London
In February of this year the British miners strike forced the Tory government of Heath to call, and lose, a general election. At that time this event was generally seen by the left throughout the world as an important victory for the working class. What is not so generally understood however is that in fact the miners strike and its surrounding events and aftermath were more than simply an important tactical defeat for the ruling class. They represented a strategic defeat for British capitalism and have provided the catalyst to unhinge and destabilize the whole economic, social and political situation in Britain. Britain has now joined the ranks of countries in Europe where even temporary restorations of political equilibrium are unlikely. As the outcome and nature of the struggles which are going to occur in the coming months and years in Britain are likely to have an impact not only on the relation of forces in that country but on the situation in the whole of Europe, it is important that the left understands the underlying economic dynamics and dimensions of this crisis and the complete impasse which British capitalism now finds itself in.
The Crisis of Bourgeois Strategy
The failure and fall of the last Tory government was not just a defeat for the Tory party, it was a profound defeat for the whole British ruling class. The Heath administration never was, for the ruling class, just 'another' Tory government. In its origins it was a government which embodied a definite bourgeois strategy, a definite project, for attempting to bring British capitalism not merely out of a general economic crisis but in particular out of the specific relation of that economic malaise to the historical crisis of the whole of British capitalist society.
The bases of the specific nature of the British capital- August 5, 1974
ist crisis are to be found in a particular pattern of historical development, starting with the very early development of British capitalism, which has led both to the extreme proletarianization of the country and to a position where historically the dominant sections of the ruling class have derived, to a degree unequalled in any other major capitalist power, their profits not from the exploitation of the British working class but directly or indirectly from the exploitation of the labouring masses of other countries. This situation is reflected in a pattern of foreign investment which in accumulated bulk exceeds quantitatively, even today, proportionately to the size of the country's economy, even that of the United States and is qualitatively higher than that of West Germany, France or Japan.1 This is in turn com-
1. In the years 1870-1913 Sweezy and Magdoff calculate, on the basis of Cairneross's figures, that the foreign investment of British capitalism was equivalent to over $24 billion in terms of modern dollars. Return on foreign investment was over $40 billion in the same terms. (Sweezy and Magdoff, The Dynamics of U.S. Capitalism, p. 33.) But even more amazing than the size, which is vast when considered in terms of the far smaller economy of that period, is the fact that by 1870 annual British capital investment abroad exceeded net capital formation at home and in 1911-13 capital investment abroad was probably double that in Britain. (Hobsbawm, Industry and Empire, p. 192.)
Even as late as 1968, on a far smaller Gross National Product (GNP) than its main imperialist rivals, apart from the United States, Britain still invested over twice as much abroad ($890 million) as West Germany ($390 million) and four times as much as Japan ($220 million). (Rowthorn, "Imperialism in the Seventies- Unity or Rivalry?" New Left Review, No. 69, p. 42.) This compares to a rate of home investment which, plemented by a pattern of "invisible" exports (insurance, banking, shipping for foreign nations, etc.) which is far greater in proportion to the size of the economy than any other major imperialism2 and to a pattern of trade which has been oriented towards sectors of the world economy, first the Empire and then the Sterling Area, where, for historical and/or political reasons, British capitalism had a privileged position as a seller and where competition on the same technological level was very weak. 3 Rarely has the word "imperialism" had such direct importance in analysing any major economy as it has in the case of British capitalism.
This pattern of insertion in the world economy has had profound historical implications for the whole social and political structure of Britain. Firstly, it has given the bourgeoisie a huge "buffer" against the need to sharply increase the rate of exploitation of the British proletariat. Secondly, it has allowed the bourgeoisie to make, when under working-class pressure and without creating economic ruin, the great economic concessions to the British working class which are reflected in the great organizational strength, and political backwardness, of the British working class. Thirdly, it allowed the bourgeoisie to avoid having to resort to fascist or military solutions between the two imperialist world wars, and thereby allowed it to maintain the enormously strong ideological weapon of 300 years of uninterrupted parliamentary regimes. Fourthly, however, and this is where the crisis within the bourgeoisie becomes very important, this situation of the British economy has meant that the decisive sections of the home-based British industrial bourgeoisie, in particular of the new industries created in the twentieth century, have not historically been the dominant fraction within the ruling class. 4 Economic pre-eminence was in the hands of finance capital, symbolized and organized in the City of London, and government was in the hands as a percentage of GNP, is twice as high in Japan (30- 35%) as in Britain (16-18%) and which is two-thirds higher in West Germany (23-27%) than in Britain. ("Survey on Japan," The Economist, March 31, 1973.) The situation on accumulated foreign investment is still more striking even in relation to the United States. In 1971, actumulated stocks of West German capital abroad were worth 4% of GNP. For the United States the figure was 8.2%. For Britain, however, it was 16.7%. (Financial Times, April 25, 1974.)
•Britain is the greatest "exporter" per trade, however, head in the world. (Manser, Britain in Balance, p. 23.)
3. As late as 1955, for example, trade with the Sterling Area represented 45% of British exports compared to only 15% with the countries that became the EEC. (Prest and Coppock, eds., The British Economy.)
4. The ideological effects of this economic, social and political situation have been analysed in a series of articles by Anderson and Nairn in New Left Review, and a brilliant sketch is given in Trotsky's "Through What Stage Are We Passing?"
wnat blage Ate we rassing!
of the remnants of the landowning sections of the ruling class-these latter two forming the dominant section of the main party of the ruling class, the Tory party, with home-based industrial capital playing a subsidiary role, and with the policy of the whole being dominated by the needs of finance capital.
This relation of forces within the ruling class meant that the policy of the British state was not in general directed towards the interests of the home-based technologically advanced industrial bourgeoisie but to the needs of the foreign operations of British capital. This was shown in dozens of ways-the return to the gold standard after the first world war with the disastrous consequences of a high exchange rate for the British domestic economy; the maintenance after 1945 of absurdly inflated exchange rates which kept the maximum value available for foreign investment but which crippled exports; the maintenance of military forces vastly beyond Britain's financial capacity in East Asia, the Arab Gulf, etc.; the concomitant foreign policy alignment not with European capital but with the United States, the only possible military protector of British investments and operations abroad; the decision not to enter the European Economic Community (EEC- Common Market) at its inception because of its effects on the financial operations of the City and the export and import patterns of British trade, etc.
The historical reasons for the crisis of this economic orientation are well known. They are in particular:
1. This foreign economic orientation was gained, as noted, at the expense of the development of the British economy itself. From the 1860s onwards, the British economy was weakening compared to its rivals. The final nail was driven into its coffin when, unlike its German and Japanese rivals, it missed the benefits of the enormous increase in the rate of exploitation made possible by a totalitarian regime.
2. British imperialism, precisely because of its weakening home base, did not have the political or military capacity to defend its markets against the encroachments of rival imperialisms. Starting with the rise of German imperialism, and ending with the concessions Britain was forced to make to the United States to gain leaselend during the war, the old political defence of the system of trade and investment began to crumble.
3. After 1945 British imperialism could no longer economically afford to sustain a foreign military system which, with the exception of the United States, far exceeded that of any other capitalist power.
4. Those sections of the world economy towards which British imperialism was oriented were, after 1945, the most stagnant sectors of the world economy.
The net outcome of these developments was that by the early 1960s it was clear to all that the old pattern of British economic development was no longer viable. 5
On every major index-rate of profit, 6 rate of investment,? rate of growth of productivity, 8 rate of growth of the economy9 -the position of British imperialism was and is unrelievedly bad. The crisis of the foreign orientation meant that it was no longer capable of compensating for the domestic deficiencies.
But two enormous barriers stood in the way of British imperialism reorienting its policy in the necessary way, i.e., towards integration into the EEC. Firstly, the British economy was so run-down that it was incapable of competing adequately with its rivals in the EEC.10 Secondly, such a reorientation would shake up, and have to overcome, the whole social and political pattern based on the old economic structure. In particular it would mean:
1. Shifting dominance within the ruling class and the Tory party from the old finance-capital-landowning nexus to the representatives and interests of big industrial, technologically advanced, British-based capital.
2. In foreign policy, shifting from the old alliance with the United States to an alliance with European capital.
3. Within the economy carrying through an unprecedented series of mergers and rationalizations and greatly increasing the rate of exploitation.
The key to this whole process, which in many ways
Average Annual Rate of Growth of Productivity in Manufacturing is analogous to, but much more profound than, the type of restructuring which French capitalism carried through under de Gaulle, is of course the ability of the bourgeoisie to bring about a qualitative shift in the relation of forces between the ruling class and the working class.
On some of these fronts the bourgeoisie has made progress, generally of an empirical stumbling sort, during the last ten years. The big series of economic mergers in the mid and late 1960s, symbolized in the coming into existence of British Leyland and GEC-AEI-English Electric, strengthened, concentrated and gave more cohesion to, the industrial bourgeoisie. 11 The success of Heath in being elected to the leadership of the Tory party put an end to the political dominance of the old landowning clique of the Salisbury-Baldwin-Churchill-Mac- Millan-Home line. In foreign policy, an attempt at a decisive break was made by the Heath-Pompidou agreements and the entry of Britain into the EEC. The
Investment as a Percentage of GNP
Range From 1960 to 1972 30-35%
Japan
23-27%
Germany
20-26%
France
16-18%
Britain
17-18%
U.S. (excludes government expenditure on machinery and equipment)
("Survey on Japan," The Economist, March 31, 1973.)
10. In the years between the mid-1950s and 1970s, Britain's pattern of trade was of necessity, in view of the world market changes, transformed. For example in 1955, 22% of British exports went to the developing countries of the Sterling Area and only 15% to the countries which formed the EEC. By 1971, only 13% of exports went to the developing countries of the Sterling Area and 21% went to the EEC. In 1955, 45% of British exports went to the Sterling Area as a whole and only 41% went to Western Europe and North America. In 1971, only 29% of British exports went to the Sterling Area and 56% to Western Europe and North America. (Prest and Coppock, The British Economy, p. 119.) But in the new markets Britain couldn't compete against its main rivals. To take just one example: Between 1963 and 1973 the West German share of British imports increased from 4.3% to 8.5%, while the British share of the German market fell from 4.7% to 3.5%. (Financial Times, April 23, 1974.)
11. This was accompanied by an ideological offensive that concentrated on building up new bourgeois "cult" figures (e. g., Lord Stokes of Leyland Motors, Arnold Weinstock of GEC). A whole series of books stressed the need to break with "amateurism" (associated with the old ruling class) and develop "professionalism" (associated with industrial capital). The buildup of Heath himself, the first "grammar school" Tory leader, fitted perfectly into this.
Notes
2. In the whole period from 1796, when records start, to 1973 there have been only nine years in which the Balance of Trade (relation of visible exports to visible imports) was in Britain's favour. In 73 years in the twentieth century there have been 69 deficits. In invisible
5. Take for example foreign investment. The pattern we have discussed above still exists, as shown by the fact that the value of British foreign investment was still 80% that of exports in 1971, compared to 18% for Japan and West Germany (Financial Times, April 25, 1974), nevertheless, returns as a proportion of GNP had fallen from 10% in 1914 to only about 2% even by
9. See table on rate of growth of Gross National Product.