Two Bonapartes (3)
When the period of long wave downtrend commenced in 1974, therefore, with the onset of the usual period of crises, the forces of social-democracy, and of socialism will ideologically ill prepared. On the one hand, the old Keynesian remedies no longer worked. Instead, they produced stagflation. Social-democratic politicians, lost faith in that solution. As James Callaghan put it, in 1976,
“We used to think that you could spend your way out of a recession, and increase employment by cutting taxes and boosting Government spending. I tell you in all candour that that option no longer exists, and that in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step. Higher inflation followed by higher unemployment. We have just escaped from the highest rate of inflation this country has known; we have not yet escaped from the consequences: high unemployment.”
In fact, there was no evidence that such intervention had caused higher inflation when used to cut short earlier recessions, because the additional money-supply was soaked up in higher levels of output, and the additional borrowing was paid for out of additional tax receipts from higher levels of economic activity. It is when the long wave boom comes to an end that these measures can no longer work, and lead to higher inflation, as firms take the opportunity of looser monetary conditions to raise prices, rather than to invest in additional capacity. In fact, inflation, and unemployment were to rise much higher in the following years, and into the Thatcher years.
Callaghan himself, influenced, in part, by his son in law, Peter Jay, went over to Monetarism, even before its introduction by Thatcher.
But, it was not just social-democratic politicians that were wrong-footed by the onset of crisis. In the 1950's and 60's, the conditions for rank and file workers to rebuild their organisations, decimated in the 1930's and 1940's, were conducive. It saw, a massive growth of the shop stewards movement, and workers were able to win quick concessions from wildcat strikes, when faced with employers that were desperate to keep production going to meet sharply rising demand. It facilitated the growth of an Economistic mindset based upon subjectivism that workers could simply raise their wages and improve their conditions purely on the basis of “more militancy”, which became a mantra of the IS/SWP. But, the truth was that that “more militancy", just as Keynesian intervention, could only work in the conditions of long wave upswing that characterised the previous period. As Engels had put it in describing the limits of such a trades union consciousness,
“The history of these Unions is a long series of defeats of the working-men, interrupted by a few isolated victories. All these efforts naturally cannot alter the economic law according to which wages are determined by the relation between supply and demand in the labour market. Hence the Unions remain powerless against all great forces which influence this relation. In a commercial crisis the Union itself must reduce wages or dissolve wholly; and in a time of considerable increase in the demand for labour, it cannot fix the rate of wages higher than would be reached spontaneously by the competition of the capitalists among themselves.”
And, as he also says, employers also find that unions and strikes can be convenient for them at certain times.
“Even strikes, than which nothing had been more nefarious up to 1848, were now gradually found out to be occasionally very useful, especially when provoked by the masters themselves, at their own time.”
(Engels – Condition of the Working Class in England)
At the start of the crisis phase, in 1974, the strength of the working-class, built up over the previous 25 years, was still sufficient to win in the Miners Strike of 1974, and to bring down Heath's Tory government. The incoming Wilson/Callaghan governments, however, introduced The Social Contract to control wages and prices. As a young shop steward at the time, I remember the difficulty in trying to get workers to go beyond it. At the same time, the government introduced cuts in public spending, consistent with Callaghan's conversion to monetarism as set out in his 1976 Blackpool Conference Speech. But, even by this time, the shape of the future was beginning to form. As the economy slowed, there was less pressure on employers to concede to pay and conditions claims. For the reason Engels sets out above, they were far more likely to enjoy saving on wages and other costs, during a strike, knowing that they could probably make up production later. Even small companies like Grunwicks were able to face down the might of the entire labour movement. Again as a young shop steward at the time, I remember getting up early one morning to get in the back of an old transit van with a half dozen other local union militants to travel down to the Grunwick picket, where we were met by hundreds of police including the hated SPG. And, the shape of the future was outlined then, not just in the use of such paramilitary police, but the backing given to the employers, by groups such as the NAFF.
By the end of 1978, all of these pressures reached boiling point. The government pay guideline for employers was 5%. Ford, which set a benchmark for pay settlements, but who were a supplier to government, and so wanted to keep within the limit found itself faced with an unofficial strike by 57,000 workers . In the meantime, Vauxhall workers got an 8.5% pay rise. Ford eventually conceded, a 17% pay rise to its workers. The Social Contract was effectively dead. Callaghan, with Labour still ahead in the polls, and with everyone expecting an election he would win, instead decided to delay.
Local government manual workers who were some of the worst paid in the country, and who had also been suffering under a barrage of spending cuts, went on strike. Callaghan attempted to keep the dead Social Contract on life support by waging an all-out battle with these workers. It led to what became known as The Winter of Discontent. Local government workers got pay rises ranging from around 11% to 14%. It set the conditions for Callaghan to lose the 1979 election, and for the reign of Thatcher for the next ten years.
Social-democracy and socialism was also ill-prepared to deal with that either.
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