based on fixed exchange rates, pegged to the Dollar, as global reserve currency. The Dollar itself had been pegged to gold, at Bretton Woods, at a rate of $30 per ounce. But, the US had printed huge amounts of Dollars to cover its spending and payment of debts, so that this relation to gold was pure fiction. When De Gaulle insisted that US debts to France be paid in gold rather than increasingly devalued Dollars, this fiction was exposed. Richard Nixon ended Dollar convertibility to gold, and made it illegal for US citizens to hold gold as bullion. The global rules based system of imperialism, thereby, came under attack from the US, which broke this basic rule under which the system had functioned for nearly 30 years. 

The result was that the global monetary system itself went into crisis. The Dollar price of gold went from an official price of $30 an ounce in 1971, to $800 an ounce at its peak in 1980. Keynesian intervention, across the globe, in the 1970's, to cut short the recession, resulted in all currencies being devalued, and inflation soaring, whilst the Keynesian intervention failed to provide the longer-term solution that it had done earlier in the cycle. Instead, it resulted in stagflation, which was increased when the oil price quadrupled as a result of  OPEC responding to support for Israel, from the US and western powers in the Yom Kippur War of 1973

But, this global crisis of the currency system reinforced the need for a rules based system, and the system of fixed exchange rates, thereby was replaced by a structured system of freely floating exchange-rates. 

The crisis of the 1970's meant that the bargain upon which social-democracy was founded itself came under strain. The system no longer guaranteed, more or less annual improvements in living standards for workers. It could not even guarantee more or less stable employment, as unemployment levels rose, and remained at higher levels than seen for several decades, even when recoveries arose. Labour governments were cutting the welfare state rather than expanding it, workers found, as with the 1974 Miners' Strike, that even where they won battles for higher pay, it now required strikes lasting weeks or months rather than hours or days, as had been the case in the previous period. Indeed, as Grunwick demonstrated, in many cases, they simply lost those battles, as employers were increasingly prepared to resist claims, to bring in scab labour, as unemployment rose, and so on. 

The victory of Thatcher in 1979, was a reflection on that. In an increased poll from 1974, Labour's vote fell by only 100,000. The Tory vote increased by nearly 2 million votes. This was not as its often presented a case of Labour voters switching on a large scale to the Tories. It was a case of the Tories, under Thatcher, being able to mobilise their base, amongst the ranks of the small capitalists, in a way that they had not been able to do under Heath, and his Buttskellite predecessors. It has significant parallels with today. The other factor was the drop in the Liberal vote. The Liberal vote dropped by nearly 2 million votes compared to 1974. David Steele became Liberal Leader in 1976, and took the Liberals into the Lib-Lab Pact of March 1977, until they withdrew in September 1978. Its hard not to see that this 2 million votes lost by the Liberals, themselves a party, like the Tories based upon the middle class, as being the real basis of the switch of votes to the Tories in 1979. 

Thatcher's victory was a victory based upon these frightened middle class elements, in reaction to the crisis in the system, and the response to it from the organised working-class. It was not a victory based upon the interests of large scale socialised capital, on the interests of the day to day managers of that capital, or even the shareholders in those companies. The Ford dispute at the end of 1978, lasted two months, and that only because Ford was responding to government pressure not to breach the 5% threshold. In fact, Ford's profits had been up, and it was well able to pay the 17% pay rise it eventually conceded. As Marx describes, in Capital III, Chapter 11, in conditions where the general level of wages rises, larger capitals benefit, and smaller capitals suffer. Or, more precisely, capitals that have a high organic composition of capital (capital intensive) benefit, and vice versa. As wages rise, the rate of profit falls. For capital intensive firms the rise in wages causes monetary demand for their output to rise by more than enough to compensate for their additional costs due to higher wages. The opposite is true for labour intensive firms. Capital moves from the latter to the former, so increasing the process of the concentration and centralisation of capital. 

Birmingham Workers Assist Miners In Closing Saltley Gates
This increased the fear of these small capitalist elements, a fear that Thatcher played to. Thatcher's programme was a programme for these frightened sections of the middle class. In the same way that today, Johnson seeks to swallow up the Brexit Party, and those to its right, so Thatcher swallowed up the support that had been growing for the National Front.  Undermining the power of workers and their unions was not a programme for the benefit of large scale, socialised capital, which operated via collective bargaining to rationalise the relations between capital and labour. As the Ford settlement showed, this large-scale capital could pay higher wages, and provide better conditions. The anti-union laws were designed for the benefit of the small private capitalists who wanted to prevent their workers from unionising or having any chance of winning in disputes, particularly by drawing in support from more powerful groups of workers, as had happened with the 1974 Miners Strike. Thatcher's tool for bringing the large corporations into line, was the adoption of the ideas of the Austrian School of Hayek and Mises, to introduce a tight control on money supply, to prevent cost push pressures translating into higher prices. Now, if workers obtained higher wages, the immediate effect would be lower company profits, as the higher wages could not be passed on. Companies that found they were now unprofitable were allowed to go bust. Unemployment soared, putting additional pressure on wages. 

Another thing Thatcher did, at that time, was to dissuade workers from fighting redundancies. In 1979, my father was made redundant. He was nearly 60. Not long after he was 60, as part of a new rule brought in by Thatcher, workers over 60, who were made redundant, could be paid an enhanced rate of unemployment benefit, if they signed a declaration saying that they would no longer be seeking work. The motivation was that any workers over 60, facing the prospect of redundancy, would, thereby be more likely to accept redundancy and redundancy payments, on the basis of then being able to obtain these higher unemployment benefits until their official retirement. It was just one of over 20 changes in rules that Thatcher introduced that also had the effect of reducing the official unemployment figures. On official figures unemployment rose to over 3 million, but calculated on the original bases, it rose to over 5 million. 

The other tool that Thatcher had was that, during the 1970's, firms seeing their profits increasingly squeezed by rising wages, looked for new technologies that would enable them to replace labour. If we take one industry, printing, it was heavily unionised, with the unions exerting considerable influence. The attack on that union power took the form initially of a rash of instant print shops being established. These instant print shops used these new technologies in the form of photocopying, including colour photocopying which had only just become available, as well as the use of newly introduced word processing, and desk top publishing systems, on personal computers as a cheap alternative to the old forms of compositing and printing. The instant print shops, were more capital intensive, but the capital they used in the form of PC's, photocopiers, and software was now much cheaper than the old printing equipment. Importantly, the labour that was required to operate this capital was now semi-skilled, or unskilled, employed in workplaces of half a dozen or less, and where unionisation could be resisted. This was Grunwick extended across the economy. 

The culmination of this process was the establishment of whole new newspapers such as Today, set up by Eddie Shah, on the basis of this new technology, and working practices, in entirely new locations. It meant that the established newspapers had to follow suit, including sending production overseas, and then ultimately resulting in the pitch battles, such as those at Wapping. Much as with the 1984-5 Miners Strike, the workers lost because the conditions were already against them. These were not the conditions of the previous quarter century. 

That this was a fundamental change is shown by the fact that, initially, Thatcher faced considerable opposition within the parliamentary Tory Party from the so called “Wets”. The Wets represented the social-democratic wing of the Tory Party, of the kind that had dominated during the period of Buttskellism. For them Thatcher's Austrian School Economics was anathema, a return to the kind of policies they had seen earlier in their lives in the 1930's. When those policies saw unemployment rise to over 3 million, that simply confirmed to them that the same mistakes were being made once more. By 1981, Thatcher's position looked unsustainable, and only a matter of time before she was removed by the Wets. Michael Foot, having become Labour Leader, led Labour to a massive lead in the opinion polls, with Labour scoring over 51% at its height. 

Thatcher was saved by essentially three things. Firstly, the progressive social-democratic wing of the Labour Party, i.e. that wing that sought to press ahead with greater planning and regulation, greater industrial democracy, and support for co-operatives etc., i.e. the Bennite wing, was also nationalistic. It had joined with other nationalists like Enoch Powell and the National Front in opposing EEC membership in 1975. Now, with Foot as leader, this nationalistic wing became more influential. This Little Englander nationalism was incompatible with a real progressive social-democracy, which now required a framework beyond the nation state. The second thing that saved Thatcher, therefore, was that this statist, and nationalist direction of the Labour Party, drove a section of the party into a split that created the SDP. With Thatcher's Tories now the open champions of the small capitalists, the Liberals now became the champions of the EU, and those sections of capital that were oriented towards it. The SDP now also entered that space, and so it was inevitable that, sooner or later, one or the other of these parties would have to go, and so it was, as the SDP merged into the Liberals to form the Liberal Democrats, though they had rather more success than did Chukas Small Change Party. Another example of history repeating as farce.  This meant that the anti-Tory vote was split, so that, although the Tory support fell from 45% in 1979, to around 27%, in 1982, that still put them neck and neck with Labour, as it shed votes to the Liberals. That is another similarity with today. 

The third thing that saved Thatcher was the Falklands War. Thatcher was able to rally the voters around the flag. In 1982, when ships returned from the Flaklands during a rail strike, a large banner draped from one of the ships read  "Call of The Rail Strike or We'll Call an Air Strike".  This was the start of Thatcher's war against "The Enemy Within".  The rhetoric of Johnson and the Brexiteers attempts to do the same thing today, now making the EU into the enemy that all must rally against.


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