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THE BOURGEOISIE FACE THE FACTS ....... AND ATTEMPT TO GET THE WORKING CLASS TO DO THE SAME .......
This is the task which Maudling outlined in the quote which begins this article. It is the material reality which has caused the Tory "dogmatists" to drop their former "principles" with nary a scruple and undertake the task. Maudling recognised that this time the Incomes Policy would have to be an Incomes Policy with a difference. Why? For the simple reason that the others had failed (The Economist points out that in "the past quarter of a century incomes policies of one kind or another have been tried in Britain in one year out of every two." 30.9.72, p.79). Maudling reflects:
"You cannot solve the problems of a major social upheaval by economic mechanics alone ... I suspect that the problems we are facing are not economic but political. Economic factors operate within a political framework and the old orthodoxies of economics, however coherent and self-consistent, may not apply in a changed political situation. What determines the course of a country's society and its economy is fundamentally political power and how it is used." "Unless we are prepared to cast aside all previous political and economic dogmas in order to meet a new political situation to which they have little relevance, we have no chance of success."
The main economic orthodoxy which Maudling argues against and which the bourgeoisie have had to jettison is that which states that wage increases can be contained by deflating the money supply or reducing global demand (Keynsianism in reverse).
These orthodoxies became very fashionable in the last five years (led by Milton Friedman and in the UK by Harry Johnson and Frank Paish - a reflection at the level of the intelligentsia of the Conservatives' reaction to the working class's actions). Enoch Powell is now its main political exponent here though most of the bourgeoisie including the FT and FT Economic Correspondent Samuel Brittan took up the arguments. It holds that if the funds are not available to the employer, the wage increase will simply not be paid. Maudling counters with the fact of the working class's power to get wage increases.
"It is argued that responsibility rests on governments and if they will control their expenditure all will be well. I think both these arguments (monetarist and balanced budget) have now been exposed for the nonsense they are. You cannot deal with cost-push inflation other than by means directly relevant to its source. To restrict the volume of money only means in modern conditions that, while the socially powerful continue to expand their incomes, more and more of the less powerful lose their jobs altogether while the economy stagnates and investment collapses. Nor do I believe that there is any truth in the theory that more competition could provide the solution. The more competitive the economy the stronger the power of the unions. Squeezing the money supply does not encourage firms to resist wage claims, it forces them to give way."
The Government's proposals on inflation recognise these facts by allowing for a 9% increase in money wages and a 5% increase in retail prices (4% for prices of manufactured commodities). To the question of how money wages can increase faster than prices (resulting in an increase in real wages) the Government have replied with a guaranteed 5% increase in production ... instead of the traditional deflationary measures which economists have been wont to prescribe:
"Many members of the CBI are wringing their hands at the prospect of a 4% price ceiling. They ought, instead, to be clapping: 5% growth for the economy as a whole will usually produce a somewhat faster growth in industrial production and manufacturing output ... Thus output in industry could well rise [to? above? - PB] 6% with little if any extra employment. Add to this a 4% rise in prices and the value of final output could be up by more than 10%. Against this, the cost of £2 a week all round would be an extra 9% on the wages bill. A difference of 1% may not sound much, but as profits are only a fraction of total value-added there is considerable gearing ... Economic growth is good for profits - and a far more important influence on them than simple price rises. As output rises, productivity goes up; as factories operate closer to capacity, unit costs come down. The desperate attempts of companies to retain their share of the national cake through price rises has been far less successful than that of the unions to have their cake and eat it ... The effect of a rise of 5% in real output might, have a magical effect on the share of profits in national income; they could conceivably go up from 12 to 16% on the basis of relatively crude calculations but only on the assumption that the Government did not intend some of the growth to go to consumers and wage earners. A better guess may be l4%." (Economist p. 77, 30.9.72)
It is not Keynesianism that failed in the '60s. The significance of Keynesianism is the conscious regulation of demand; what has been lacking is equally conscious regulation of wages and prices. Maudling points out that it is impossible to defeat a politically organised and economically powerful working class by attempting to impose the laws of the market. The class's political demands (for full employment and rising real wages) mean that the market must be regulated to produce both these. They are possible only if growth in production is also occurring for which adequate profits are necessary and therefore the need for regulation of wages and prices.
The political orthodoxies Maudling refers to are not defined by him. I think they are the following:
(l) With one exception, Incomes Policies have been seen by the bourgeoisie and explained to the working class as temporary phenomena necessitated by exceptional circumstances (the 1949 and 1967 devaluations). The need for wage restraint is defined as limited in time after which the working class and employers can return to normal collective bargaining. When normality is duly decreed to have returned by the state and again produces the conditions necessitating another incomes policy, the same explanation is again used. The working class has become conscious that the "exception" is the rule and is not borne out by the material reality. However, it has been offered no other explanation of why it is essential to accept regulation of wages.
(2) The 1964 Declaration of Intent (and possibly the Coalition Government's intentions for the postwar period) were not explained as exceptions. However, the 1964 campaign relied on the ability of the TUC and a Labour Government (which it was presumed the working class would have faith in to look after its interests and therefore accept a lead from on faith) to determine the action of the working class by virtue of their being its leaders. Thus, the reasoning behind the Declaration (though identical to the present proposals) was never explained to the working class. It remained at the level of electioneering rhetoric about prosperity and a better society and never descended from those heights to grapple with the central material issue: that regulation of wages and prices would necessarily involve a substantial change in the present form of the economic struggle; the free, competitive collective bargaining between workers and employer and between sections of the working class would have to be consciously regulated by the participants. Therefore, the working class had every reason to accuse the Labour Government of betrayal when it was asked to abandon this form. (It should be remembered that the conscious regulation of incomes does not remove the power of the working class to gain real wage increases. As Maudling points out, it could not possibly do this. The working class's power is not dependent on Government fiat but derived from economic and political reality. It does put the exercise of that power into a consciously regulated framework which provides for its fruitful use, i.e. instead of wage increases forcing price increases without increase in production, wage demands are met with increasing production and an inflation rate which is the same as the rest of the capitalist world.) When the working class rejected the Labour initiative, the TUC leaders had to follow suit - otherwise they would have been replaced by new "rank and file" leaders. I am doubtful whether either the TUC leaders or the Labour Party were capable of explaining the economic and political reasoning behind the Declaration to the working class. They did not consciously keep the working class in the dark; they simply did not fully understand themselves the economic and political implications for the working class. To do that they would have had to be dialectical materialists.