Economic Causes of the Great War

HALF a century has passed since the beginning of the FirstWorld War. In August, 1914, the Executive Committee of the Socialist Party of Great Britain issued a manifesto — "The War, and the Socialist Position."

It was discussed and agreed before being issued but the discussion was not at all about the question whether the war should be supported or opposed but about the details of the wording. The Party's attitude to war between capitalist governments did not need to be discussed; it had been decided years before at the formation of the Party. It was implicit in the Declaration of Principles which was adopted when the Party was formed and has remained unchanged, in particular in Clause 6, which reads: —

. . . the machinery of government including the armed forces of the nation, exists only lo conserve the monopoly by the capitalist class of the wealth taken from the workers. . .

The Manifesto therefore took the form of re-affirming Socialist principles including the principle on which rests the Socialist attitude to war.

It opened with the declaration: —

Whereas the capitalists of Europe have quarrelled over the questions of the control of trade routes and the world's markets, and are endeavouring to exploit the political ignorance and blind passions of the working class of their respective countries in order to induce the said workers to take up arms in what is solely their masters' quarrel.

Later on it declared that: —

as the workers' interests are not bound up in the struggle for markets wherein their masters may dispose of the wealth they have stolen from them (the workers), but in the struggle to end the system under which they are robbed, they are not concerned with the present European struggle . . .

In this Manifesto the Socialist Party of Great Britain was restating three principles which are fundamental to the Socialist case — that war is not an accidental interruption of the peaceful operations of capitalism but is inherent in the structure of the system itself; that the interest of the workers in all parts of the world is to stand together against the governments of capitalism; and that the only way to end war is to end capitalism.

In the world of 1914 the great majority of the organisations which called themselves Socialist did not accept these three principles. They did not accept that it is capitalism itself which necessarily produces the conflicts over markets, trade routes, raw material sources, etc., which engender war. Along with the naive belief that war could be " humanised " by the banning of particularly destructive weapons they thought that war could be eliminated through international agencies appealing in the name of law, humanity or religion. Adding to the confusion there was one school of thought which relied on proving to the capitalists that "war does not pay," and another — we have it still — which envisaged an international agency having armed forces to preserve peace by waging war on war-making governments.

In August, 1914, when the Socialist Party of Great Britain was issuing its Manifesto most of the so-called Socialist parties were declaring their support for their respective governments.

Because they did not accept that capitalism was the cause of the war they readily succumbed to the excuses for the war offered to them by their respective governments. In Britain it was the defence of Belgium and France against the megalomania of the German Kaiser and German Militarism, and later, "the war to end war "; or the war for democracy. In Germany it was defence against Russian autocracy and Russian "barbarism." Although all of these parties, in the second International to which they belonged, had long seen the threat coming and had even formally declared their opposition to it at the Basle conference in 1912, most of them put loyalty to "their country " first, when the war actually came. Their lip-service to internationalism had never possessed the solid Socialist basis of recognising the mutual interest of all workers against capitalism and its governments everywhere.

Those who reject the Socialist contention that the root of modern war is in capitalism have to seek other explanations. These fall into several groups — the innate aggressiveness of human nature; the acts of wicked men or their rulers; economic causes other than capitalist ones; the strength of nationalist or religious feeling; and the conflicts of ideologies.

The human nature explanation of modern war is an irrelevance. It is true that individuals along with the capacity to live peacably side by side and to show humanity and compassion, will in appropriate circumstances engage in quarrels and violence. (The "appropriate circumstances" often being features of the competitive struggle inside capitalism). But when it comes to preparation for war it is always the governments which have to set out deliberately by lying propaganda to stir up hatred of whoever happens at the time to be "the enemy," and so little do the aggressive instincts of the mass of the population cause them to rush into war that almost all of the governments in the 1914 war (and subsequent wars) had to use conscription to drag the unwilling heroes into the battle line.

The argument that wars arise from economic but not capitalist causes, rests on the fact that long before capitalism came into being, or in places where capitalism did not exist, food shortage caused migrations and consequent wars, or caused wars among tribes in adjacent areas. But this situation has little bearing on the wars between capitalist powers in the modern world. It gives no explanation for the 1914 or 1939 wars, any more than it does for the long years of cold war between the American and Russian groups. The Powers involved in the 1914 war were not faced with inability to produce enough. All of them had for years been increasing their output of all kinds of commodities. Their worry was not over production but over the sale of what they produced.

The belief that modern wars are caused by nationalist or religious differences merely obscures the facts. What happens is that when capitalist rivalries have produced clashes in which governments consider going to war, the governments then calculatedly exploit nationalist and religious prejudices in order to popularise the war and cover up the real causes. Nations and the national religions are themselves products of capitalism as Louis Boudin showed in his Socialism and War (lectures given early in the 1914 war), it was the rise of capitalism in place of the feudalism of the middle ages which necessitated the division of Europe into separate national states. "Capitalism needed larger economic units for its development. The small groups therefore began to coalesce and amalgamate into larger units which would permit the larger economic life which is the characteristic of the new era ": —

Thus arose the modern European nations, each with its own language and separate and distinct social, political and economic life : England, France, Spain, the Scandinavian countries, Russia, Italy and Germany.

This development also needed and brought about the separation of the national religious organisations through the Reformation.

The other so-called ideological causes of war fare just as badly when lined up with the facts. British propaganda in 1914 made much of German "militarism"— this was argued also by leaders of the Labour Party — but halfway through the war conscription, the major feature of "militarism " was introduced in this country and, of course, Britain's European allies all had conscript armies. Another ideological charge against Germany was her brutal treatment of populations in her African colonies; but Britain's ally Belgium had an even worse record in Africa, and the British capitalist record in their colonies was equally open to charges.

There remains the argument that wars are caused by the acts of individuals, including individual rulers. It is still possible, fifty years after, for an article in the Sunday Telegraph (28/6/64) to start off: — "Two bullets that killed the Austrian Heir at Sarajevo on June 28, 1914, started the holocaust of World War I," And books are still being published about the degree of personal responsibility of the German Kaiser Wilhelm II for the first World War.

Professor Pigou writing soon after the first World War, in his Political Economy of War, dismissed the Sarajevo incident as being the occasion not the cause of the war. It may have been "the match to the powder magazine. The real fundamental causes are there that lie behind the assembling of the powder."

The Times Literary Supplement (26/3/64) reviewing two books on the supposed personal responsibility of the Kaiser, pointed out that in effect Germany long before Sarajevo had been in what would now be called a "cold war," the stage of preparations for the eventual fighting war of 1914.

An article in the SOCIALIST STANDARD in September, 1914, on the same theme, showed that for years before 1914 the British and French governments had been building up their forces and arranging for the disposition of their navies to meet the counter preparations of the German government.

The origins of that war lay in the fact that the nineteenth century industrial military and naval predominance of British and French capitalism was being challenged by the rapid expansion of Germany. As German industry grew, German production and exports were catching up and the German navy had grown to a size and striking power comparable with the British.

After the German annexation of the French provinces of Alsace and Lorraine in 1871, the way was opened for the link-up of Lorraine ore with Westphalian coal, and Germany's pig-iron production soon jumped ahead. In 1870-74 it was 1,800,000 tons a year against Britain's 6,400,000, but by 1908 German production was far ahead. The same was true of steel and the German mercantile shipping fleet was being rapidly expanded.

A warning had been given by the Commission on the Depression of Trade in its Report as early as 1886 about German competition in world markets : —

A reference to the reports from abroad wiil show that in every quarter of the world the perseverance and enterprise of the Germans are making themselves felt. In actual production of commodities we have now few, if any, advantages over them, and in a knowledge of the markets of the world, a desire to accommodate themselves to local tastes or idiocyncrasies, a determination to obtain a footing wherever they can and a tenacity in maintaining it, they appear to be gaining ground upon us.

An area of acute conflict was in the field of colonies. Britain and France, along with Belgium, had been first in this field, Britain in India and Asia and all of them in Africa. Germany, the late comer, seeking to enter and expand in Africa, more and more threatened the future of those who were there first and had taken most of the more profitable areas. When Germany showed in 1911, by sending a gunboat to Agadir, that she intended to get a foothold in Morocco, Mr. Lloyd George, Chancellor of the Exchequer, at once reacted with a speech threatening war. This incident had the effect of bringing French and British capitalism nearer together in mutual self-protection.

One of the more dramatic forms of the conflict was the German plan for a Berlin to Bagdad railway, a counter-blast to the British scheme of the Cape to Cairo line. The German plan involved pushing Russian influence out of the Balkans, cutting Russia off from the Mediterranean by control of the Dardenelles, and opening up a way for Germany to expand towards the Persian Gulf and India.

The 1914 war did not start overnight through an assasin's bullets; it was the outcome of years of conflicting capitalist interests.

H., Socialist Standard August 1964

further reading
War and the Working Class SPGB pamphlet 1936 (.pdf)
The Socialist Party and War SPGB pamphlet 1970 (.pdf)

Jingo Communists

One of the strongest holds the capitalists have over the minds of the workers is given by the workers' ready acceptance of the dogmas of patriotism. Before the rise of class society, and even until comparatively modern times before locomotives and steamships broke down geographical barriers, the workers did have a real interest in the country of their birth. But now that independent craftsmen and tillers of the soil have become wage earners the basis of patriotism has gone. Still the sentiment persists when even religion is fast decaying, and the master class who control the forces and services of the State are able to identify their own private interests with the instinctive patriotism of the class which has now no stake in the country. This degenerate patriotism is strong enough in the mother countries of the great empires, but it appears in its most degraded form among the members of the so-called subject races. The British Empire is at once the foremost in power and extent, and it has developed this national spirit in its possessions to the greatest degree. In its modern form patriotism began to become a striking-feature during the last quarter of the nineteenth century when, after the unrivalled trade expansion between 1816 and 1875, a period of depression and competition set in. During the previous period sufficient development on capitalist lines had taken place in India and Egypt to lead to the rise of organised agitation for independence, or at least for some measure of self-government.

There had, of course, always been widespread dislike of the foreign rulers, and to this was now added the resentment of educated natives, lawyers, state officials, merchants, etc., who felt themselves arbitrarily deprived of the best opportunities, and whose discontent was of great importance because it was capable of expression. The growing body of native capitalists and traders were, besides, coming to see what a glorious field of exploitation would be open to them if they could but use this volume of discontent to throw off alien rule. In Ireland, although there was no great gulf of race, historical tradition of suppression and religious bigotry supplied all the necessary zeal to the struggle for independence. There were, too, the very real economic grievances of the Irish farmers and merchants, and these latter, with their intellectual leaders and publicists, were able, without great difficulty, to deceive the workers into the belief that all their troubles, too, were due to foreign tyranny. This was, of course, untrue. The workers' only useful aim is to dethrone the capitalist class. It has nothing whatever to gain by assisting one group against another. The Irish workers who were foolish enough to help Irish capitalists to win Dominion Status from Great Britain now have the chance to learn that the capitalist system is the same wherever it exists, and whatever the nationality of the rulers who use the State forces to keep the workers' hands off their property. We, as Socialists, have no sympathy whatever with the demand for independence made by native capitalist groups. We would no mare assist them than assist the British Government against them. A plague on both their houses ! Our only interest is to try to get the workers in both camps to mind their own business and leave this quarrel about the right to exploit to the people who gain from exploitation. Many so-called Socialists think, or at any rate act, differently. Some of them are still very much the victims of the mental disorder called patriotism, and their understanding of Socialism is nil; others are playing a double game which they call "tactics." They argue that as the people among whom it is desired to propagate Socialism are still entirely wrapped up in all kinds of antiquated illusions, then the way to clear their minds is to tack their superstitions on to the Socialist case. It is hard to imagine anything less calculated to further Socialism. When Socialists are so adaptive that they can be Catholic in Dublin, Protestant in England, Atheist in France, Free Trade, Protectionist, patriots and anti-patriots, their propaganda becomes a farce and they degenerate usually into the more or less open tools of local business interests. Some of our blustering wartime pseudo-Socialist recruiting sergeants had a more intimate connection with the "Trade " than is gained by looking down a pint pot.

Whatever differences there may have been between the various independence movements, they had one thing in common there was money in them. In addition, the Irish movement lent itself to the vote-catching of the Liberal and Labour Parties in this country. Owing to the brilliant lack of success of the "tactic " in making Socialists, the professional Parliamentarians at the head of numerous stagnant parties in this country were anxiously looking for new sources of revenue. These political brigands, who live on and by the ignorance of the workers, found what they wanted by lending themselves to the political wire¬pulling of the subject nations. They were willing (they said in the interests of Socialism) to encourage the vilely anti-Socialist national fanaticism which we find invariably associated with such movements. The Communists of this country have given their indiscriminate support (for what it is worth) to a round half-dozen capitalist movements of this kind, and have attempted to justify their attitude by resurrecting a plea that was familiar and discredited in the Socialist Democratic Federation thirty years ago. They talk about smashing up the Empire as a preliminary to the final struggle with the capitalist class. They forget some things. First, there is no movement or combination of movements which has the power to scratch the British Empire, much less dismember it. Secondly, the effect of their attitude is simply to strengthen the patriotism of the British worker and make him still more ignorant of, and hostile to, Socialism.

Thirdly, assuming independence could be obtained and any real progress took place in the development of Labour movements in these countries, the home capitalists would want to come back into the Empire for the assistance of a strong central Government against their own workers. The stampede back would make their present agitation to get out look sick in comparison. The Irish Communist Party, which ought by now to have learned something from experience, is not one whit better. It has pandered to Catholicism and suppressed the Moscow attitude to religion, and it has stooped so low as to appeal to the foul Jingoism which makes the Irish worker so blind to his class interests.

In the Workers' Republic, June 23rd, 1923 (official organ of the Communist Party of Ireland), half a column is devoted to the exposure of a "scandal." The scandal is that the capitalist Free State Government has placed orders for army uniforms in London instead of in Dublin! This staggering charge "can be proved to the hilt if needs be."

Just consider with me the enormity of it. The Free State capitalists keep troops to protect their property against the propertyless Irish workers. During the last few months, for instance, troops have been openly used to help farmers in Waterford against strikers. If the Communists or anyone else kick against the Free State Government they will get shot, and the remedy they propose is to have the uniforms made in Dublin! They wouldn't like to be shot by a man in an English-made uniform, but these internationalists will be perfectly happy if the uniforms are made at home. Their joy would have no bounds if the bullets were Irish through and through, and what would happen if they were made by Trade Union labour as well it is beyond me to imagine.

But we must be fair. Communists are economists as well. "Can you wonder why their is so much unemployment in Dublin?" To think, dear reader, that it has never occurred to you that if only all the capitalists had their army uniforms made at home the unemployment problem would be solved. It never struck these Simple Simons that contracts and jobless workers have a habit of going to the best market, and that if, owing to bad trade, prices are lower in Dublin, the English manufacturer would sub-let the work to the Dublin sweat shops, even if they are not, as is probably the case, already working in harmony.

The Workers' Republic writer, in fact appears to have decidedly more than a grain of sympathy for these clothing bosses; because they "have had to close their doors for want of contracts, and others are standing off their workers for the same reason." These people occasionally have the nerve to call themselves Marxists !

And the excuse for all this lying and humbug is always the same. They are in a hurry and want to bring the poor benighted workers in. On this ground, more than any other, their policy is damned. Not only are the recruits, soaked in religion and patriotism, totally unreliable and of no conceivable value in their present state for Socialism, but their numbers are not sufficient to justify the telling of the whitest and most forgivable of fibs, let alone the turgid stream of corruption these Communists call propaganda. The sooner they give up pandering to working-class political ignorance and devote themselves to teaching (and learning) Socialism, the sooner will the nationality problem be solved. The capitalists of the subject nations will line up with the Central Government of the Empire for protection against the growing unity of the working class, and the way will be cleared for the real fight — the fight for working-class emancipation.

H., Socialist Standard October 1923

SPGB Lectures on Economics

Inveresk Street Ingrate (one of my fav. blogs) has posted a series of lectures by the late E. Hardcastle on aspects of marxian economics. Darren provides the details.

Unemployment - cause and cure

There are now upwards of 1 1/4 million workers registered as unemployed in Great Britain. How many there are not registered, and how many are working short time, it is impossible to say, but we may safely assume that there will be, before this winter is out, more than 1 1/2 million men and women, boys and girls, able and willing to work, but prevented from doing so. The present depression began at the end of 1920 and shows no sign of lifting, and it is no longer sufficient for Ministers to prophecy improvement; even the most credulous workers are now unwilling to believe in the early coming of the long deferred revival.

There is no lack of freaks, frauds and cranks anxious to gain attention for their fallacious diagnoses and quack remedies — free traders and protectionists, and advocates of imperial preference; deflationists and inflationists, Christians preaching Brotherhood, and others who want another war, bareheaded Daily Mailites, and their ridiculous Liberal Labour opponents, who weep for the wrongs inflicted on the poor German capitalists, emigrationists, and last and most futile of all, the motley crowd of "Socialists," who have time for these and every vain scheme, but no time for Socialism. We, on the other hand, urge now, as we have always urged, that there is a solution — Socialism; that it is the only solution; and that it is a solution for the present and not for the distant future.

The attempted explanations of unemployment are as varied as the suggested remedies, and it is necessary therefore to make clear a few important points. First, do rot be misled by those who have tried to saddle Poincare with the responsibility. The widespread unemployment began in 1920 and had reached a point in 1922 higher than at any other time since; yet the French occupation of the Ruhr did not take place until January, 1923.

Do not believe that it is an " abnormal " after-war development. Apart from earlier times of special distress due to political and economic disturbances, unemployment has been a constant feature of our system since the industrial revolution at the end of the 18th century. There has during that period always been a mass of employable but unemployed workers; the number increasing enormously during trade depressions and decreasing with trade prosperity. It never wholly disappeared, in spite of the big drain of emigration to America and the Colonies. Dr. Macnamara, M.P., speaks of a normal pre-war unemployed army of 200,000 persons (Times, llth September, 1923.) Unemployment is a normal feature of capitalist production. And what of the future? Macnamara promises that

" that even if the unsettlement of Europe were ended and normal trade returned, the permanent unemployment in this country would be three or four times as big as in pre-war times."

While Sir John Norton Griffiths, M.P., a Tory, tells us (Daily Herald, llth April, 1923) :—

" We have now got, and always, apparently, will have . . . trade boom or no trade boom a million or more unemployed men who cannot be absorbed in industry."

Neither Macnamara nor Norton Griffiths seems greatly perturbed, but it may be worth your while to consider carefully the prospect before you.

Refuse to be drawn by the Labour leaders into the free trade-protectionist controversy, for it does not concern you. It is no question of principle, but one of capitalist interests, and will be readily scrapped by those who teach you to worship it, when profit-making demands a new policy. The sudden conversion of the traditionally free-trade Bradford woollen industry illustrates this. Moreover free trade is an illusion in the modern world. What does free trade mean to a cotton or soap combine which has a practical monopoly of raw material and the home market? What does free trade mean to an international meat or steel combine, which allocates to its members certain geographical areas and a certain percentage of the sales in the total markets? And remember that the inquiries instituted by the Government immediately after the war brought to light the fact that there is now hardly any important industry which is not controlled in some direction by a federation or central organisation.

Protection is in effect the state support of one industry at the expense of those who pay for the whole cost of administration, that is the capitalist class. Protection or direct subsidies cannot in the long-run overcome the world conditions governing the whole mass of a country's trade, or better the position of the working class. A subsidy for agriculture, or a bar on the import of agricultural produce (advocated by a section of the Labour Party) will, it is true, stimulate the agricultural industry and lead to the employment of more workers there ? But that is only one of the results. The production of more food at home means a decrease of the import of food products from abroad, and a corresponding decrease in coal or manufactured goods which would ordinarily have gone to pay for those imports. A mere transfer of some miners or cotton operatives to the ranks of the unemployed and the corresponding employment of a number of out-of-work agricultural labourers does not solve the problem of unemployment.

It resembles the emigration schemes which appear to rest on the notion that one can remove unemployment by migrating the unemployed from one country to another. It takes no account of the fact that the problem is a world problem, because this is obscured by certain temporary factors and local peculiarities.

Protectionist U.S.A., which two years ago had six million unemployed, strictly limits immigration, but this has not been the means of fulfilling the late President's fatuous wish that the boom of last year should be an era of " permanent prosperity." Depression is beginning there once more, and during 1922 alone no less than two million farmers and hands had to leave the land and resort to the industrial towns, to swell the unemployed army. Their chief immediate trouble was that there is too much wheat in the world for the capitalist system to dispose of, and yet some of our Labour men still believe that the panacea for agricultural stagnation at home is to grow more wheat !

Canada has its own problem to face, and cannot even find work for all of a few thousand men who were enticed out there for the harvesting. Unemployment is acute and growing in South Africa, where it is also complicated by the racial hostility between the relatively highly paid (and out-of-work) whites, and the low paid blacks. The South African unemployed actually asked to be migrated to Australia to join the ranks of the unemployed there, many of them want to come "home" to England. South Africa is also asking for immigrants—"with £2,000 capital."!

France has but little unemployment, because she has remained largely an agricultural country, with a land system of peasant proprietorship. There are relatively few wage-earners, the only ones liable to suffer unemployment, and for some time past French industry, especially textiles, has been doing big trade abroad at the expense of English exporters, owing to the depreciation of the franc. This has led to an amusing clash between one brand of currency-mongers, who want to save us by raising the £ sterling to par, and another brand who can see the millenium in lowering it until Bradford mill owners can undersell French cloths. However, to the extent that French trade prospers and stimulates development of industry (including the Ruhr industries) France, too, will become more and more dependent on the state of world trade, and her growing army of factory workers will be drawn into the pool of, potentially, surplus labour.

It is also quite wrong to suppose that unemployment is a product of over-population. Sir William Beveridge, at the British Association, dealt with this, and quoted elaborate statistics to show that
"Man for his present troubles had to accuse neither the niggardliness of Nature nor his own instinct of reproduction." — "Daily Telegraph," 18/9/23.) Unemployment, he said, was " a function of the organisation and methods of industry, not of its size."

The British Government has announced its policy of authorising the expenditure of £50,000,000 on relief works for the coming winter. This, in face of the evident hopelessness of expecting any important trade revival in the near future, is merely an admission of the failure of the capitalist class to solve the problem. It is just a form of relief without, what is from their viewpoint, the drawback of idleness, leading to a loss of the habit of work. The capitalists as a whole, and their thinkers and apologists, are in the same fatalistic state of mind as one individual employer who was recently declared a bankrupt. He ascribed his failure to his anxiety not to dismiss some old employees although he had no work for them. He just "hoped" that " something would turn up." It didn't for him, and it won't for the system as a whole. Nor is there any hope from Labour Governments. Labour Governments in Australia (including the one still left) were just as helpless as any other; they used precisely the same methods to reduce wages when prices fell, and treated the resistance of the workers with the usual brutality. Unemployment is as rife in Queensland as in any other capitalist state, and as little is done for them. In fact the unemployed are better off under our own Government.

The Australian capitalists, like those here and elsewhere, continually have one consideration in mind. At all costs the workers must be kept from determined discontent. First promises, flattery, or the illusive benefits of Labour Governments are tried, then the paltry bribe of relief and doles, and finally, if nothing else will serve, the open violence of the armed forces of law and order.

Our explanation of the problem is simpler than any of these. It may from one aspect be summed up in the statement that the inability of 1 1/4 million British workers to find work although they wish to do so, is due to the frank determination of another million persons not on any account to spoil their pleasant lives by painful toil. You work because it is your only means of getting the means of living. The things you need are the result of the application of your labour to the natural resources, but because these natural resources, along with the railways, the factories and steamships, etc., are privately owned by a small class of wealthy persons, they can and do live without having to work, and they possess the power not only to appropriate the proceeds of your labour, but also when they think fit to prevent you from working at all. In the early days of capitalism these people justified their rents and profits by the services they rendered. But by now they have, as a class, long ceased to render those services. Land¬owners are no longer the pioneers in agricultural science, they do not lead the way in raising the technique of the industry, or in encouraging their tenants to better methods of production. They lost 35 years ago their last semblance of being a necessary part of the machinery of government, when in 1888 the Justices of the Peace were all but abolished, and their powers handed over to the elected county councils. Industrial capitalists do not now bring brains, enterprise or directive ability to industry; these functions are mainly exercised by salaried officials, members of the working classt Far from promoting economic development, the growing tendency is for the controllers of the chief industries to restrict production in order to save themselves from the world shrinkage of markets. As for the so-called " risks " of capital, it is a commonplace for big business when in difficulties to get the State to help them out and take the risk from their shoulders.

The problem of permanent unemployment arises out of this one fact of private ownership. The owners return to the working class as wages an amount which will purchase only part of the total product. The balance cannot be consumed entirely by the owners and must in any event first be sold. The manufacturer of cotton cloth, for instance, might as well be propertyless as to have on his hands a great amount of unsaleable goods. To sell there must be markets, and owing to the rapid industrialisation of the last 50 years there is now relatively little demand for the manufactured products of the advanced nations.

The competition for the markets causes wars, but far from solving these only aggravate the problem. During the artificial prosperity of war time great strides are made in powers of production, and when peace comes the glut is worse than ever. The Right Hon. C. A. McCurdy, M.P., writing in the Daily Chronicle (14th September) pointed out that the steel industry of this country after the war was developed much above the demand of the market for its products. And it is foolish to suppose that trade depression and unemployment can be avoided by reducing wages or by lowering the cost of production in any other way. The enormous wage reductions in Great Britain which followed the Labour leaders' campaign for increased production, certainly did not stem the tide of unemployment. And if it were true that lower prices would cause a trade revival, the capitalists are perfectly free now to lower their prices by cutting into profits. They would do so if this policy would lead to a corresponding increase of sales. But the world economic position is such that no reduction of prices would cause any appreciable increase in demand. In fact in many industries (cotton for instance) this has been clearly realised, and the policy is being followed of deliberate and agreed restriction of output in order to raise prices. Sir Charles Macara stated this explicitly for the cotton trade (Business Organisation, March, 1923). He argues that the loss of foreign markets led to cut-throat competition at home without any material growth in home sales. The producers sold no more by lowering prices and merely sacrificed profits. It has been said that the Capital Levy, by reducing taxation, would enable manufacturers to sell cheaper, and thus would revive trade. The argument is fallacious, because it assumes that capitalists who now do not reduce prices, would do so then; ignoring the fact that they could do so now if they wished, and that they would not be compelled to do so then if they did not wish. They do not reduce now because it does not pay to do so, and unless the world situation as a whole were changed, it would still not pay them to do so after a Capital Levy. Assuming a reduction in taxation occurred, only profits would benefit.

If then, as we say, unemployment is a necessary adjunct of capitalist production, there is only one remedy. The workers must deprive the capitalist class of their ownership and control of the means of production. Once made the common property of society, they can be used for the purpose of satisfying society's needs; not the unstable demands of a market, but the direct human needs of the people.

For the application of this solution only one thing is lacking. The political machinery exists through which the workers can constitutionally express and enforce their will. The knowledge of the productive process in all its branches is contained within the ranks of the working class. But
the majority of the workers still support the capitalist system of society. The Socialist party is doing all it can to undermine that trust in capitalism, and it invites the immediate and active assistance of all workers who recognise the accuracy of our contention, that there is no future for our class except in Socialism.

H., Socialist Standard November 1923

James Maxton: a political failure

Maxton's whole political life was devoted to the Independent Labour Party (ILP). He was its Chairman in 1926-1931 and again in 1934-39, served on various committees in the organisation and was one of its principal spokesmen in Parliament and up and down the country. So the measure of his achievement is to be looked for in the principles and policy of the ILP, its rise and eventual winding up.

In his book on Maxton in the Manchester University Press "Lives of the Left" series William Knox sets himself the task of evaluating Maxton's work. He rejects AJ.P. Taylor's assessment that it was "barren of achievement" but concedes that Maxton was not responsible for any identifiable body of political theory. On Maxton's claim that he was a Marxist, the author says that it was "a brand of idiosyncratic Marxism", whatever that may mean.

He quotes many opinions of Maxton: That he was a "powerful orator"; that he was "the finest gentleman in the House of Commons" (Winston Churchill); That he was "the greatest Briton of this generation both in his ideas and his life" and that "he made more socialists than any other comparable figure in Britain" (Fenner Brockway).

The author says that between 1922 and 1945 Maxton was "the personification of British left-wing democratic socialism", and offers this final judgement:

His oratory and challenging idealism influenced thousands of young people to become Socialists and instilled in them a vision of Socialist society which transcended the narrow, unimaginative doctrines of Stalinism and State Capitalism. As long as the idea of "Red Clydeside" and the world community of freely co-operative producers endures then so long will the name of Maxton, the "incorruptible conscience" of the British left. His search for a Socialist/Humanist solution to economic crisis and war is as urgent today as it was in the 1930s (page 150).

The reader of this may well wonder what exactly the author is trying to say. A critical look at Maxton's aims and activities in the ILP point to a much more definite conclusion. Maxton declared his great admiration for Keir Hardie, founder of the ILP and "Father of the Labour Party" and shared his views on aims and policy. (Maxton was, too, a great admirer of Lenin). He also shared Keir Hardie's weakness for making contraditory statements, sometimes declaring a commitment to socialism as a sole objective; sometimes looking to reforms of capitalism to solve society's problems.

Keir Hardie declared his unqualified support for socialism as defined by Marx in his From Serfdom to Socialism, published in 1907 when he was first Chairman of the Labour Party and three years later in his My Confession of Faith in the Labour Alliance. Maxton did the same in debate with The Socialist Party of Great Britain in 1928, a report of which was published in the Socialist Standard (June 1928). After the opening speech in which J. Fitzgerald had stated the case for the SPGB, Maxton said: "This state¬ment of socialist first principles was unassailable. The definitions were clear and correct. He accepted absolutely the diagnosis given". Several debates with the ILP took place over the years and it was customary for their speakers to take that line.

But later in the debate Maxton discovered "a point of difference". It concerned the need now to build up an effective machine for the achievement of socialism in the form of a majority of Labour MPs in the House of Commons. In this Maxton was following the strategy laid down by Keir Hardie when the ILP was formed in 1893. Hardie argued that it was useless simply to ask the workers to vote for socialism because they are not ready for it. As evidence he pointed to the inability of the Social Democratic Federation to get its candidates elected. Hardie's alternative was for the ILP to work first for the formation of a working class organisation with mass trade union support to send to Parliament MPs independent of the Liberals and Tories and then tackle the job of winning them over to socialism. That organisation was the Labour Party. Maxton repeated this in the debate: "The ILP seeks to induce the Labour Party to accept Socialism as their Object". But of necessity the strategy carried with it the tactic of promising all sorts of reforms in order to attract the votes of non-socialist workers. As Maxton put it, when defending the ILP's reformist "Living Income" policy: "The ILP wants socialism but the workers want a living wage".

The first half of the Keir Hardie strategy was a remarkable success story. The ILP concentrated on recruiting first the young local officials of the unions and then the national officials, so that by 1910 when there were 42 Labour MPs in Parliament more than half were members of the ILP. Its membership reached 50,000. As the Labour Party grew this continued and in 1924 when the first Labour government came into office, out of 193 Labour MPs 132 were members of the ILP. Twenty-six of them were in the government and six of them, including Prime Minister MacDonald, were in the cabinet. In 1929 out of 288 Labour MPs over 200 were members of the ILP. Again it was very strongly represented in the government and cabinet including, as before, MacDonald as Prime Minister. Among the MPs was another ILP member, Clement Attlee, who was to become Labour Prime Minister in the 1945 government. A distinction has to be made between members of the ILP who were candidates of local Labour Parties and the much smaller number who were the ILPs own candidates standing under Labour Party auspices.

So far so good. At that stage the ILP could congratulate itself on building up the mass party Keir Hardie wanted. But what of the next stage, getting the Labour Party to accept socialism as its object? If the ILP was to win over the Labour Party membership to socialism, who was to win over the ILP membership to socialism as a first step? For while the ILP published works by Marx, and Keir Hardie and Maxton could declare their support for Marx's conception of socialism, their own publications and election programmes were full of proposals for reforming capitalism. In the debate Maxton personally disowned some of these but that did not prevent the ILP continuing with them, because the majority of their own members had been recruited, not on the demand for socialism, but attracted by the reforms. A typical example of these many reforms was that dealing with unemployment, in the ILP's The Socialist Programme (1923). Having said that there was practically no unemployment in France, Belgium and Italy it explained how the same effect could be achieved in Britain if only the banks would "lend freely". Before many years had passed all of those countries, and Britain were submerged in unemployment much heavier than the level to be reached in the 1980s, but by then the ILP had discovered a new false cure for unemployment in the old rubbish of Keynes.

The ILP consistently misled the workers with its description of state capitalism (nationalisation) as socialism. One of its favourite nostrums was the nationalisation of the Bank of England. At the end of his life, when the Attlee Labour government came to power in 1945, "Maxton" says Knox, "especially welcomed the nationalisation of the Bank of England" (page 145) but by then the ILP had broken with the Labour Party and Maxton was opposed to re-affiliation.

With the formation of the first two Labour governments trouble had built up for the ILP in its relations with the Labour Party. In 1930 at a conference of the Scottish group of the ILP a resolution was passed demanding the expulsion of MacDonald from the Labour Party. The National Administrative Council of the ILP in June 1931 carried the following resolution:

It must be noted as a remarkable fact that to wage a Socialist fight against the poverty of the working class is made more difficult when a Labour Government is in power than at other times, and that obstacles are put in the way and threats directed against working class organisations maintaining that fight.

Maxton opposed the demand for MacDonald's expulsion. He was against expelling anybody. He wanted to keep them in the Party where they were "under control". He had got it all wrong. The ILP didn't control the Labour Party leadership, nor its own members who were leaders in the Labour Party. It was the Labour Prime Minister and his fellow ministers who insisted on enforcing the Labour Party discipline on the small group of the ILP's own Members of Parliament. It was over this issue that the ILP in 1932 disaffiliated from the Labour Party, by which time MacDonald and a few others had joined the Tories and Liberals in forming a National government. The whole of the Keir Hardie-Maxton strategy for socialism was in ruins.

Knox's statement about Maxton's oratory "which influenced thousands of young people to become socialists" can now be seen for what it is worth. It never even influenced them to remain loyal to the ILP, let alone to become socialists. When Maxton won the seat at Bridgeton in 1929 he got over 21,000 votes. When the ILP put up a candidate there at the 1955 election his vote was 2619 and he lost his deposit. After the 1945 general election the number of ILP members in Parliament had dropped to four, all of whom eventually drifted back into the Labour Party. The ILP has now vanished.

So what can be said of Maxton? He worked devotedly all his political life in the service of the ILP but his efforts achieved nothing for socialism because the Keir Hardie plan he followed was mistaken from the start. They had a wrong idea about the politics and economics of capitalism — and the same is true of all the long line of Labour Party leadership through MacDonald, Attlee, Wilson, Callaghan to Kinnock. As they see it, if you have the "right leaders with the right compassionate" policy as the government, all the evils of capitalism can be got rid of, one after the other. Marx and Engels wrote about such people in the Communist Manifeto in 1848:

To this section belong economists, philanthropists, humanitarians, improvers of the condition of the working class, organisers of charity, members of societies for the prevention of cruelty to animals, temperance fanatics, hole and corner reformers of every imaginable kind.

Keir Hardie, in 1907, said that the first "evil" they would tackle would be armaments. Eighty years later, with the destructive power of weapons multiplied a thousandfold, his political successors are still talking about it. On the political side Keir Hardie and Maxton imagined a working class becoming more and more attracted to socialism as they saw Labour governments progressively getting rid of war, poverty, unemployment, crisis, depressions and the rest. Capitalism isn't like that. Its "evils" are an integral part of the sys¬tem itself, only to be removed by abolishing it - for which the Labour Party and the ILP never had, or sought, a mandate. So in 1987 we see the workers returning a Tory government to power for a third time.

The only organisation that can consistently carry on propaganda for socialism is one the membership of which is confined to socialists, with socialism as its only objective. The Labour Party and ILP never met this requirement. If winning over the working class to accept the socialist case is a painfully slow process, it is made more difficult by the reformist propaganda of the Labour Party and ILP.

H., Socialist Standard July 1988

Questions of the Day (part 16)

Inflation and unemployment

IN THE LAST QUARTER of the nineteenth century, during what was known at that time as The Great Depression, and again in the depression between the two world wars, an increasing number of workers — and even some professional economists — were paying attention to the analysis of capitalism made by Karl Marx in his work Capital. Marx showed that unemployment, and its rise to peak levels in periodical phases of trade depression, arise put of the structure of capitalism itself, and are therefore inevitable while capitalism lasts.

This growing interest in Marx was all but extinguished with the publication in 1936 of J. M. Keynes' The General Theory of Employment, Interest and Money. According to the new doctrine it only needs that the government "manage the economy in such a way as to maintain demand" for full employment to be created and trade depressions to be abolished.

Keynes described Marx's Capital as "an obsolete economic textbook, which I know to be not only scientifically erroneous but without interest or application for the modern world" ("A Short View of Russia", J. M. Keynes, 1925. p 14). Keynesian doctrines were accepted by most economists, political parties and the trade unions. Writing in 1957 (Remedies for Inflation) Mr. (now Sir Harold) Wilson stated that the Labour Party and all other "major parties" were Keynesian. As late as 1974, in spite of the evidence that Keynesian techniques had been a failure, the Tory M.P. Mr. Peter Walker called his party "the party of Keynes and Disraeli"; while the Liberal M.P. Mr. John Pardoe said that the Liberal Party is "the party of Keynes and William Beveridge".

Alone in this country the Socialist Party of Great Britain insisted from the outset that Marx was right; that the new doctrines were fallacies; that full employment cannot be maintained; that trade depressions cannot be eliminated, that the remedies proposed were only disguised inflation and would do nothing to serve working-class interests.

The Labour Party adopted the new policy at its Annual Conference in 1944, in a Report on Full Employment and Financial Policy, which declared:

"If bad trade and general unemployment threaten this means that total purchasing power is falling too low. Therefore we should at once increase expenditure .... We should give people more money and not less, to spend."

The Tory Party was committed to a similar view; but such was the confusion created by Keynes' theories that neither Party recognised that this is a policy of the crudest inflation. So at every general election in the post-war years they continued to declare their opposition to inflation. Both parties pledged themselves to maintain "full employment", defined in the Labour Party's 1945 General Election programme as "Jobs for All".

In the history of capitalism, as Marx had explained, periods of good trade and low unemployment alternate with periods of bad trade and high unemployment. One such period of low unemployment occurred in the years immediately following the second world war (helped by work on making good war damage); but Labour and Tory Governments both claimed this to be evidence of their success in "managing the economy". From 1955 onwards, however, unemployment has been on a sharp upward trend, each peak of unemployment rising to a higher level — to 747,000 in 1963, to above a million under the Heath Government in 1972, and to 1,500,000 in 1976 under Labour Government, and to over 1,600,000 in July 1977, This was capitalism operating in its normal way; but it led many who had wrongly believed that Keynesian techniques would abolish unemployment to reach the false opposite conclusion: that it was those techniques that had been the cause of unemployment. The Times,13 February 1976, told its readers that "unemployment ... will decline as fast and as soon as we all forget Keynes".

But if Keynesian policies did nothing for unemployment, their effect on prices was that by 1977 the general level was ten times what it had been in 1938, and was rising fast.

Inflation is caused by governments going on year after year printing and putting into circulation hundreds of millions of pounds of additional paper money.

Wherever and whenever currency has been issued in excess, the price level has risen; and wherever and whenever currency has been restricted, prices have stabilised or fallen. In the period 1920-23, the printing presses of the German central bank were busy day and night pouring out notes, and prices were rocketing upwards. In Britain in the same three year period the Government had decided to halt inflation; the note issue was restricted and prices were falling fast.

Inflation is not the only factor affecting prices. In Britain, in the 90 years before 1914 when there was no inflation (the price level in 1914 being below that of 1820), prices rose moderately in trade booms and fell again in periods of bad trade, a process also explained by Marx.

The reason there was no inflation in Britain in the century before 1914, was that through the operation of the gold standard the note issue was controlled. Beyond a fixed low limit the Bank of England could not issue additional notes without adding an equivalent amount of gold to the reserve in its vaults. Also the notes, by law, were freely convertible into a fixed amount of gold — one pound or a sovereign being fixed at about a quarter of an ounce of gold. Gold coins and Bank of England notes both circulated; but because of legally enforced convertibility a Bank of England note "was as good as gold", and the combined circulation of notes and gold coins was equivalent to the circulation of a total amount of gold.

Marx showed that if that total amount of gold is replaced by inconvertible paper money, and if the amount of that paper money is then issued in excess, prices are pushed up accordingly.

"If the quantity of paper money issued is, for instance, double what it ought to be, then in actual fact one pound has become the money name of about one-eighth of an ounce of gold instead of about one quarter of an ounce .... The values previously expressed by the price £1 94 will now be expressed by the price £2" (Capital, VoL 1.
Allen & Unwin Edition, p. 108).

Governments since 1938 have followed the policy of continually increasing the amount of currency in circulation, from under £500 million in 1938 to over £7,000 million in 1977, an increase far beyond any increase that would have been necessary because of the expansion of total production and trade. In 1976 and 1977 when the Government claimed that its "wages and incomes policy" would curb inflation the flood of additional paper money went on without interruption.

The man, more than any other, who was responsible for abandoning the nineteenth-century policy of controlling the amount of paper money was J. M. Keynes, who declared that it was no longer necessary "to watch and to control the creation of currency".

So for 40 years the major British political parties and the trade unions have been misled by the Keynesian policy of inflation into believing that capitalism could be rid of unemployment and trade depressions. It failed as it was bound to do with the market conditions and 'free' labour conditions of the western world.

Marx showed, and subsequent events have confirmed his analysis of capitalism's economic laws, that, arising from capitalism's inescapable anarchy of production, its progression is the cycle of moderate expansion of production and sales, then boom, then crisis, then depression. But just as there is no Keynesian device which will secure conditions of permanent boom, so there is no such thing as a permanent depression or "collapse of capitalism". (In the middle of "The Great Depression" Frederick Engels, three years after the death of Marx, did temporarily hold that Marx's cycle had ceased to operate and put forward a theory of "Permanent Depression"; but events soon showed this to be wrong and he returned to Marx's view — Preface to Capital 1886.)

In a depression, with bankruptcies which remove competitors, stocks of unsold goods disposed of, wages restrained by unemployment, and raw material prices and interest rates forced down, sooner or later conditions return restoring prospects of making a profit and capitalism expands again: but only to repeat the cycle. There is, however, one kind of 'collapse' that can occur, a collapse of the currency if the excess issue is expanded to the point where the currency as Marx put it "falls into general disrepute", and nobody wants to hold or receive paper money.

Although he only half understood the problem, such a situation was foretold by Herman Cahn in his Collapse of Capitalism published in 1919. What he foretold as inevitable, like an "Act of Nature", was that "within a few years" (or within a year if the war continued), there would be collapse and "social chaos"; out of which, though the workers were not prepared for it, Socialism would arise.

A currency collapse was at that time on the way in the great German inflation (by contrast the British Government had decided in that year to halt it). By December 1923 inflation in Germany had reached fantastic proportions and unemployment had risen to 30 per cent of workers registered as unemployed, an unknown number not registered, and 42 per cent on short time. There was indeed "social chaos" while a new currency was issued and conditions got back to normal. But chaos does not produce Socialism. In Germany it helped to prepare the way for the rise to power of the Nazi Party under Hitler.

The situation in Britain in 1977 is that, although Keynesian inflation has lost many of its adherents, the Keynesians have not given up the struggle. Under the name of 'reflation' it is still being pushed by the T.U.C., by some professional economists, by Labour Party leaders and by some of the Tories and Liberals. (Most of the 'Left-wing' organisations are all for it.) If the inflationists have their way they could produce a currency collapse here. The dilemma of all parties is that if they abandon the Keynesian belief that unemployment and depression can be eliminated under capitalism, what can they do except face the alternative — fearful for them — of getting rid of capitalism?

Some politicians and economists are now urging a return to the nineteenth century gold standard in order to get rid of inflation.

It only needs to add that getting rid of inflation is not the answer. Capitalism without inflation, as in the nineteenth century, no more solves working class problems than does capitalism with inflation, as in the years since the end of the second world war.

Further Reading

Marx versus Keynes SPGB education document
The Marxian Theory of Inflation SPGB education document
the Edgar Hardcastle Internet Archive