benefits of the bosses.
ing to run a capitalist economy.
The proof of British capitalism's deep troubles can be seen in the record infistion and the huge gap between what the capitalists manage to sell abroad and what they have to buy overseas (S4000 million). But it is the virtual drying up of British capitalism's ability to make profits out of it its operations that is the biggest problem.
During the late 1950s the profits carned each year by British private industry were equal to about 15% of the total amount it had invested in capital. But by the beginning of the 1970s the profit rate had been cut almost in half-to 8%.
On top of this long-term trend, further problems mounted up as a result of the recession of 196971 and the inflationary boom of 1972-73.
For some time the real extent of this crisis was concealed on paper by the effect of so called 'stock appreciation -the increase in the value of row materials, partly finished prodacts, or unsold finished goods being beld in stock, as their prices are pushed up by inflation. Now, bowever, the real facts of the situa tion are coming out.
The first massive drop in profits came in 1968-70 when the total, rea in moncy terms, fell by 4500 In. in real terms- taking into account the effect of inflation the fall was much greater, By 1973 prospects had appar ently improved. Profits, on papef, were a "healthy" 293. But almost one third of this was due to stock appreciation resulting from the wave of inflation. By the time you cancel out this factor, and take into account the declining purchasing power of money profits, real profits were up only about 10% even on the previous low level.
SLICE The upshot of all this is that the "profits slice of the total economic cake, after rising to a bit more than 11% at the beginning of 1973, crashed to less than 9% by the end of the year and to less than 7% by the early part of this year (although the three-day week is partly responsible for this).
But while profits have heen falling off, the interest rates which must be paid on borrowed money have been soaring. This cost industry, which depends heavily on borrowed money to keep ticking over, an extra £900 million in the course of last year.
Moreover companies, like warkers, have to pay taxes based on their money incomes, not the real purchasing power of that income, So taxes rise as money profits are pushed up with inflation, even if real profits are stagnating.
Taking account of these increases in interest payments and taxes, company profits feil by something like 42.5% in 1973. If we calculate the real purchasing power of these profits, then the fall is more like 48% The shattering extent of this drop can be seen by comparing the present-day figures with those from the 1960s: real profits, after taxes, are only about 20% of what they were in 1963. Since real investment has been going up considerably in this period the fall in the rate of profit is even sharper.
The industrial section of the British capitalist class is being crushed to death by the present crisis. Only Red Weekly 24 October 1974 Page 10 paper, The Times) have spoken out against this massive scheme to pick workers' pockets for the But they put forward no alternative, socialist policy. In this article ALAN JONES takes a look at the effects of the present economic crisis on industry and explains how Labour's policies are inevitable from any government which is attemptan enormous economic shot in the arm will enable them to survive.
This crisis is not just another coonomic recession, on a more serious scale. It involves a basic upheaval in the whole set-up of the British capitalist economy. This is why the crisis is having such a big effect on both economics and politics in this country.
The first sign of this shake-up is that companies can no longer afford to pay for now investments and expis a socialist one ansion out of their own pockets. Capitalist firms in the rest of Europe and Japan have usually raised new capital through the banks or the state. But British industrial capitalists have traditionally relied on their own profits. or the stock market.
Since the mid- 1950s most company finance has come from 'internal funding from profits. has been drying up as profits tumble. In 1963, for example, almost three quarters of new capital was raised from profits By last year the figure was below 50%.
But industry still needs vast sums of new capital. ount required for this year range from £2000 million to £5000 million, with the "best guess" being about 3000 million. So how can firms raise such colCOME SUESE The Traditional alternative to inter nal profits as a source of capital has been the stock market.. But the economic crisis has destroyed the contidence of investors in shares and sent the stock market reeling. Since May 1972 share prices have fallen on axcrage by almost two-thirds. As a resuit the stock market last year was able to provide only £135 million of new capital-about 15h of the total required.
* Increasingly, therefore, industry has had to turn to the banks. Whereas only 14% of the capital needed was obtained through bank loans in 1963, this is a drop in the bucket compared with the £3000 million or so industry needs altogether.
What's more, it's not so easy lo turn to the banks. As we have already mentioned, interest charges can become a colossil burden. And even the mighty British banks cannot provide sums like this at the drop of a far. But given the crisis, there isn't Joans being repaid, and not a single even a fraction of this huge sum.
their loans to business, but they will insist on having some form of assistance and guarantees. itution in the whole of society which could underwrite such an operation The first solution to the present crisis B the capitalist State.
British capitalist class is turning its ectly under their control, they are now applying huge pressure to get Labour to dole out the millions But this source on the old model of Government suh sidies It is a fight for a whole new set-up for British capitalism, without Estimates of the amUNEMP which capitalist industry will be pulverised in the crisis. This set-up must by 1973 the figure was 34%. But even banks and colossal State intervention, be based on a big new role for the both to shore up the hanks and to directly help industry panied by drastic tax concessions and the removal of all the present controls OU DIULS In order to bave this job carried through withour hesitation, the rulIng class must be able to rely on the Governinent. That is why, despite the remolest possibility of many such private bank or finance institution in the country could afford the loss of The banks are prepared to step up The only instustry For this reason the whole of the eyes to the State and the Government.
Having failed to get a Tary or ToryLiberal coalition, which would be dirpose.
This is not a struggle over peanuts, or even a 'few hundred million pounds Such a move will have to be accomported the Lahour Party in the last clection. For the Labour Party, des pite the thoroughly pro-capitalist outlook of its leadership, is not a direct tool of big business.
This is also why someone like Tony Benn worries the ruling class so much. It is one thing to have a Labour polit ician like Harold Lever proposing which will leave it up to private capitalists to decide exactly how the money is going to be distributed. It is quite another thing for cash handouts to be given only on condition that the State takes over a big slice of the firms being bailed out. Under pres ent conditions this could soon result in the state owning and controlling a huge share of what is now the pri vate sector of the economy.
LABOUR GOVERNMENT The result of all this for the Labou Government, now that it is in office again, is equally drastic. It will not merely have to carry out viciously anti-working class policies-impose an incomes policy, allow unemployment to rise and workers' living standards to fall, etc. But at the same time it will have to make gigantic cconomic concessions to private bus The economic dependence of capitalist businesses on the State will become almost total in the near future. Every time a firm is faced with a crisis it will become a matter of Government and State policy.
Rarely has the workers' movement bad such clear-cut choices before it The first solution to the present crisis is the socialist one--based on the nationalisation of the banks and big financial institutions, and of the key sectors of capitalist indThe second alternative is to rifle the pockets of the working class through swingeing taxes and raging inflation, and hand over this loot to the capitalists through tax concessions and cash handouts There is no doubt what the Wisons, Levers, and Healeys will proThey are quite prepared to implement schemes that will allow INLAND REVENUE plus and cut working class living standards by 5% or more every year. all in order to bail out the capitalists But this means that they will have to simultaneously attack the working class and pive huge handouts to the employers a combination that could lead to an explosive reaction by the working class against Wilson's policies TRIBUNITES Faced with this open retreat even on the right-wing election manitesto, some Labour MPs have become scared they will lose their working class supwill win port. It was for this reason that Norman Atkinson, Tan Mikardo and five other Tribunite Labour MPs wrote to The Times warning against Lever's plans to hand out 13,000 miltion to private industry.
Atkinson & Co.'s reformism can provide no real alternative to Wilson, however, Firstly they argue, it is not clear that such a salvage operation is needed", In other words, instead of seeing that private capitalism is economically bankrupt and unworkable without vicious attacks on the working class, the Tribunates attempt to pretend that thing are really all right.
Secondly, their basic argument is that these handouts may endanper the social contract because it will he widely seen as a contract with capitalism, and rejected". In other words, Atkinson & Co. ure actually scared that the real nature of the social contract might become understood by the working class Thirdly, the Tribunites" defence of the social contract actually leads them to attack the working class for attempting to defend its living stand ands. Atkinson & Co. write: "The in jection of up to 3,000 million of the consumers" and taxpayers' money into industry could represent a formual for a massive wages explosion'. In short, the final logic of the Tribunites' position is to drive them, just like Michael Foot, to support employers against wage demands.
Finally, we can expect that even the Tribunites weak words will not be matched by actions. We can be absolutely confident that no matter what reactionary brew Healey serves up in his budget on 12 Novenber Atkinson & Co. will vote for it all in the name of preserving the Labuur Government'. In reality not only will the Tribunites vote for viciously anti-working class measures, but they will help to dig the Labour Government's grave as it demoralises more and more workers and prepares the way for the retura of the Tories, the Liberals and the Nationalists In reply to both the openly reactjonary policies of Wilson and the reforitism of the Tribunites the working class must develop its own answer, A fight must be waged within the labour movement, and above all within the trade unions, for:
*Not one single penny to the bank rupt representatives of a bunkrupt sys tem-nationalisation without compen sation, with full guarantee of wo loss of jobs and under workers control, of all firms creating redundancies.
*Nationalisation of the banks and the whole finance system.
*A trade union plan for the full nationalisation of the economy und er workers control
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They would require solid guarantees, the crisis in the Tory Party, no signi- too, before sticking their necks out this ficant scction of the ruling class sup-
... he second alternative is to rifle the pockets of the working class