Political Intelligence: Labor In Britain: After 10 Months

...Labor's crucial failure was that it did not take financial measures, most plausibly devaluation, in the early days of office, that would have (temporarily) ended the sterling crisis and given the Government time in which to set going its long-term program for industrial expansion...

...But the Government has itself awarded increases above the stipulated norm in the public sector (an improvement on the Tories, who enforced restraint only in the public sector), and it is doubtful if even the unions which officially endorse the incomes policy will in fact accept smaller wage increases as a result...

...The Labor Party's whole economic attack on the previous Government had rested on criticism of deflationary measures as a means of maintaining the value of the pound and a stable balance of payments...

...Yet American radicals have looked longingly for British opposition to US policy in Vietnam, an opposition that would certainly have a greater effect inside the US than that, for example, of France, and that would also produce a stronger international alliance against the present war...

...The earlier imitation of the Kennedy style (with an ill-fated Hundred Days, getting Britain moving, and all the rest) has now given way to Johnsonism and the image and techniques of Consensus...

...It is duplicated by pressure at home...

...In spite of Wilson's mastery of Parliament, the Labor Government has shown a singular and disastrous incapacity to evoke a popular response to its policies...

...Such are the difficult electoral prospects and Labor's tenuous grasp of power...

...This is a language that can more easily be cashed in as measures against the unions than as coercion of business...

...Immigration from outside the Commonwealth, almost all white, now runs at 42,000 per year and is not to be restricted...

...The Government's survival now depends on a degree of luck...

...Two main causes explain this...

...The cuts in public expenditure have the appearance of a ritual sacrifice...

...Clearly, economic arguments about overcrowding, unemployment, etc., are a bogus facade for essentially racial demands...

...Yet there is not even a pretense of democratic decision-making in the Parliamentary Party and unconditional support in this situation is merely an invitation to a Labor Government to give in to all the other and stronger pressures on it...

...The reason it is still struggling to maintain overseas confidence in the pound after three successive deflationary budgets is that bankers can demand evermore conservative policies from a leftist government in a weak trading position, as they did earlier from the Italian center-left regime...

...The Party faced this crisis with a majority of three, that is, without the security which would enable it safely to face a year or two's unpopularity and later reap the benefits of successful social programs...

...The Act of Parliament against racial discrimination was also radically changed to meet Conservative specifications...

...The Party has no awareness of the political importance of unionization, no conscious strategy for converting the decline in the proportion of manual workers into an enlarged class of "workers by hand and by brain...

...15 August 1965...

...There has been a structural failing in the British economy for many years, expressed in the inability to achieve a favorable balance of visible trade and also in a steadily declining share of export markets...

...If one Labor MP from a marginal constituency dies in the next few months, its overall majority could be reduced to one...

...The alternative of a pact with the nine Liberal MP's has its own hazards, mainly because of the incompatible programs and constituencies of the two parties...

...East of Suez" is only an extreme version of what he has said so often about Britain "being tired of being pushed around...

...For the time being, this gap between optimum and actual strategy seems unbridgeable...

...But in July the final point of ignominy was reached by emergency budgetary measures directed in particular at public expenditure...

...The Conservatives' choice of Heath as leader, in imitation of Wilson's tough, technocratic image, has already paid off in a Tory lead in the latest Gallup poll figures...

...But Labor had an opportunity in March, when the opinion polls were favorable, to increase its majority through a quick election...

...The bill for the public ownership of building land has yet to appear and "practical considerations" seem likely to limit its scope to merely "selective" ownership...

...This would probably be unmanageable and the Government would then be forced into a general election at a time of almost certain defeat...

...In part, this follows from the decision to defend sterling, both because US support of the pound has its political price, and also because it is those segments of the sterling area lying "East of Suez" which produce the largest favorable balances...

...No attempt was really made to retain it and Richard Crossman even commented, characteristically, that the Leyton by-election defeat might really be a good thing if it taught Labor that lesson...

...Since then, the Government has run into further economic difficulties and has announced postponement of many of its social welfare programs (the minimum incomes guarantee, local authorities' building programs, lower mortgate rates, etc...

...If that course involved risks, it could hardly be more ignominious or dangerous than the Government's present policy...

...Though Wilson has a majority of three, there has been only a single instance of leftist revolt in the House of Commons, by one MP...

...Why has this happened...

...Labor has for the time being utterly failed to grapple with the problems posed by the holders of sterling...

...Even the restrictions on public expenditure have been selective to a degree and local authority housing for rent is to be increased as a proportion of total housebuilding...

...The situation is now gloomy...

...Wilson had argued that these "stop-go" measures, while apparently meeting the probIems in the short-run, actually slowed down innovation and investment and weakened the economy in the long-run...

...He has virtually left the field of domestic politics, where his own reputation was built, to his unimpressive deputies Brown and Callaghan, and devoted himself to negotiations with foreign presidents...

...The image of moral collapse is seen even more sharply in the Government's almost total capitulation to racialist pressure and its restriction of Commonwealth immigration to 7,500 per year...

...Wilson has abandoned the role of the threatening, aggressive radical of the public platform, which he performed with such success in the campaign, and taken up instead that of the responsible statesman...

...Inner-party debate is at a low ebb and the pressures of office make it unlikely that the Government can be influenced by outside discussion of alternative options...

...Such a strategy could connect, we thought, with structural changes already taking place in British society...

...Yet the cumulative effect of these recent restric tions will be the most severe deflation for many years and they will certainly cause a sharp increase in unemployment...

...All this has left the Government with its sterling crisis and a choice of financial measures to deal with it...

...The Steel Nationalization Bill has been postponed, thanks partly to opposition within Labor, from two MP's of the extreme right...

...So economic and moral weakness are interrelated...

...Steps have been taken towards increased company taxation and fiscal control of the private sector...

...In fact, they must be explained by their effects on confidence, notably that of overseas bankers...

...The radical option suggested above as the best way of confronting the economic crisis was probably open only to a Government which regarded its communications with its supporting movement and with public opinion at large as a major priority and which worked to maintain a high degree of popular involvement...

...Discrimination, in certain public places only, is to be referred in the first instance to "conciliation courts" instead of to the criminal courts as was originally announced...

...Soon after winning power, it lost that contact with the public...

...Evictions were stopped and rents restricted...

...We suggested that a stress on an expanding social sector, on unionization and the incorporation of white-collar and white-coated workers in a new working class, on the enlargement of political modes of decision-making and control, could become the basis of a socialist transformation...

...The Government's proclaimed revitalization of the permanent civil service ran into im• mediate silent obstruction...

...Much of this pressure is essentially political...

...There are beginnings of an academic teach-in movement on Vietnam, which may grow when term resumes in the autumn...

...The renewal of obsolete social capital and the provision of a decent standard of living for everyone have been sacrificed to the stability of the pound...

...Wilson rejected devaluation, which, as he recently said, could have bought a year's time (though at the price of possible disruption of the international currency market) by restoring more favorable terms of trade...

...In spite of a large IMF credit, however, this did not solve the problem and in the Spring a second series of measures— raising the bank rate and restricting bank lending and mortgages—intensified the deflation...

...And there has continued the nationalist exhortation that was always one of Wilson's worst traits as a politi cian...

...But Labor soon lost its initial momentum and also the sustenance of active goodwill...

...During the election campaign, the Party had captured the political initiative and found an audience for its radicalism...

...The party machine has been left to stagnate, its poor organization unimproved (despite rumors last year of impending radical transformations) and its research department, key source of new policies in the previous ten years, has been largely replaced by the civil service...

...No more stop-go" had become a wearisome Labor slogan in the election, so often was it repeated...

...The Labor Party's modes of internal control and of government in general are increasingly managerial and dirigiste...

...Up to this point the effect on consumption was slight and there was even disagreement among liberal economists about the extent of the deflation and, crucially, the degree of unemployment that would be caused by it...

...until the sterling problem is solved...

...To make such an arrangement, Labor would be under pressure to bargain steel nationalization for Liberal support...

...Labor inherited from the Conservative Government a severe balance of payments crisis, immediately exacerbated by speculation against the pound...

...And if the Liberals were ever in a position to risk an election (which they currently are not), Labor could face the choice of abandoning all pretense of a socialist pro gram or losing office...

...In any case, improvements in the growth rate and in export competitiveness resulting from these directly industrial measures will not be noticeable for some time...

...At the same time, a Labor Government experiences stronger pressures than the Conservatives in any given economic crisis...

...Indeed, after ten months of Labor government all the major political and economic battles wait to be fought...

...Because the conflict of interests between the City of London and the long-term needs of industrial growth is not widely recognized in industry, any attempt to sacrifice the pound (by devaluation) in favor of continued expansion would have meant taking on a large part of the private sector in a bitter fight...

...Academic advisors, brought in to provide a nucleus of socialist officials in Whitehall (Labor supposedly profiting from its earlier experiences with the civil service), mostly found themselves on the margins of power...

...It was a failure to face up to conflict with the City of London and with overseas financial interests...

...The "swing" then, if repeated in a general election, would give the Tories a majority of 190 in the Commons...

...Earlier, the Chairman of the Bank of England, Lord Cromer, had been rebuked by Wilson for urging a reduction in public spending "to maintain confidence among overseas holders of sterling...

...There are some signs, in nominations to the Labor Party National executive, that constituency activists are seeking a new generation of leaders, less dominated by the Parliamentary ritual and its endemic defeatism...

...These plans called for increases in domestic investment, state action to increase research and industrial training, modernization of selected key industries...

...The leadership's reliance on political gimmicks has not helped...

...The key to understanding how this unhappy situation has come about lies to a considerable extent in Labor's economic predicament on coming to office...

...Comprehensive schools are to be introduced at the local authorities' own initiative and speed, and there is a proposal being put about that the "public" schools should be integrated into the state system "by agreement with their head masters...

...the Wilson Government has in the event made a disastrously different set of choices...

...These are small but real benefits and will no doubt be followed by others if the Government survives...

...As it did so, it seemed less and less likely that Wilson could successfully spring an election —so one has watched his political bluffs begin to be called...

...And on the issue of democratization, Party leaders are not only indifferent but actively antipathetic...

...There was a confusion in this article between the optimum strategy which might be derived from Labor pronouncements and the likely actual strategy...

...They are intended to meet a shortterm drain on reserves, yet will not take effect until well into 1966...

...Pensions were increased and taxes mildly redistributed in the first weeks in office...

...There we sketched a version of Labor's strategy, an optimistic view of what Wilson's "center-left" was about...

...For certainly either the City of London and its foreign allies or the powerful trade unions must be attacked and subdued if Britain is to achieve faster economic growth...

...Opposition from without has also been disorganized and fragmented...

...With such a small majority, of course, such a conflict would not have been easy...

...Alongside the economic retreat, there has been a kind of moral collapse in the Labor Party...

...Only Kaldor, ghost author of the Finance Bill, has had some visible influence on policy...

...Devaluation, or rigorous exchange controls, might have precipitated the international monetary crisis, and possible recession, that has threatened in the backround for some time...

...The strategy for Labor we suggested was perhaps potential in the situation...

...Apparently it hasn't...

...Most serious from a welfare point of view, Labor's minimum incomes guarantee, only the first instalment of its pensions policy, has been postponed...

...Alarmingly, the controlling theme of Wilson's speeches has been that of modernization and "ending restrictive practices...

...Thus the Government has given almost unlimited verbal support to the United States in Vietnam and the Dominican Republic...

...It does not seem impossible that the Government could have successfully phased both another election and tough non-deflationary measures to hold the balance of payments position...

...nor is the net immigration of about 30,000 per year from the Irish Republic...

...Expenditure on military bases in Aden, Singapore, Kenya, etc., is not unconnected with the defense of these investments overseas...

...The reactions of Labor MP's and party workers to this depressing scene have been, at best, of troubled and defensive loyalty...

...Secondly, there is the incubus of the sterling area which involves high and unrestricted capital outflows both in the short-term and in long-term overseas investment...

...This withering away of the functions of the "movement" is of course related to the retreats on policy...

...Caution and weakness are heavily built into this situation...

...Labor came into office with longterm plans for dealing with the visible trade balance though these were not in any advanced stage of preparation —the Government's first economic plan is not due until September...

...The Party has an overall Parliamentary majority of two...

...They also involved a plan to stabilize incomes and prices—the incomes policy —which has so far had little if any effect...

...Of the three major priorities we suggested, only one, the stress on social spending, was prominent in the intentions of Labor politicians...

...Labor inherited a crisis the effects of which would not be felt by the public until well after the new Government had taken power...

...Initially, the Government chose import controls and a mild measure of deflation...

...Though they are selective (public housing, schools and factory building being exempt), the result at home will be to prevent further increases in local authority housebuilding, curtail urban improvement, and slow down the motorway and hospital programs...

...But they do not come to grips with Britain's greatest problem...

...If it later does so, or if the Conservatives under the technocratic Heath attempt to make the unions the scapegoats for modernization, there could yet be a sharp polarization in British politics...

...Against this depressing situation, we must weigh Labor's few positive measures...

...Britain could only have devalued at considerable risk to the dollar and to the stability of international liquidity arrangements...

...After ten months of Labor Government one has entirely lost that confidence so widespread on the Left prior to the election, and reflected in our earlier DISSENT article...

...There have been other setbacks and defeats...

...Now Rustin discusses the actual events of Labor's first, hard months of power.—ED...

...Many unions, though not the Transport and General or the more militant white-collar unions, have given formal assent to the incomes policy...

...The local election results in May, before the recent deflationary measures were announced, were spectacularly bad...

...But meanwhile the active, critical discussion generated in recent years by the New Left is sadly lacking...

...Balogh, economic advisor to the Cabinet Office and rudest advocate of a purge in Whitehall, watches the Treasury lay down economic policy...

...Economists sympathetic to Government policy were still arguing in May that no increase in unemployment would occur for another year...

...And the legislation in no way covers housing or employment...

...Finally, the Labor Government has to come to terms with Britain's key role in the international monetary system...

...CND can now call out only its core of activists and a small auxiliary army of teenagers...

...And both are defended by the argument, often heard here, that it doesn't really matter what Britain does...

...The furor that greeted the Government's temporary import controls—primarily from the European Free Trade Area countries—shows how unwilling other nations are to recog nize that the immediate burden of righting Britain's balance of payments must be shared by them at some stage, if Britain's economic decline is not to continue...