MARXISM lODAY, MARCH, 1974 79

selves from direct politival domination and are going their own "demographic transition". For
beginning to free themselves from the continued example, in countries like India where the pro-
economic exploitation of world monopoly capital- duction of a large number of sons is still seen as
ism, the population explosion can be seen to be a a way of increasing the earning capacity of a
legacy of, and perpetuated by, imperialism. This family and the only means of obtaining a measure
is true (albeit in different ways) whether of of security in old age, family planning campaigns
countries like India or Indonesia where population will never be fully successful unless they are
growth is associated with the "demographic para- accompanied by the necessary social and political
sitism" described above, or of those like Ceylon changes rather than transistor radios.
where it is much more recent and associated with
(sometimes specific) technical innovations the (The second part of this article, dealing with the
introduction of which is not directly exploitative. question of resources, energy, and the carrying
In both cases it is continued exploitation and im- capacity of the biosphere, will he contained in the
poverishment that prevents them from under- April issue).

Discussion Contributions on:

Inflation and Marxist Theory'

Pat Devine
{The author is a Lecturer In Economics at Manchester University)

The phenomenon in need of explanation is not Section 111 attempts a summary interpretation of
inflation in the abstract but inflation in the world of British inflationary experience in the post-war
state monopoly capitalism in the period since the period in terms of the approach developed in the
second world war. Two questions arise. First, earlier sections.
throughout this period inflation has been chronic It is important to relate recent inflationary
in all the major capitalist countries; why has it experience, and successive developments in Labour
replaced depression as the principal "economic" and Tory policy, to a Marxist analysis of post-war
problem confronting the capitalist system as a whole ? experience as a whole. This is especially so since
Second, within this overall framework, why has the inflation has ceased to be primarily an "economic"
rate of inflation varied, both between countries and problem and has become a major socio-political
at difterent times? This paper is mainly concerned problem. If it is not done, the working class will
with the first question, although in the course of continually find itself placed on the defensive,
discussing it the major influences believed to be making opportunistic use at any given moment of
relevant to the second are isolated. contingent, ad hoc, even false "explanations" of
Section I is concerned with Marx's basic model, inflation which are unrelated to fundamental
necessary modifications to it and some thoughts on analysis of the distinctive features of modern
the "historical and moral" element in the value of capitalism.
labour power in the post-war context. Section II
looks at the international nature of the capitalist
system, the central role of the state and the relation- I. CAPITALISM, EXPLOITATION AND THE
ship between state policies and theories of inflation. LABOUR MARKET
Marx's Model: Competitive Capitalism
' This paper was presented to a Conference on "Money In Marx's analysis of capitalist production,
and Inflation" organised by the Conference of Socialist exploitation takes the form of the appropriation by
Economists in November 1973. An earlier version was
presented to a Conference on "Inflation" organised by the capitalist of the surplus value produced by the
the Economic Committee of the Communist Party in worker, i.e., the value in excess of the value of the
February 1973, I have drawn heavily on the work of Bill worker's labour power. The model assumes equili-
Warren and on discussions with Phil Leeson, David brium. In equilibrium, competition between capi-
Purdy, Roger Simon and Ian Steadman. talists has enforced equal profit rates and the sale of

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produced commodities at their prices of production that money wages (earnings) have risen contin-
and competition between workers has enforced the uously, although at varying rates, for a prolonged
sale of labour power at its value. In fact, market period unprecedented in the history of capitalism.
prices and wages fluctuate around these equilibrium This has had far reaching effects on the functioning
levels, according to the changing relationship of of the capitalist system. Faced with rising money
demand and supply. But exploitation must be wages, capitalists have sought to contain the increase
explained given equilibrium. in real wages and fend off pressure on profits by
In his formal analysis Marx worked with com- increasing prices. To accommodate these changes
modity money, i.e., gold, whose value and price of in the nature of capitalist reality, modifications are
production are determined in the same way as those needed to Marx's basic model.
of any other produced commodity. Thus, not only First, money has long since ceased to be com-
are the relative prices of production of produced modity money and is now token money. In equili-
commodities determined but so also are their brium, competition will still enforce equal profit
absolute prices, i.e., their exchange ratios with gold.- rates but only relative prices will be determined;
Given the absolute (gold) money prices of produced absolute prices will be arbitrarily, or more accurately,
commodities and the real wage, absolute (gold) historically determined. Second, insofar as some
money wages are determined. Within this frame- capitalists enjoy monopoly power, profit rates will no
work, an increase in money wages (for whatever longer be equal. However, if a structure of profit
reason) cannot, ex hypothesis alter the money prices rates dependent on the distribution of monopoly
of produced commodities. Higher money wages, power can be specified, relative prices will still be
therefore, mean higher real wages and lower profits. determined. An increase in the extent of monopoly
This was the basis of Marx's attack on Citizen will enable once-for-all increases in historically
Weston for his implication that wages determine determined absolute prices and hence in profits but
prices.' cannot lead to continuously rising prices.
The mechanism which regulates supply and
demand in such a way as to enforce, on average, the
Oligopolistic Competition
sale of labour power at its value is crucial to Marx's
Finally, however, the epoch of monopoly capi-
analysis. With the accumulation of capital, demand
talism is not so much one in which capitalists are
for labour power eventually outstrips supply and
monopolists as one in which the position of the
money wages rise. Inseparable from accumulation is
dominant capitals combine elements of both
the process of technical change, continually revo-
monopoly power and competition in the form of
lutionising the forces of production and increasing
oligopolistic competition. Such competition typi-
labour productivity. At the same time there are the
cally assumes non-price forms and is associated
periodic crises which continually interrupt the process
with various forms of explicit or implicit collusion
of capital accumulation. In these two ways the
over pricing.
industrial reserve army, the army of the unemployed
is continually re-recruited. It is the recurrence of In conditions of oligopolistic interdependence,
mass unemployment which imparts a check to wages the pattern of relative prices tends to reflect the
by continually re-creating a balance of power in the competitive strengths and strategies of the rival
labour market overwhelmingly in favour of the capitals and will not be lightly disturbed. When
capitalists.^ faced with (wage) cost increases, capitalists know
that their rivals will be subject to similar pressures
and that their competitive positions, i.e., their
Monopoly Capitalism Today relative prices, will be unaffected by common
For reasons which may be summarised as a change increases in absolute prices. As long as it is believed
in the balance of class strength on a world scale in that relatively full employment is assured, if necessary
favour of the working class, the period since the by state action to maintain effective demand,
Second World War has been characterised by there is no reason to fear that higher prices will
relatively full employment, i.e., by comparison with affect aggregate sales." To assert that in these
earlier historical periods.^ One result of this has been circumstances capitalists have considerable ability
to pass on cost increases by increasing prices is not
•' Cf. Capital, Vol. 1, Ch. 111, esp., pp. 70-71 (Allen & to deny that capitalist production is commodity
Unwin edition).
production, i.e., production for the market; rather,
' Value, Price and Profit, es p., C h. V.
' Cf. P. Sweezy, The Theory of Capitalist Development, it is to assert something about the nature of the
Ch. V, Sections 3 and 4.
^ For an outline of the argument, see Maurice Dobb, " For a discussion of the relationship between full
Papers on Capitalism, Development and Planning, pp. employment and state economic policy, see Bill Warren,
40-45; and David Purdy, Bulletin of the Conference of "The State and Capitalist Planning", New Left Review,
Socialist Economists, Spring 1973, pp. 25-29. 72, March-April 1972, pp. 17-22.

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competitive process in tiie epoch of monopoly and moral element" predominates in determining
capitalism. what is to count as necessary. As noted above, in
Within this modified framework, higher money the post-war period real wages have risen con-
wages do not necessarily mean higher real wages tinuously. The socially acceptable minimum, as
and lower profits. The increase in real wages will enshrined in Britain in the supplementary benefit
be held below that in money wages and profits will level, has also risen—if anything more rapidly than
be maintained to the extent that prices are increased. average net real income.* Similarly, notwithstanding
Of course, increases in productivity have to be taken any changes in the pattern of differentials, it seems
into account. If money wages increase at the same clear that in all forms of employment and strata of
rate as productivity, labour costs will not rise, money society there has been a continuous rise in the real
profits will increase at the same rate as money wages income regarded as normal. Furthermore, expec-
—without price increases—and real wages and tations of continuously increasing living standards
profits will rise at the same rate as productivity. In have also become normal and have thus become
fact, in the post-war period, money wages (earnings) incorporated into the valueof labour power.
have risen faster than productivity and the resultant The question of how a given level of, and an
pressure on profits has been largely offset by price expected rate of increase in, living standards come
increases.' Prices, however, have not increased at as to be accepted as normal is one that requires serious
rapid a rate as money wages, so that real wages have study by Marxists. In the post-war period, three
risen continuously. interrelated influences may be suggested. They are
all closely connected with the prolonged economic
Chronic Inflation growth and relatively full employment which have
Thus, the effect of the qualitatively changed characterised the capitalist system for the last three
conditions in the labour market and the conse- decades.
quential movement in money wages has been to First, the nature of the production process has
substitute chronic inflation for periodic depression changed rapidly. Technological developments have
as the major "economic" problem facing the required qualitatively new levels of skill in the labour
capitalist system in the post-war period. The force; the labour process has made more exacting
qualitative changes in the labour market were demands on workers. Higher living standards have
themselves largely due to the major shift in the been necessary to accommodate the educational
global balance of class strength that resulted from and psychological implications of these changes.
the course and outcome of the second world war. Second, the post-war period has seen the develop-
They have subsequently contributed to further ment of a "mass produced economy of mass
socio-political changes which have strengthened consumption"." While this has obviously brought
the position of the working class in advanced great benefits to the working class and has had an
capitalist countries and led to intensified pressure overwhelmingly positive effect, its influence has
for higher real wages. The precise outcome of the nevertheless been contradictory. The inherent
continuing struggle between capital and labour has, tendency of capitalism today to generate discontent
of course, been heavily influenced by international is not only due to its exploitation and manifest
considerations and the activities of the state (see disregard for human aspirations. It is also due to the
Section II). Nevertheless, as one might expect, class persistent and glaring inequalities of wealth and
relations turn out to be at the root of the major income and the individualistic, competitive ethos of
post-war "economic" problem of capitalism— the system which, together with technical and
inflation. fashion obsolescence, advertising, etc., continuously
create social pressures for evermore consumption—
The Value of Labour Power for more "things", which are frequently meretricious
The value of the commodity labour power is and desired primarily for the sake of novelty. At the
determined by two elements: the "necessary" real same time, a growing tendency towards alienation,
wage and the prices of those produced commodities as human relationships and values are undermined,
entering into it. Given these two elements the reinforces the desire for individual consumption
necessary money wage is also given. Consider the to compensate for the resultant social and psycho-
"necessary" real wage. It seems obvious that in logical deprivation. Thus, in capitalist societies today
advanced capitalist countries today the "historical there is a permanent tendency to demand ever more
consumption and hence ever higher real wages.
' On the trend of profits in post-war Britain, see A.
Glyn and B. SutclilTe British Capilalisni, lVorl<ers and the " Cf. Social Trends, 3, 1972, p. 90.
Profits Squeeze, pp. 54-69. They argue that intensifying " E. J. Hobsbawm, Industry and Empire, p. 281; for a
international competition in the sixties reduced the discussion of the social consequences of technical change
extent to which British capital was able lo pass on wage and mass produced mass consumption, see the whole of
cost increases. Ch. 14.

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Discontent is endemic; the process is self-sus- increases in excess of the rate of productivity growth
taining.^" and workers cannot prevent capitalists from raising
prices, the result is chronic inflation.
Gap between Actuality and Potential
Finally, experience of relatively full employment II. STATE MONOPOLY CAPITALISM AND
and increasing living standards itself leads to further INFLATION
socio-political changes. Jobs, improving conditions So far it has been argued that chronic inflation
and rising real wages come to be regarded as rights— emerged as the principal "economic" problem of
not just abstract rights but realisable rights, to be post-war capitalism because of the changed nature
fought for and won. The achievement of more and of the relationship between capital and labour in the
improving social provision is increasingly insisted market for labour-power. To move from this
on through various forms of collective pressure. In fundamental but general proposition to considera-
the longer run, dissatisfaction with the market tion of variations in the rate of inflation, both
system mounts as the irrationality of resource between countries and at different times, requires
utilisation under capitalism and its inability to paying explicit attention to the international character
provide a satisfying and creative social life are of the capitalist system and to the role of the state.
increasingly felt. Irrespective of the actual real wage,
or for that matter of the rate at which it is increasing, Capitalism as an International System
there is a growing sense, for the most part not Capitalist international economic relations in the
consciously expressed but nonetheless there, of the post-war period have been shaped by the interaction
yawning gap between actuality and potential, of three sets of contradictions: within the individual
between what is and what could be. capitalist states, between the capitalist states and
between the capitalist and socialist world systems.
Under capitalism, i.e., in a society devoid of any
The initial post-war arrangements were largely
possibility of genuine mass participation in a
imposed by the United States and reflected the
process of democratic planning, the most direct
over-riding need to stabilise the reduced capitalist
way in which workers can strive to realise their
world that emerged from the second world war.
aspirations for a better life is to seek higher real
Subsequent developments have been a response to
wages, although collective pressure has also been
the changing relative strengths of the major im-
exerted by the more conscious on behalf of weaker
perialist powers, with each seeking to mould the
sections and for social provision.
rules of the game to its own advantage in the light
Whether for these or other reasons, there is no of its internal position.
doubt that in the post-war period the real wage to
which workers have regarded themselves as entitled, Of course, uneven development always leads to
to which they have aspired, has risen continuously. shifts in relative strengths, but the particular forms
The effect of rising aspirations on the functioning assumed by the resultant contradictions in the post-
of the economic system, in circumstances in which war period—chronic balance of payments deficits
workers are able to obtain increased money wages, and surpluses, the dislocation but not breakdown
depends on the ability of the system to meet those of the international monetary system and the
aspirations. development of regional trade discrimination—
have been determined by the specific characteristics
If aspirations rise faster than the rate of pro-
of the period, i.e., relatively full employment,
ductivity growth, attempts to realise them through
unprecedented economic growth and continuous
higher money wages will squeeze profits and
inflation.
capitalists will seek to offset this effect by increasing
prices. If prices are already rising, the increase in Inter-imperialist rivalry has been conducted
money wages necessary to achieve a given rise in real within this broad context and antagonisms have not
income will be correspondingly larger. If capitalists been allowed to become so acute as to cause the
succeed in increasing prices to offset that part of the collapse of the international framework for trade
money wage increase in excess of the growth in and payments. A central aspect of these develop-
productivity, workers' aspirations will be to that ments has been greatly increased interdependence
extent frustrated and they will then seek further between capitalist economies, both directly in the
increases in their money wages. Since capitalists form of trade and capital flows and their consequences
cannot prevent workers from obtaining money wage and indirectly in relation to state policies."
Consider the impact of '"direct" international
'" One implication of this is that the conditions interdependence on the discussion of Part I. In a
necessary for realising the higher stage of communism, closed, purely capitalist economy with no state, all
i.e., "to each according to his needs", will have to be costs are wage costs and the only prices are those of
approached not only from the supply side, by developing
the forces of production, but also from the demand side, " Cf. Bill Warren, "Capitalist Planning and Inter-
by refining the concept of need. nalional Contradictions", Marxism Today, July 1970.

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(domestically) produced commodities and the wage national trade are governed by long-term contracts
rate. Once foreign trade is introduced the prices of relatively small shifts in the short-term relation
internationally traded goods become relevant. between residual supply and demand cause large
Capitalists will seek to offset any increase in the movements in commodity market prices.
prices of imported inputs into domestically produced ]n a context of currency instability, initial dramatic
commodities by raising their prices and insofar as price increases appear to have been accentuated by
they succeed this, together with any increase in the speculation." The very rapid increase in primary
prices of imported wage goods, will lower the real commodity prices during the past year illustrates
wage corresponding to any given money wage. Of the importance of distinguishing between the
course, increases in domestic costs due to higher underlying, general causes of persistent, chronic
import prices could be offset by increased pro- inflation in the post-war capitalist world and the
ductivity, but this would leave less scope for increases determinants of the particular rate of inflation in
in money wages without increases in prices and hence any given period or country. Failure to make this
for increases in real wages. distinction carries with it the danger of opportunism,
As long as profits retain their share, higher import e.g., the argument that since domestic rates of
prices will result in lower real wages than would inflation over the last twelve months have been
otherwise have been the case. The prices of exported heavily influenced by rapidly rising import prices,
goods are clearly also relevant since the intensity of this "proves" that increases in money wages are not
international competition will affect the extent to a signilicant factor in the inflationary process.
which capitalists raise their prices in order to offset In addition to trade price effects, there have
cost increases. probably been less tangible influences at work
linkingtheexperienceof different countries. "Demon-
International Prices stration" effects have been widely discussed in
How are international prices determined? In relation to French, Italian and British "wage
relation to manufactured goods, a recent OECD explosions" over the past five years, frequently in a
study of the period 1955-70 concluded, "Foreign somewhat mechanistic way. International demon-
trade prices are determined by a simultaneous stration effects are probably best interpreted as the
interdependent set of relationships between all consequences of a growing internationalisation of
trading countries, each country contributing its own social life alongside the more familiar internationali-
elements of domestic inflation to world trade price sation of economic life. At the national level,
trends, but each country's domestic inflation also Jackson and Turner have advanced the concept of
being influenced by international trends'".'- As "equilibrium" inflation in which money wage
might be expected, the relative importance of increases equal to productivity increases occur in
domestic and international influences was found to high productivity industries and this sets up pressure
depend on the size of the domestic economy and its for the same rate of money wage increase to spread
degree of openness. In the US the domestic influence to other industries, despite their lower rates of
was overwhelming; in W. Germany and the UK. it productivity increase, thus resulting in price in-
was also dominant but less so; in Canada, France creases"^ It may be that there is a similar process
and Japan the two influences appear to have been developing at the international level, with advances
more equal; in the smiller countries (e.g., Austria, in living standards in more rapidly growing econo-
the Netherlands, Norway and Sweden) international mies contributing to pressure for similar higher
influences were considerably more powerful than standards elsewhere."'
domestic."
Prices of imported primary products are more " Cf Nalioiuil Instiliitc Economic Review, May, 1973,
directly determined by market forces and since pp. 4 and 28; and the Economist, July 21, 1973, pp. 63-66.
supply is subject to considerable fluctuation they '•' Cf. D. Jackson, H. Turner and F. Wilkinson, Do
are more volatile and less easy to control than the Trade Unions Cansc Inflalion'] Ch. 2, pp. 22-29.
prices of manufactured goods. The recent exceptional '" One reason for this development may be the growth
of labour mobility between countries. There is evidence
increase in world commodity and, in particular,
that the Dutch wages explosion of the caily 1960j was
food prices seems to have been due to a combination stimulated by comparisons between the relatively low
of longer-term social restrictions and shorter-term Dutch wage rates and the much higher levels prevailing
natural disasters, e.g., harvest failures, on the supply in W. Germany; see M. Edelman and R. \V. Fleming,
side and to the coincidence of boom conditions in all The Politics of Wcii^c-Price Decisions, Ch. 5. For references
the major capitalist countries on the demand side. to similar influences in the Italian "hot autumn" of 1961,
Since many transactions in this sector of inter- see G. Giughi, "Recent Trends in Collective Bargaining
in Italy", Internationa! Labour Review, 1971. A likely
'- OECD, "The International Transmission of In- development in the future is the growth of demands for
flation", Economic Oiirlool<, July, 1973, p. 88. V)arity of treatment between workers employed in
" Ibid., p. 86. different countries by multinational companies.

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Competing Claims on Real Resources interdependence should be mentioned. It is com-

Thus, whether through trade price effects on the monly suggested that the experience of different
real wage, through the influence of international countries has been linked, especially since 1965,
competition on the extent to which cost increases through the effect on the money supply of inter-
can be passed on or through international influences national capital flows originating in the US payments
on aspirations for higher real wages, the inter- deficit. The OECD study referred to above sum-
national character of the capitalist system impinges marised its discussion of this hypothesis as follows:
on the struggle between capital and labour—the "an 'international liquidity-monetarist' explanation
fundamental cause in post-war conditions of of the course of inflation in OECD countries other
chronic inflation. Looked at in real terms available than the US during the period 1965-72 appears
resources are claimed for real wages, capitalist rather difficult to reconcile with a year-by-year
consumption, investment and the foreign balance examination of the facts; even for 1971, when the
(the state has yet to be introduced into the analysis). monetary and price indicators are best in line, the
A reduction in a trading deficit or increase in a low prevailing level of demand pressures implies the
trading surplus involves encroachment on resources need to resort to a rather extreme (quantity theory)
otherwise available for domestic use, by curbing argument"."*
imports and increasing exports. Similarly, an adverse However, while the way in which the money
shift in the terms of trade, whether due to non- supply is supposed to have exerted an independent
parallel trends in import and export prices or to causal influence remains obscure, it seems clear
exchange rate depreciation, also means fewer that large capital inflows render the operation of
resources available for domestic uses than would monetary policy more difficult and that this may
otherwise have been the case. have impaired the state's ability to control domestic
The attempt to effect such reductions in real demand—not only the level of aggregate demand
resource use at the expense of real wages normally but also the pattern of demand, the allocation of
includes price increases of one sort or another. real resources between the major rival claims. For
Insofar as workers refuse to accept the burden and all that, while the capitalist state's room for inde-
seek and obtain higher money wages, either profits pendent action in one direction may have been
are squeezed (capitalist consumption and/or invest- impaired (not removed), especially in smaller
ment) or prices are raised still further and the countries, there are always other directions and the
external position does not improve. As long as creative ability of the state to generate policies in
money wages cannot be prevented from rising and the long-run interests of (national) capital should
oligopolistic markets enable product prices to be not be underestimated.
increased in the face of common cost increases,
competing claims on real resources in excess of The Role of the State
those available will result in chronic inflation.'• The struggle between capital and labour in
Of course, international interdependence exists in individual capitalist countries and the struggle
the form of actual and potential capital flows, long between rival imperialist powers are closely inter-
and short term, as well as through trade. If the cur- connected. A central role in both processes is
rent commercial balance is unable to sustain overseas played by the state, actively seeking to develop
government transactions and long term capital and implement policies which will preserve and
flows, the shortfall may for a time be made good by strengthen the position and power of the nationally-
short term monetary movements; but eventually the based capitals within its domain." Thus, an analysis
underlying weakness will make itself felt in balance of state policy and action is essential for any under-
of payments crises (or "crises of confidence"). standing of capitalism today.
Measures to deal with such crises, traditionally The state in the immediate post-war years was
deflation and/or devaluation, and the consequences primarily involved in action to rebuild the economy
of these measures are considered under the role and to stabilise capitalist economic relations in
of the state below. face of internal and external threats. Military
expenditure remained high. New levels of provision
Monetary Supply in the social and welfare services were reached.
However, before turning to the role of the state, State intervention in industry, through public
one further possible consequence of international ownership and assistance to the private sector.

" The situation cannot be analysed in static economic *' * OECD, op. cil., p. 90. This conclusion is considered
terms, with prices rising until equilibrium is reached; further below.
socio-political influences in the post-war period have '" Subject to the overriding necessity to preserve the
precluded the possibility that equilibrium ever could world capitalist system: and shaped by the particular
be reached without a decisive shift in the prevailing interests of the dominant groupings of nationally-based
balance of class strength. capitals.

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became the n o r m . Initially, after immediate post- with Improving the 'quality of life'. Under investment
war reconstruction, tiie state concerned itself —apart from what is needed simply to support a
primarily with short-term demand management. high growth rate—comes improved housing, im-
Inexorably, however, under the interacting pressures proved communal and leisure facilities, and no
doubt, to an increasing extent, investments needed
of domestic class struggle and inter-imperialist
to protect and improve the physical environment.
rivalries, it was obliged to assume a more generalised Under both public investment and public or publicly-
responsibility for "capitalist planning".-" supported consumption comes the improvement
of health standards and the extension of health
Growth of State Expenditure care and growth in the quantity and quality of
Although the Second World W a r marked a educational facilities. And It is through the provision
of public services, as well as via transfers, subsidies
qualitative change in the role of the state, this
and grants, that Governments seek to provide
should not be seen as a once-for-all development. Income maintenance, alleviate poverty, and carry
State intervention has grown relentlessly throughout through many other programmes designed to
the post-war period a n d will certainly continue to ensure a fair sharing of the fruits of material pro-
grow in the future. This growth has been reflected gress."'-'
in the rising relative importance of state expenditure;
between 1955-57 and 1967-69. state expenditure in While the picture painted is that of beneficent
the O E C D area as a whole rose from 27.0 to 32.5 capitali.sm in which the neutral state looks after the
per cent of GNP.'-' It is extremely interesting to interests of all, the significance of what is happening
consider the reasons for this trend. should not be underestimated. As well as state
T h e " p e r m a n e n t a r m s " hypothesis is impossible intervention to bale out private capital a n d modernise
to sustain; military expenditure has clearly declined the economy there has been a massive increase in
in relative importance.-'- The growing importance social services provision. This can be considered as
of state expenditure has been mainly due to rapid an aspect of the rising "historical and m o r a l "
increases in the provision of collective services by element in the value of labour power discussed in
the public sector (e.g. health and education) and in Section I. Part of the pressure for such provision
the proportion of household expenditure financed stems from the need to ensure a supply of labour
by transfer payments.--' Associated with these power with characteristics appropriate to the
developments has been a striking decline in the changing production process. More important, in
relative importance of " p u r e " private consumption, my view, is popular pressure originating in a growing
i.e., consumption financed out of primary (factor) awareness of the potentialities created by the level of
incomes, with that flowing from state transfers development of the productive forces.
excluded; over the period 1955-1969 the O E C D T h e O E C D study just quoted concludes:
average for the proportion of G N P accounted for
by " p u r e " private consumption fell by over six ". . . of course, these things have to be paid for . . .
percentage points, to just over 51 percent.'-' these Increasingly ambitious social and environ-
The O E C D ' s comments on the changing relative mental programmes to Improve the quality of life
importance of the major categories of expenditure have to be reconciled with the more directly inaterial
are worth quoting at length : and market-oriented needs of individual consumers.
. . . In the context of this report it Is Important to
". . . it is within the components of expenditure note that inflation /.v not only a symptom of unresoived
which have been rising in relative importance— tensions witliin tlie economy with liigltly undesirable
investment, public consumption and publicly— economic, social and political consequences; it is also
supported consumption—that are to be found the the mechanism by which efforts to alter the dis-
Items inost closely related to the rising concern tribution of income or expenditure which are not
accepted by lliose concerned are partially or fully
-" For an excellent discussion of these developments, frustrated."-"
see Bill Warren, "The State and Capitalist Planning",
op. cit. The picture sketched here Is, of course, merely a Claims versus Availability of Resources
stylised account of general trends whose specific form
and speed of development have varied considerably This conclusion, if generalised, captures the
between countries. essence of the socio-political origins of inflationary
^' OECD, ExpeniliUiie Trenils in OECD Countries pressure. The competing claims of private con-
1960-I980Ju\y,]912.p. 13. sumption, investment, public provision, military
'-'- Between 1955-57 and 1967-69 defence spending as a expenditure, the foreign balance, have exceeded the
proportion of G N P fell from 7.1 to 6.2 per cent for all availability of resources. Efforts to c o m m a n d e e r
OECD countries and from 4.1 to 3.2 per cent if the US resources for one use, if not acquiesced in by those
is excluded, /hid. pp. 66 and 67.
'" Ibid., p. 13. •''' Ibid., pp. 11 and 12.
•" /bid., p. 13. '-" /hid., p. 12. (einphasls added).

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from whom the resources are to be taken, call forth low productivity growth, payments problems and
responses designed to frustrate them which for the short-term crisis measures which accentuate the
most part manifest themselves in higher prices. longer-term weakness. Internal pressures for higher
Thus, if the state increases direct taxation on standards have to be situated in the context of such
personal incomes or indirect taxation, in order settings, both the way in which they affect the setting
to increase social provision or to stimulate private and the way in which they are affected by it. Although
investment via reductions in corporate taxation or conflicting claims on real resources may be tem-
to make room for a shift of resources into the porarily reconciled by inflation, in a regime of fixed
balance of payments, workers will seek to offset the exchange rates inflation has a crucial impact on a
effect of this on their private consumption through country's competitive position. On the other hand,
higher money wages; if capitalists raise prices in policies designed to improve or maintain a country's
order to raise profits to finance increased investment competitive position are likely to have important
or if the terms of trade deteriorate and prices rise, consequences for the extent to which aspirations for
workers will again seek to oftset this through higher higher standards can be met.
money wages; if workers obtain higher money
wages, in order to offset increased taxes or increased Floating Exchange Rates
prices or simply to assert their claim to a higher In the past few years floating exchange rates have
standard of living and a larger share of what is been used as an additional weapon available to the
produced, they will commandeer a larger proportion state. Given domestic inflation, floating rates
of resources for private consumption than would provide a degree of flexibility in dealing with the
otherwise be the case and the state or capitalists resultant pressure on the external payments position.
will seek to offset this through higher taxes or higher However, if a float is to be effective in stabilising a
prices. Chronic inflation is the result of a situation in payments imbalance it is likely to involve lower
which available resources are insufficient to meet real incomes at home. If a reduction in real wages
claims on them and claimants cannot be prevented (or their rate of growth) is not acquiesced in there
from bidding—workers via higher money wages, will then be additional pressure for higher money
capitalists via higher prices, the state via higher wages and if this cannot be contained the rate of
taxes or borrowing from the banking system. inflation will increase and there will be further
This is the intractable problem with which capita- depreciation.
list state policies have had to grapple in the post-war Floating is essentially a way of seeking to act on
period. In countries with high rates of productivity the allocation of real resources and is unlikely to be
growth and a low degree of dependence on the successful unless workers can be compelled to accept
international economy (whether due to size and the intended reallocation. Nevertheless, in the
relative self-sufficiency or to a strong payments short-term it may provide much needed room for
position) there has been the greatest room for manoeuvre to hard pressed capitalist states. It is
manoeuvre. High productivity has not provided a interesting that the British government has not
permanent way out—aspirations for higher living operated a "clean" float but has pursued a delicate
standards, both private and social, tend to rise to short-term balancing act, including the use of
meet sensed potentialities and the resultant pressures interest rates to influence monetary movements,
require ever higher rates of productivity increase if designed to prevent the payments deficit from
they are to be mollified. But at any moment, given forcing deflation while simultaneously preventing
the state of working class expectations, the higher the exchange rate from falling to an extent that
the rate of productivity increase the greater is likely would place too great a strain on its internal "coun-
to be the range of possibilities open to the state. ter-inflation" policy.
Similarly, neither relative national self-sufficiency Alongside recognition of the role played by the
nor a strong payments position have in the long-run level of money prices in inter-imperialist rivalry,
prevented the problem of reconciling conflicting recent years have seen a growing awareness of the
claims from becoming more acute. Nevertheless, socio-political consequences of continuously rising
for as long as a country's international economic prices. For both reasons the capitalist state—an
position remains strong it is relatively free from one active, learning entity—has become increasingly
of the major constraints that have operated on concerned with the money wage and price level. It
national policy-making in the post-war period. is totally wrong to argue that the state deliberately
Of course, in general a close relationship has engineers inflation in order to hold down real wages.
existed between the productivity performance of a On the contrary, it becomes increasingly evident
country and its international strength. The virtuous that in most countries the state would be prepared
circle of export-led growth associated with a high to settle for a level and rate of increase of real wages
rate of productivity increase and a strong payments at least equal to that which has obtained in recent
position contrasts sharply with the vicious circle of years, if only it could establish control over the

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system—in particular over money wages and there- expectations,-' with the policy implication of the
fore, with due allowance for international inter- need to stabilise expectations by pursuing strictly a
dependence, over prices. This is the background widely-publicised course of expanding the money
against which developments in state policy to supply at a rate equal to that of estimated long-run
combat inflation must be considered. productivity growth. The ideological function of
bourgeois economic theory, especially neo-classical
State Policies and Tlieories of Inflation theory, is seen here at its clearest.
The explanation advanced in this paper for the The expansion of the money supply is essentially
chronic inflation experienced in the capitalist world a symptom, rather than a cause, of inflation. It is
since the second world war is that it has resulted either the result of the state seeking to make ex-
from a situation in which claims made on real penditures that socio-political pressures make
resources have been greater than the resources necessary and that these same pressures prevent from
available and it has not been possible to prevent being financed by taxation or by borrowing from
rival claimants from seeking to realise their claims the private sector; or it is the resuir of the state being
by increasing their money receipts and/or expen- obliged to accommodate pressures elsewhere in the
ditures. The basic reasons why it has not been economy for fear of the socio-political consequences
possible to prevent this are socio-political and may that would follow if it did not.-'*
be summed up as the absence of sufficient social The attribution of the cause of inflation to asocial
control. (This is not to say that there have not also abstractions like the money supply,-" or excess
been "technical" problems). Thus, the situation demand, obscures the social conflicts underlying the
that has prevailed can in no sense be adequately chronic inflation of modern capitalism. Thus, to
defined in terms of the normal ""economic" concept say that inflation can be ""cured"" by curbing the rate
of "excess demand". of increase in the money supply is in fact merely the
It is true that one form in which the irreconcilable currently fashionable way of saying that state
socio-political pressures which have characterised expenditure on the social services and welfare pro-
post-war capitalism have made themselves felt grammes should be cut, or that private consumption
has been that of high levels of aggregate demand. should be held back by increasing taxes, or that
This was the most prevalent manifestation of the unemployment should be allowed to increase until
underlying pressures in the early post-war years, the workers come to their senses. Of course, if these
the heyday of the standard "demand-pull" theories things were possible there would be no problem of
of inflation held in various forms by the neo- inflation to cure in the first place. It makes no sense
classicals and the Keynesians, with their policy to propose ""technical"' cures for inflation which
implication of the need for fiscal and/or monetary depend for their implementation on the absence of
policy-induced deflation. However, even in con- the very socio-political pressures which cause the
ditions of relatively high unemployment the under-
lying pressures continued to make themselves felt ''' Expectations in relation to future price increases,
in rising money wages and prices and this experience not in the sense of aspirations (thought to be realisable)
gave rise to the ""cost-push" theories of inflation, about future living standards.
with their emphasis on trade union "monopoly" '" Once again, the basic point that the money supply
power and their policy implication of the need to cannot be considered an independent causal influence
curb trade union strength. Support for incomes does not mean that expansion of the money supply as a
policies has been common to some cost-inflationists resiill of, say, capital inflows may not cause technical
and some Keynesians; the former in the hope of problems for the operation of monetary policy which
persuading the unions to use their strength ""respon- impair the state's ability to manage domestic demand.
sibly", the latter in the hope of shifting the Phillips •^" It is perhaps the use made of abstractions like '"the
Curve and thus rendering more humane the rate of money supply" which is asocial, rather than the concepts
exchange between lower inflation and higher un- themselves. The state may be able to expand the money
supply to obtain command over resources when other
employment. Tiieans are not possible politically because of its more
anonymous character. Cf. also Maurice Dobb, Theories
Monetarist Theories (if Valite and Distribudoii Since Adam Smith, p. 271: "If
Most recently at the theoretical level there has one is inclined to view state policy as an instrument or
reflection of class interest, or of powerful pressure-
been a vigorous oft'ensive by some neo-classicals in groups within the ruling class, one will tend to regard
the form of monetarism, receiving its impetus from monetary policy as a way of enforcing (more or less
the self-evident demise of the stable short-run consciously), [footnote: To some extent, perhaps,
Phillips Curve relationship. An attempt has been unconsciously and influenced by what has become
made to salvage the role of excess demand, in the traditional] on behalf of capital-owners as a whole, such
form of a long-run vertical "'Phillips Curve"" at a a profit-share in the proceeds of production as existing
""natural" rate of unemployment, by introducing circumstances permit."

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inflation they are supposed to cure; no sense, that is, rendered British capitalism peculiarly vulnerable to
except as a means of mystifying the nature of social intensified inter-imperialist competition as its
reality and holding out the forlorn hope that it is European rivals and Japan recovered and lorged
possible to control inflation without fundamental ahead.
changes in that reality. This was reflected in the deepening balance of
payments crises that characterised the 1950s and
Incomes Policies early 1960s. Resources were desperately needed for
While the monetarists have been the most active investment to modernise the economy in order to
at the theoretical level in recent years, state policy improve competitiveness. However, due to the low
has increasingly moved in the diametrically opposite rate of productivity growth, such resources could
direction, towards incomes policies of one sort or only be obtained by holding down the rate of
another. The one is concerned with mystifying growth of real wages and the attempt to do this was
ideology, the other with the practical task of partially frustrated by successful working class
managing state monopoly capitalism. Insofar as pressure for higher living standards. At the same
incomes policies seek their justification in cost-push time, the state was obliged to claim an increasing
theories, they approach more closely the underlying share of available resources, in response to pressure
causes of inflation. With their language of priorities for improved social provision and in order to
and the national interest they appear to confront finance policies directly designed to promote
the problem of socio-political conflict, particularly modernisation.
in those versions which lay stress on the position The result of the interaction between these acutely
of the "weaker" sections of the community, the antagonistic pressures was inflation at a rate faster
lower paid, redistribution, fairness, equity. that that in most other countries and hence an
intensification of the balance of payments problem.
However, since incomes policies under capitalism
The deflationary measures adopted to deal in the
are based on a faulty analysis of social reality,
short-run with recurrent external crises merely
denying the inevitability of class conflict and the
intensified the long-run problem by reacting back
class character of the state, they are essentially
on the rate of productivity growth.
manipulative and devoid of any possibility of
genuine mass involvement in a process of democratic By the 1960s it had become clear that fundamental
planning. Hence, while there may be short-term changes were required if Britain was to survive as an
successes, especially for policies receiving social independent imperialist power. The new strategy
democratic support and/or backed by legislation, that emerged may be characterised in general terms
incomes policies cannot succeed in the long-term under three headings. First, much more detailed
unless they are part of a successful shift in the state intervention, both to modernise the economy'"
fundamental balance of class forces. Nevertheless, and to regulate money wages and prices. Second, a
attempts to win trade union suppport for incomes determined efl'ort to control the power of the
policies, thus integrating the unions into the process organised working class by a judicious alternation
of managing the capitalist economy, remain the of stick and carrot—higher unemployment and anti-
most promising course of action for the state and are union legislation on the one hand, offers of integra-
certain to continue, involving unexpected con- tion into the process of "managing" the economy
cessions by way of price and profit controls and the (including an incomes policy) in exchange for higher
offer of sizeable increases in real inconie. real wages on the other. Finally, a new international
alignment in the form of entry into the E E C '

111. INFLATION IN POST-WAR BRITAIN

The tendencies at work in the post-war capitalist Since the Second World War
world have created a situation in which there has In the complex of influences at work determining
been a chronic shortage of resources in relation to the outcome of the struggle for real resources, the
the demands made upon them. The eff'ects of this working class is able to affect directly only money
made themselves felt earliest and have been most wages. The result in terms of real wages depends, of
acute in Britain—because of its internal balance of course, on what is happening to prices and direct
taxation (including other deductions).
class forces relatively favourable to the working
class, its relatively low rate of productivity growth '" Between 1964 and 1968 public expenditure on
and its chronic balance of payments problem. These "economic services", at current market prices, rose from
three factors, all rooted in Britain's imperial past, 6.5 to 9.3 per cent of GNP, at current factor cost; CSO
have interacted with one another to shape the WE 1973, Tables I and 49.
course of events. The inherited parasitism of the " For a fuller discussion of the argument, see Pat
economy—deep-seated distortions in the economic Devine, "The Economic Strategy of British Capitalism",
structure, inefficiency, lack of competitiveness— Marxism roi7'fl>', September, 1971.

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TABLE 1. Rates of growth of money and net real income per head, men manual workers
and all employees, 1948-72.

Annual Money income Net real income Price effect Tax effect
growth
rate Men All Men All Men All Men All
manual employees manual employees manual employees manual employees

% Percentage points

1948-52 6.9 6.7 0.7 1.6 6.2 5.1 —0.1 0.0

1952-56 7.2 6.5 3.5 3.5 3.6 3.1 0.2 0.0
1956-60 5.0 4.8 2.1 2.3 2.1 2.1 0.8 0.5
1960-64 5.5 5.6 1.3 2.0 3.3 3.1 0.9 0.5
1964-68 6.6 6.4 0.5 1.2 4.1 3.9 2.0 1.3
(968-70 10.0 10.2 1.3 3.4 6.4 5.5 2.3 1.3
1970-71 10.0 12.4 1.9 3.8 9.5 8.6 —1.4 0.0
1971-72 15.4 12.0 7.5 6.5 8.5 6.8 —0.6 — 1.3

Source: D. Jackson, H. Turner and F. Wilkinson, Do Trade Unions Cause Inflation?,

Ch 3, Tables 2* and 3*, and personal contact with F. Wilkinson.

Table 1 gives a rough picture of what has happened rough indication of post-war experience is given in
in Britain since the war. Table 2.
The rate of increase in money income (earned)
has varied between about 5 per cent and 15 per cent Looking at Tables 1 and 2 together, an attempt can be
per annum. However, due to tax and other deduc- made at a summary interpretation.
tions and price increases, the rate of increase of net
real income has normally been less than half that of 1948/50-52
money income, ranging from about 0.5 per cent to Sharp rise in prices following the 1949 devaluation
7 per cent per annum. It is important to note that and the outbreak of the Korean War. Available
the size of the divergence between the rate of resources restricted due to slow growth of GNP and
increase of money and of net real income has varied imports. Massive expansion of public expenditure
considerably over the period. (military), diverting resources away from exports
and investment. The rapid increase in money income
The scope for real income increases has been after the breaking of the Labour Government's
determined by the rate of growth of GNP (plus freeze was largely offset by the price increase, thus
changes in imports) and the competing claims of resulting in a very low rate of growth of net real
exports, investment and public expenditure. A income.

TABLE 2. Rates of growth of G N P and its components at constant prices, 1950-72.

Annual Price Current Consumers'

Growth deflator GNP Imports Exports Investment Public expenditure
Rate % expenditure

1963 prices
1950-52 8.2 0.9 0.7 —3.5 0.4 8.9 — 1.0
1952-56 3.6 3.4 5.3 5.2 7.4 —0.4 3.4
1956-60 2.4 2.9 5.2 2.7 5.8 0.1 3.2
1960-64 3.0 3.6 3.3 3.6 6.7 2.6 3.1
1964-68 4.1 2.3 4.0 4.6 4.4 2.5 2.1
1968-70 6.1 2.2 4.2 7.5 1.0 —0.1 1.6
1970-71 8.9 1.5 4.6 4.9 —0.6 3.5 2.6
1970 prices
1970-71 8.7 2.3 4.8 7.1 0.5 3.7 2.6
1971-72 7.5 2.1 10.2 3.1 1.2 3.8 5.9

Sow ce: OECD, National A •counts 1950168, PP 408 and 9 CSO, NIE 1972 and NIE
1973, Tables 1 and 14.

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1952-56 still further, public expenditure remained constant

Money income continued to rise rapidly. This and the rate of increase of investment tailed off.
pressure was partly accommodated by a relatively Exports rose sharply as the effects of devaluation
rapid growth of G N P and imports plus a fall in and deflation worked themselves out.
public expenditure. This enabled a substantial rate
of growth of net real income as well as a major 1970-71
recovery in exports and investment, while at the same Money income continued to rise at an unpre-
time allowing the rate of price increase to fall cedented rate. The growth rate of G N P probably
considerably. increased somewhat, the rate of increase of exports
fell but remained relatively high, investment tailed
1956-60 off further but public expenditure rose sharply.
The rate of increase in money income fell to its Despite a rate of price increase of roughly 9 per cent,
lowest point in the period covered by the tables. This the rate of growth of net real income continued to
was partly due to direct state pressure (the "Three rise, partly because of a dramatic reversal in the
Wise Men") but mainly due to the particularly tax effect.
severe balance of payments induced deflation, the
latter resulting in a fall in the growth rate of GNP. A 1971-72
reduction in the rate of growth of exports and The highest rate of increase in money wages in
investment did not release sufficient resources to (he post-war period coincided with a slight easing
prevent a fall in the rate of growth of net real in- in the rate of price increase (partly due to the CBI's
come, brought about by price increases and, for the price initiative). This, plus a still favourable tax
first time, a significant increase in the tax effect. It efl'ect, produced a remarkable surge in net real
is worth noting that during 1956-60 the rates of income, with a rate of increase roughly 75 per cent
growth of money income and prices were at their faster than at any other time during the post-war
lowest but that this was not so for net real income. period. The increase in net real income was reflected
in the unprecedented rate of growth of consumers'
expenditure. The growth rate of G N P for the year
1960-64
as a whole fell, but this conceals a reversal of trend
The rate of money wage increase rose but the rate
in mid-1972 when a phase of rapid growth began.
of price increase rose faster and the rate of increase
Public expenditure continued to rise at a high rate
of net real income fell again. The faster rate of
and investment began to recover. The pressure on
increase in G N P was partly offset by a fall in the
real resources made itself felt in the striking accelera-
rate of growth of imports and was partly used for a
tion in imports and deceleration in exports, although
higher rate of growth of exports and investment and
the impact of this on the payments position was
a significant resumption of growth of public expen-
masked by the sterling float introduced in June
diture.
1972. The reasons for the decision to impose a
freeze in October 1972 are not hard to see. Further-
1964-68 more, the extraordinarily rapid growth of real
Over the four years as a whole the rate of money income in 1972 as a whole probably largely accounts
wage increase rose, despite the effects of the Labour for the government's success in enforcing Phases
Government's freeze and squeeze. Nevertheless, the 1 and II, even though real incomes were probably
rate of increase of net real income fell still further, more or less static over the year from October 1972.
to its lowest level in the period covered by the tables.
This was partly due to a sharp rise in the tax efl'ect
and partly to the price rise resulting from the Summary
pressure of expenditure on a more slowly growing T o sum up. T h r o u g h o u t the post-war period (with
G N P as the era of "stagflation" set in. Imports and the possible exception of October 1972-October
exports increased roughly in balance, the rate of
growth of public expenditure was maintained and the 1973) net real income has risen, but the rate at which
slowdown in the growth rate of G N P was felt in a it has risen has depended o n the relative strengths
slackening in the growth rate of investment and of working class pressure a n d the competing claims
consumers' expenditure. State action made itself on resources m a d e by capital for accumulation and
felt in four ways: (1) reducing the growth rate of by the state responding to popular pressure a n d
G N P ; (2) restraining money wage increases by its seeking to manage the economy as a whole in the
incomes policy; (3) increasing the tax effect; (4) interests of capital. There has been urgent pressure
contributing to the price increase by increased
to contain the rate of increase of net real income for
indirect taxation and the 1967 devaluation.
most of the period. This has been due to the need
for more investment and exports, a n d more recently
1968-70 also for greater public expenditure, in order to
With the ending of the Labour Government's
tackle the two deep-seated, mutually reinforcing
incomes policy the rate of increase of money income
rose sharply, outstripping the still severe tax efl'ect problems of British capitalism—its slow rate of
and the accelerating rate of price increase. Thus, the productivity growth a n d its chronic balance of
rate of growth of net real income rose for the first payments position.
time for sixteen years. The growth rate of G N P fell Capitalists have sought increased prices to cover

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wage increases in excess of productivity increases, dropping below trend, until the next money income
while tlie state has exerted direct pressure to hold increase. For virtually all the time, therefore,
down the increase in money income, has removed immediate experience is of falling real income,
part of the increase by direct taxation and has further although on average overtime real income is rising.
curbed the increase in net real income through price Furthermore, expectations will be related to the real
increases brought about by increased indirect income achieved immediately after the last increase
taxation. On several occasions, most notably in the in money income and hence they will tend con-
recent period, there has been a rapid rise in import tinuously to be above the actual trend level of real
prices due to trends in world commodity prices and income increase.^*
the depreciation of sterling. Inflation has become a cause of permanent and
Workers have pursued money wage increases growing concern to the capitalist state. Initially, in
large enough both to offset price and tax increases Britain at least, this was primarily because of its
and to realise an increase in net real income con- contribution to the deepening balance of payments
forming to their aspirations. Thus, inflation has been crisis through its effect on competitiveness. More
the result of capitalism operating under conditions recently in Britain, and perhaps throughout the
of relatively full employment and both generating post-war period in some other countries, it has also
demands for rising real standards, public and increasingly assumed the character of a socio-
private, and being unable to prevent workers from political problem. In this context it is interesting to
pursuing those demands through political pressure note the recent finding that there has been no resting
and higher money wages, while at the same time place between average rates of inflation less than
being unable to nieet them. 10 per cent and rates between 20 per cent and 35 per
cent. In this latter situation, social groups constantly
and consciously engage in redistributive struggle and
IV. CONCLUDING COMMENTS this greatly exacerbates social and political in-
There are several reasons why pressure for money stability.''*
wage increases may be expected to intensify dis-
proportionately once the rate of inflation reaches a The movement of real wages in 1972, up by an
certain level. It has been suggested that diflferentials unprecedented 7 per cent or so (see Table I), is
tend to be upset in a period of rapid money income sufficient explanation for the timing of the Con-
and price increase and that the desire to restore or servative government's volte face on the issue of
maintain them adds a further twist to the inflationary incomes policy. The year of Phases I and II saw a
spiral. There is some evidence that this consideration dramatic reversal of this situation, with real wages
may have been of importance in Britain over the increasing slowly, if at all—a lower rate of money
past period.'2 income increase having been more or less offset by
There is also evidence to suggest that with the price and tax effects. This, in the context of the
continued exposure to inflation a tendency to over- faster growth of GNP begun in mid-1972, has been
estimate its extent develops."^ Perceptions of price associated with a rapid rise in profits. How successful
increases over the recent period appear to have been the government will be in enforcing Phase III
heightened by the continuing rise in the prices of remains to be seen. What is not in doubt is that
sensitive items like house prices, rents and food. It pressure for an incomes policy is to be regarded as a
seems highly likely that "money illusion" (a pre- permanent feature of capitalism in Britain today and
disposition to think in terms of money income and increasingly elsewhere.
hence to overlook the effect of price changes on real Since workers are genuinely worried about rapid
income) has now gone into reverse, with belief inflation, an important determinant of the outcome
widespread that price increases have more than of struggles over incomes policy will be coherent
offset money income increases even though real argument relating inflation to the fundamental
income has in fact increased. characteristics of modern capitalism and exhibiting
There is a ready explanation for this phenomenon. it as a central present day manifestation of the basic
Even when on average overtime money income is contradiction of that system—the conflict between
increasing faster than prices so that real income is capital and labour. Of course, the struggles at any
rising, money income is adjusted at intervals whereas moment will be for the most part over specific wage
the price rise is continuous. At the moment when demands, in defence of free collective bargaining
money income is increased real income will rise and on other immediate issues. But the existence
above trend; thereafter it will fall steadily, eventually
•" Cf. Jackson, Turner and Wilkinson, op. cit., Ch. 2,
'- Cf. ECE, Economic Survey of Europe in 1971, Part II, pp. 38 and 39. for a discussion of this process under
p. 31. "strato inflation"—rates of price increase averaging
'^ Cf. M. Corina, quoting the work of H, Behrend, between 20 per cent and 35 per cent.
Times, (January 9, 1972). ••"' lljid., Ch. 2, Graph 11, p. 21 and pp. 29-39,

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(or absence) of a convincing Marxist thieoretical variant of bourgeois rule. The 13th Plenum
analysis of inflation will surely play an increasingly of the Communist International in December
important part in determining the context in which 1933 and Dimitrov at the 7th World Com-
such struggles are fought out, as well as contributing munist Congress of the International In 1935
to a growing consciousness of the urgent need for formulated the basic Communist view of
socialism. fascism as "the open terrorist dictatorship
This paper has attempted to situate the pheno- of the most reactionary, most chauvinist and
menon of persistent inflation in the characteristics most imperialist elements of finance capital".
of modern capitalism. It has been argued that Merson fmds even this last definition
chronic inflation is a necessary feature of a social somewhat inadequate, arguing that it can
reality in which workers are impelled to struggle to tend to emphasise the repressive at the
realise their rising aspirations, cannot be prevented expense of the equally important ideological
from struggling and the system cannot, necessarily aspect of facism.
cannot, meet those aspirations. Within this context Valuable sections of the lecture are those
it is unscientific to attempt to attribute "blame" or which contrast in detail the anti-capitalist
"responsibility" for inflation to different classes— demagogy which provided the Nazis with
workers (unions), capitalists (monopolists, multi- their mass basis, with the pro-monopolist
national firms, money lenders, speculators), land- practice of Hitler's government from 1933
owners—or to the state. Inflation is a product of the onwards, and examine the relation of the
capitalist system in its present stage of state mono- monopolists to the Nazi dictatorship, espe-
poly capitalism. Of course, agitation and propaganda cially the whole economic preparation for
are not scientific analysis and have their own World War II by the big monopolists.
requirements; but they should not be inconsistent Merson shows how despite rivalries be-
with the results of scientific analysis. tween different groups of monopoly capital-
ism "the leaders of German monopoly
capital committed their interests deliberately
THE MEN BEHIND THE N A Z I S and irrevocably to a fascist dictatorship and
The latest pamphlet published by the to a programme of all-out war preparation".
History Group of the Communist Party— He also disposes of the myth that the Nazi
The Nazis and Monopoly Capital* (the text of a party imposed its will on big business,
lecture given by Allan Merson, Senior showing that, rather, they worked in the
History Lecturer, Southampton University, closest collaboration. The big Nazis became
to the History Section of the 1972 Communist big monopolists (Goering especially). The
University)—is an outstanding piece of work. biggest monopolies looked above all to the
It should be read by all who seek to under- SS to keep their enormously expanded
stand the nature and the main economic and exterprlses in Germany and in conquered
political features of one of the mostferocious, Europe "safe".
bestial and anti-human movements of all
time—German Nazism.
Merson seeks to provide us with a Marxist DISCUSSION ON INFLATION
view of the social basis of fascism, especially
of its German variant—Nazism. To do this he We have published the following articles
closely examines and criticises the various on inflation in recent issues o^Marxism Today:
myths, theories and views about Nazism
JOHN PURTON
which he developed In the '30s and have been
Inflation and the Working Class
repeated by historians since World War II.
December 1973 and January 1974.
Some claim that Nazism was a radical, third
alternative to both capitalism and socialism, PAT SLOAN
others that it was an anti-capitalist movement, Monopoly Prices, Exploitation and Inflation
that it was primarily a movement of the petit- February 1974.
bourgeoisie and that It was an accident of
PATDEVINE
German history, something historically
Inflation and Marxist Theory
unique etc., etc.
March 1974.
A t first, on the left, it was regarded, even
by many Communists, as just another Discussion contributions of up to 2,000
words on the subject of inflation will now be
* " O u r H i s t o r y " Pamphlet, No. 57, Summer 1973, 20p. welcome.
Obtainable from the History Group of the Communist
Party, 16 King Street, London WC2E SHY.

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MARXISM TODAY, MARCH, 1974 93

Trends in Youth Culture

Paul Fauvet
J o h n Boyd"s hysterical contribution to the dis- c a n n a b i s and L S D ? T h e r e is in fact n o evidence
cussion o n Y o u t h Culture in D e c e m b e r ' s Marxism to show that the ruling class h a s viewed any
Today was a perfect example of how n o t to self-activity on the part of young people in the
analyse a social p h e n o m e n o n . I shall not deal with past few years -whether violent as in the case of
the second half of his article which degenerated the skinhead cult, or predominantly peaceful as
into a rabid piece of chauvinism attributing youth in the hippies—with anything other t h a n m a r k e d
culture' to " a n intensive American offensive o n distaste. A n d at times, of course, ruling class
British c u l t u r e " (complete with a list of " i n v a d e r s " reaction to specific instances of " y o u t h revolt" has
ranging from h o r r o r comics to commercial taken on the dimensions of a witchhunt—witness
r a d i o ! ) . Hopefully such chauvinist fantasies are the massive n u m b e r of police deployed to evict
rare within our C o m m u n i s t Party. However, the squatters from 144 Piccadilly, o r the formation
certain points in the first half of C o m r a d e Boyd's of vigilante squads by the worthies of St. Ives to
article deserve to be taken up. chase hippies out of the area.
C o m r a d e Boyd is quite correct to quote "Lenin This sort of action and the continual virulence
on the rejection of "special cultures". But M a r t i n displayed in the bourgeois press t o w a r d s " y o u t h
Jacques in his original contribution was not sug- c u l t u r e " is a bit difficult to explain on C o m r a d e
gesting that we go and create a special culture; Boyd's thesis of the whole thing being a p u t - u p
his article was concerned with how we analyse job posing no threat to ruling class d o m i n a t i o n .
and relate to a culture which, whether we like it If one takes the trouble of flicking t h r o u g h faded
or not, is already in existence. It will not disap- copies of IT, OZ and other " u n d e r g r o u n d " news-
pear if we say it should not be there in the papers dating back to the late 1960s one finds in
first place, and effectively ignore it. fact that they are full of anti-capitalist rhetoric.
Similarly in a lot of the rock music of the time
(particularly that e m a n a t i n g from the West C o a s t
A Capitalist Conspiracy' of America) there is an angry and wholesale dis-
C o m r a d e Boyd seems to believe that the entire missal of bourgeois values.- This is not t o say
cultural experiences of young people in the 1960s that youth culture was or is intrinsically revolu-
was a massive capitalist conspiracy. " C a p i t a l " , he t i o n a r y — t h e solutions proposed by the " u n d e r -
says, " h a s moved in, deliberately fostered and g r o u n d " were usually of an anarchist a n d blatant-
exploited the so-called 'generational" differences ly Utopian n a t u r e — b u t merely that it frequently
and then fused them together, labelling the expressed anti-capitalist attitudes, and that it is
' p h e n o m e n a ' a youth revolt" (page 375). A little a wilful disregard of the facts to dismiss it as just
later we are told that the whole thing has been a n o t h e r p r o p a g a n d a weapon in the h a n d s of the
"imposed by the ruling class and its mass media"" bourgeoisie.
and imposed in order " a b o v e all to alienate young
people from their working class r o o t s " (page 377).
Commercialisation and Culture
But if youth culture in its entirety was so
N o n e of this is rendered any the less true by
perfectly manipulated by the ruling class, h o w
the commercialisation of rock music. It is absurd
does J o h n Boyd explain the violence and hysteria
to say that merely because certain elements in the
of the reaction from the mass media to the
ruling class can m a k e a profit o u t of y o u t h
developments a m o n g young people in the mid and
culture, therefore youth culture must be a creation
late 60s—particularly to the hippie p h e n o m e n o n ,
of the bourgeoisie. As Martin Jacques pointed
the gradual breakdown of bourgeois s t a n d a r d s
out in his original article, life is never that simple.
of sexual morality, and the increasing use of
F o r a start the record companies, in order to sell
'The term "youth culture" is not altogether large a m o u n t s of their particular c o m m o d i t y —
satisfactory, as it covers a number of sub-cultures, rock music—must ensure that it has mass appeal
all of which need detailed analysis. Since such and therefore that at least to some extent en-
analysis cannot be offered in a relatively short
contribution, and since the term has already been -eg the lines "All your private property/Is target
used by other participants in the debate, I shall for your e n e m y / A n d your enemy/Is we" from the
continue to employ it—but with reservations. Jefferson Airplane song "We can be together".

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