WORLD OUTLOOK
Vol.5, No.40 December 8, 1967 Tribunal Verdict: U.S. Guilty
of Genocide
Ernest Mandel: The Pound Sterling Bows Out
as the Queen of Moneys George Novack: Why McNamara’s Removal
from Pentagon Stirs Fear
Livio Maitan: In Reply to the Bolivian CP
and Its Backers Jean-Paul Sartre:
Speech at Copenhagen Hearings on U. S. War Crimes
Stokely Carmichael’s Message
on Che Guevara soe
THE POUND STERLING BOWS OUT AS THE QUEEN OF MONEYS
By Ernest Mandel
Several historic tendencies met at the crossroads in the devaluation of the pound sterling. The most important, without doubt, were the decline of British imperialism on the one hand and the growing social crisis in Great Britain on the other. The British Labour party chiefs, good doctors at the bedside of capitalisn, tried for a long time to bolster the patient by means of stimulants. But in face of the gravity of the relapse, they could not avoid the surgery which many experts had desired for quite some time.
Downfall of a Queen
For a century, from the battle of Waterloo until the shots fired at Sarajevo, the pound sterling was the queen of the world. Not that all the gold flowed toward the City, London's financial district, often there was more in Paris and sometimes even in Petrograd.
What gave the pound sterling its power was the superiority of British industry, the rise in productivity which it enjoyed in relation to that of other countries, the low prices which enabled it to penetrate all customs barriers, the abundance of capital which flowed toward all continents.
This abundance was such that the returns on capital invested abroad, for more than a half century, from 1885 to 1939, outweighed the capital exported annually.
The British bourgeoisie constructed the Empire to assure the security of their investments. They planted naval and military bases throughout the world to defend this empire and -- prudent stockholders -- spent for this only a fraction of the income returned by the capital invested abroad. Another function of the Empire was to extort from the colonized peoples -- above all those of India and Egypt -- payment for a good part of the costs of maintaining the British arny, fleet and administration.
Two victorious wars and a wave of colonial revolution completely undermined the solidity of the edifice. A good part of the investments abroad had to be liq-~ uidated to finance the war effort. The political independence granted most of the former colonized countries meant that while the British investments were still safe, these countries hardly contributed any longer to financing the Establishment of her Gracious Majesty. The revenues brought in by these investments is still considerable, but their proportion in relation to the national income has been greatly reduced. They no longer suffice to absorb the traditional deficit of Britain's trade balance; above all they are insufficient to finance the military effort which this weakened imperialist structure continues to require in all quarters of the globe.
The worst is that Great Britain long ago lost its monopoly in the world market on high productivity. Taking into account only the capitalist countries, the United States, Western Germany, Japan stand above England's technical level and sell industrial products at a lower price. In this is to be found the definitive cause of the continual deficit in the trade balance, the fundamental reason why the pound sterling no longer serves as an international means of payment.
For two decades, the Labour and Conservative governments succeeding each other in office have sought to hide this fundamental truth. In line with this, they have imposed many useless sacrifices on the British people. The day of reckoning finally came. The pound sterling is dead as the queen of moneys. The sterling zone is dying. The pound is becoming one money among others, standing somewhere between the Deutsche mark and the Italian lire. Thus the economic and financial reality, like a faithful seismograph, registered this major political overturn -- the irreparable decline of British imperialisn.
Revolt of the Working Class
Not since the general strike of 1926 has the British working class been beaten in a direct struggle -- something unique in all of Europe. It suffered, it is true, the upset of MacDonald's split in 1931. But its Labour party came out of this holding the bulk of its forces, accentuating its socialist doctrine, remaining more than ever the symbol and rallying point of the world of labor as opposed to the world of capital.
This undefeated working class assembled the majority of the nation in 1945 in hope of constructing a socialist society along the peaceful road. If ever this hope could seem realistic anywhere, it was certainly at that moment and in this country. It is not easy to see what social force could have stood in the way of the Labour party forces at that time when they sought to definitively break with the capitalist regime.
The leadership didn't want socialism. Of course, they passed the most progressive social legislation, they nation-
alized some uneconomic branches of industry, but they left the monopoly of the manufacturing industries in the hands of the private capitalists and left it up to them to introduce the most modern technology in current production.
The results were not long in becoming manifest. The British economy showed a rate of growth below that of its main competitors. To seek to adjust high social expenses with an economy based on private profit -- this has long been impossible under capitalism. Thus first came the austerity which led to the discontent of a part of the middle classes and the white-collar workers, permitting the Conservatives to return to power. Then came fifteen years of Tory power during which the old industrial position was progressively wasted away in luxury expenditures and the growing flight of capital. Competitive capacities deteriorated more and more, not because wages were too high but because productive investments were insufficient.
To step these up, it was necessary -- as this course logically implied -- to stimulate and subsidize profits; and, in order to accomplish this, to reduce social costs and real wages. If the Tories had tried this, there would have been a general strike. Thus the job was left to Harold Wilson, greeted by the British capitalist press as the champion of "modernization" of the country from the time of his election.
Wilson loyally applied the program of capitalist health improvements. He reinstated austerity, levied new taxes on consumers' goods, froze wages, threatened organizers of strikes with criminal prosecution. Undoubtedly he scored the success of a surprise attack. For a year the British workers remained stupefied at the spectacle of "their" representatives, whom they had lifted into office at the cost of such efforts and sacrifices, unmasking themselves as worse enemies than the representatives of the bosses had ever dared show themselves in forty years.
But after this year of paralysis, came a second year of anger. One after the other, the big unions, the labor army by entire detachments, revolted against Harold Wilson.
The Transport Workers were the first to take the road of revolt; Wilson was beaten at the last Trades Union Congress. A shameful bit of skullduggery still saved him at the Labour Congress at Scarborough -- he promised the miners to suspend closing down the pits for the time being, without adding that this pronise implied tie perspective of an accelerated shutdown in the spring. The Miners Union thus voted for him at Scarborough; but when they discovered how they had been cheated (Lord Robens, the head of the nationalized coal mines, charged the government with seeking to reduce employment in the mines from 380,000 persons to 65,000 within a time limit of a few years), they turned violently against the cabinet. Then the Amalgamated Engineering Union elected a militant of the left, a former Communist, Hugh Scanlon, to replace an extreme right-wing bureaucrat as main leader of the organization. Next came some very spirited and militant strikes in the ports of London and Liverpool.
Already cut off from the majority of the trade-union movement, Wilson had to undergo a furious assault from almost the whole party when his chancellor of the exchequer, James Callaghan, publicly supported a declaration made by the governor of the Bank of England, Sir leslie O'Brien, according to which a permanent pool of unemployed is indispensable if Britain is to overcome inflation. This signified abandoning the principle of full employment, which has dominated the reformist ideology since the crisis of 1929. This was the drop that made the cup flow over. Wilson was threatened with a revolt by his whole party. This is what led him to devaluate.
The truth was that the economic policy of the Labour cabinet was caught in a dilemma: it sought at any price to wipe out the deficit in the balance of payments; and it sought at the same time to step up the economy. The struggle against the deficit in foreign payments implied deflation; deflation implied mounting unemployment (at present it is without doubt around 800,000). But to seek at one and the same time to carry out deflation and to step up production is an impossible combination. By devaluing, that is, by cutting export prices seventeen percent, Wilson can hope to stimulate production and discourage inports; i.e., reestablish equilibrium in the balance of payments without choking off industrial expansion.
The Immediate Repercussions...
The immediate effect will be to cut down unemployment and weaken the pressure on the cabinet from the trade unions.
But the respite will not last long; inasmuch as Great Britain imports a large part of its food and raw materials. Devaluation stimulates not only exports (and thus production); it also provokes a rise in import prices, hence a rise in the cost of living. The specialists estimate this at four percent; no doubt their figure is too low. Wilson will seek to block the demands for an increase in wages. Cousins and Scanlon, under the pressure of their rank and file, have already warned him that he should be
under no illusions about this.
If the government seeks to impose a new wage freeze, the battle it evaded in the field of unemployment will have to be conducted in the field of incomes. If it concedes in this, inflation will become all the worse.
As always, the devaluation will thus provide only a brief respite, after which all the unresolved problems will reappear, sharper than ever.
In the international domain, the capitalist countries were happy over Wilson's "moderation"; if he had devalued thirty percent, it would have rudely shaken their markets. In exchange for this "moderation," they granted him a bit of charity in the form of a loan. The editorial writer of The Economist summed up perfectly the relations between the British bourgeoisie and their foreign partners in the title: "Beggars or Choosers." Are we beggars, or people who still have a choice?
The weekend of November 18 provided an answer to the question.
..-and the Long-Range Ones
Aside from the British colonies and semicolonies, the only countries that immediately devaluated their own currencies following the devaluation of the pound sterling were those that have an analogous domestic problem of simultaneous inflation and stagnation, such as Spain and Israel. The operation on their part had a political rather than monetary motive.
In Brussels there was exultation: Great Britain's path toward the Common Market was singularly shortened by the elimination of two obstacles: the international role of sterling and the econonmic stagnation of Great Britain. It remains to be seen whether the social crisis and industrial competition will not yet arouse sentiments of a different kind among the capitalists of Western Europe.
For if in truth the other imperialist moneys are, to say the least, technically solid, the real problem does not lie there. The devaluation of the pound places a premium on British exports. If the world market is expanding, this premium brings a loss to no one. If it is stagnating, other countries are threatened with paying the bill for the temporary advantages assured to the British industrialists.
The first to become worried were the Japanese, who for the moment are experiencing the greatest expansion. In New York and Dusseldorf, the reaction is like that of the primitive rain makers: "May a recession be staved off! May an expansion come!" The fate of the international capitalist economy will be determined in the next six months. If in Germany a recovery sets in, the threat of a general recession will be avoided...this time. If the recession in Germany lasts, the effects of this recession and the British devaluation will make 1968 a somber year for the international capitalist economy. A touch of fever could lead some of the other capitalist powers to take advantage in their turn of devaluation in order to get out of a decline. The whole international monetary system threatens to be shaken.
The root of the problem is to be found here. Like the pound sterling, the dollar, keystone of the arch of the entire world monetary system, has a double function requiring two qualities that are becoming more and more contradictory.
As a means of international payment, it must be as stable as possible. As a weapon of struggle against a crisis in the United States (and by way of ricochet for the international capitalist economy!) it must also be flexible, that is, as unstable as possible. Any return to the automatism of the gold standard threatens to precipitate a grave economic crisis, which the capitalist world must avoid at any cost. But any continual monetary manipulation for expansionist aims is certain to precipitate inflation and the erosion of the international monetary system. The main lesson of the devaluation of the pound is that within the framework of the capitalist regime, there is no way out of this dilemma.