Edgar Hardcastle
Source: Socialist Standard, June 1949.
Transcription: Socialist Party of Great Britain.
HTML Markup: Adam Buick
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Business men and Labour politicians are worried. Exports fell heavily in April and the President of the Board of Trade, Mr. Harold Wilson, says that we are beginning to face "some of the difficulties which every exporter in this country knows we have got to face before long." Sir Frederick Bain, retiring President of the Federation of British Industries, says the time is near "when we must once again fight for our lives in a competitive world." (Daily Telegraph, 12/5/49). The (Daily Express), backing it both ways, tells us that depression is now upon us, and it will creep over the world," but that "of course, the future does not hold any terrors. Wise counsels will prevail in many of the western countries and there will not be a serious dislocation of commerce and industry such as occurred in 1929." ((Daily Express, 11/5/49.)
The Chairman of the Drapers' Chamber of Trade, who perhaps had missed reading those last reassuring words, told his members, "Now is the time to sell your old stock. Throw it out at any price—but turn it into money. See that if the storm breaks you have money in he bank instead of unsaleable stock on your shelves." The same day several petroleum companies cancelled their orders for oil tankers because the shortage of oil and of tankers was over; which caused the City editor of the (Daily Express (12/5/49) to give this tip to shareholders in shipping companies: "Now is the time to get out."
This all adds up to one thing, that the men at the top have suffered what the economists call a "lack of confidence." The post-war scarcity of many raw materials and manufactures has been so far made good that the long rise of prices has stopped and some big falls have already taken place. At this point let us turn to Sir Stafford Cripps who, on his visit to Italy, told the Romans what he thinks about it all. "Movements of inflation and deflation were to a considerable extent psychological and could be greatly accelerated by a panic psychology encouraged by a lack of knowledge of the economic facts. It is often said, quite truly, that a country can talk itself into a depression, and it almost looks as if there were a danger of this in some countries today." ((Manchester Guardian, 4/5/49.)
This theory of the cause of depression is not a new one, and a little examination will show that it is not at all convincing. If, as Cripps maintains, a depression is a thing into which a country can talk itself, it is equally reasonable to suppose that a country can just as easily talk itself out again. Why then did not the Labour Government of 1931 talk itself and the country out of that crisis? Why does the President of the Board of Trade go off post-haste to Canada to drum up business for British exporters? And why are the British workers again being urged to forego wage increases and concentrate on more and cheaper production?
Let us look more closely at this "psychological" explanation. Does Cripps really believe that at a chance moment, without any inducement in the shape of economic causes, the business men suddenly and from nowhere pick up the idea of depression? If the change of attitude is explained as psychological what set the tram of thought in motion?
Sir Stafford would perhaps reply that the key to the mystery is that the idea of depression is indeed suggested by "economic facts" but only because the business men do not properly understand the facts ; they suffer from "lack of knowledge." This is, of course, not a "psychological" explanation, and it is not at all true. When the manufacturers and exporters have been selling their products in a world of rising prices and more or less unlimited demand, and when they suddenly see the price rise halted because the market is being satisfied, they are not acting in ignorance of the economic facts but in clear recognition of them. The prime fact is that a fall of prices, or even a halt to a rise of prices, suddenly brings them up against the cold hard fact of capitalism, that within a short time their profits may be turned into losses, and their businesses land into bankruptcy.
They see danger ahead and they know how they would deal with it. They would cut wages, curtail production and try to force the workers (with the help of the pressure of unemployment) to work harder and produce more cheaply. Capitalism would then go through its traditional phase of depression and mass unemployment until such time as the market recovered and prices began to rise again.
But Cripps will have none of this. He indicated in the speech in Rome that if depression does threaten he would use the financial technique laid down in the wartime coalition government's white paper on Employment Policy which consists of the government "making work" by initiating and encouraging road making, house building and all sorts of schemes that would provide employment and put money in the pockets of the workers and thus keep the wheels of industry turning.
Although this "cure for crises" has been plausible enough to take in Cripps and the Labour Party it is a piece of pure fantasy, as will become apparent when the next crisis comes, provided that is, that Cripps and his colleagues still have nerve enough to try to carry it out. More probably they will rush for safety to the formation of another economy government as did MacDonald in 1931. In conditions of crisis government revenue from taxation falls with the decline of industry and exports, and the budget collapses. To start its "work-making" schemes the government then has to raise new loans. Far from restoring confidence to the capitalists who have lost it through their own financial difficulties this will shatter their confidence still more. From other aspects, too, the schemes would be almost impossible to operate. If miners, seamen, shipbuilders, electrical machinery and textile workers, etc., are out of work because of the falling demand for their products at home and overseas, is it really going to be practicable to transfer them to other occupations, often necessarily in different parts of the country? And if, as the government so constantly tells us now, goods must be exported to pay for necessary imports of food and raw materials how is a fall of exports remedied by building roads and houses? If foreign capitalists (probably themselves affected by the same depression) stop buying British exports will they provide loans to the British government to finance the employment schemes?
The whole theory is so useless for the intended purpose that it would after all be better for Cripps to stick to his other idea, and rely on talking himself out of the depression when it eventually does come in full force.
Socialists have always maintained that the Labour Party does not understand Socialism. Sir Stafford Cripps on capitalist crises convinces us that he does not understand much about capitalism either.