Britain 1931: Coalition, cutbacks and crisis

While no historical period is identical with Britain now, the tumultuous events that shook the country 80 years ago – combining the great depression, a ‘grand coalition’ government wielding the axe, and a damaging currency peg – are rich in lessons for workers in Britain and Europe today.

THE 1929 WALL STREET crash was the trigger for the most profound global crisis in the history of capitalism, the great depression. And it took the second world war to create conditions for an escape from the economic cul-de-sac. For over half a century, capitalist economists believed that studying the depression was of purely historical interest. Then, over one weekend in 2008 – as the world financial markets teetered on the edge of breakdown following the collapse of Lehman Brothers – even the most obtuse representatives of capitalism realised that they faced the possibility of a repeat of their system’s worst ever crisis.

Unprecedented state measures – quantitative easing and stimulus programmes in the US, Japan and other major economies – were taken to bail out the financial system. While this prevented a repeat of the 1930s, however, it did not solve any of the underlying problems. It is the recognition that there is no prospect of healthy recovery, and that the global economic crisis is still developing, that has caused turmoil on the world’s financial markets again over the summer.

Like the Bourbon kings, capitalist governments seem to have forgotten nothing but learnt nothing. In the immediate aftermath of the 2007/08 financial crisis, capitalism behaved as if it had learnt something from their studies of the 1930s. However, the period of nation states ‘priming the pump’ was brief. Now, the world’s governments, above all the Con-Dems in Britain, have switched to savage cuts in public spending which are startlingly similar to the deflationary policies in the aftermath of the 1929 Wall Street crash.

The result, as in the 1930s, has been to worsen the economic situation, forcing the capitalists to consider priming the pump again. Even if they do so it will not solve the underlying economic problems. During the great depression the Russian revolutionary, Leon Trotsky, explained that only the richest capitalist country, the US, could afford even the minimal Keynesian policies of the pump-priming New Deal, which president Franklin D Roosevelt switched to in the mid-1930s in the aftermath of the savage cuts in state spending carried out by his predecessor, Herbert Hoover.

Today, in a sense, no country can afford a ‘New Deal’. US imperialism is weakened, crippled by the twin deficits of the federal budget and trade. Globally, we are witnessing a prolonged and deep, organic crisis of capitalism which, due to the massive and economically unsound financial bubble that has developed over the past 20 years, is becoming still deeper and dramatic in character. Capitalism will be hobbled for a protracted period. The lessons of the 1930s have never been more relevant to the working class than they are today.

The return to the gold standard

THE GREAT DEPRESSION meant appalling misery for the working class in Britain. By the end of 1930, UK exports had plummeted by 50% and unemployment had more than doubled to 20% of the workforce. Other countries, including the US, suffered an even greater fall in production but in Britain it followed many years of inexorable decline. Once the world’s great imperialist power, British capitalism had been first challenged and then decisively pushed down the pecking order by the development of German then US capitalism.

In 1925, the Tory government had put Britain back onto the ‘gold standard’, which linked sterling to the value of gold and, in reality, to the US dollar. This was an attempt to restore the power of British imperialism by re-establishing sterling at pre-war parity with gold and to slow the tendency of Britain’s colonies to orientate towards the ever more powerful USA. However, “the British empire [was] being mortgaged to the United States”, as the Daily Mail commented.

In September 1931, the national government took Britain off the gold standard, following panic on the world financial markets. There are innumerable parallels between Britain’s experience of the gold standard and the crisis currently engulfing southern Europe. Both involved national capitalist classes tying their currencies to a more powerful country. Initially, both were hailed as a success when, as Trotsky explained regarding the gold standard, “we seem to have a great victory for British capitalism [but] in actual fact Britain’s decline is nowhere more clearly expressed than in this financial achievement”. (Where is Britain Going? 1925) Just as with the gold standard, the outcome of the crisis in Europe will be the break up of the euro, sooner or later, with at least some countries being forced out of it. In the meantime, again as in the 1920s and early 1930s, the price of membership of a common currency is being extracted in the misery of millions of working-class people.

The decision to return to the gold standard at too high a level – overvalued by around 10% – had immediate economic consequences. The capitalist class responded by attempting to make the workers pay with savage pay cuts. The economist John Maynard Keynes attacked the decision, saying that it would be the workers in general, and miners in particular, who were the “victims of the economic juggernaut… Mr Churchill’s policy of improving the exchange by 10% was sooner or later a policy of reduction everyone’s wages by two shillings in the pound [10%]”.

Like the Greek working class today, workers in Britain refused to pay for a crisis that was not of their making. The magnificent nine-day 1926 general strike, in which four million trade unionists took part (out of a total of five-and-a-half million), still remains the most important event in the history of the British working class. Due solely to the criminal betrayal of the trade union leaders, it is also its greatest defeat. That defeat forms a vital part of the backdrop to the events of 1931. In the aftermath of the strike, Britain’s capitalist class exacted a terrible revenge on the working class, with widespread wage cuts and hundreds of thousands of the most militant activists thrown out of work. Trade union membership fell by half a million in 1927 alone. The unemployed were treated with appalling brutality. The diseases of poverty, tuberculosis, rickets and polio, were common.

The 1926 defeat was heavier because the young Communist Party (CP), which included many of the most militant workers, had not put forward a clear strategy for victory during the strike. It followed behind the trade union leaders, particularly those of the left, too uncritically. As a result, it did not come out of the general strike strengthened as it could have been. Nor was it able to prepare effectively the most militant sections of the working class for the battles that were to come. The Minority Movement, founded by the CP and involving half-a-million trade unionists at its peak, went into terminal decline. These failings were exacerbated as the CP followed the policy zigzags of the Stalinist regime in the Soviet Union.

Today, the working class is not suffering from recent industrial defeats. On the contrary, workers in Britain are only now beginning to awake and attempt a serious struggle to defend their interests. Nonetheless, the defeats the working class has suffered over the longer period of the last three decades still have a negative effect. The ideological defeat caused by the collapse of Stalinism in 1989/90 and the resulting wave of capitalist triumphalism which pushed back socialist consciousness remain an important factor, albeit a decreasing one. Working-class consciousness today is still on a lower level than in the 1930s. Today, the lack of mass parties of the working class complicates the resistance to the capitalists’ onslaught. In 1931, the crisis was of the leadership of the political organisations of the working class. Today, it is of its very organisation. The trade unions, which organise over six million workers in Britain, remain intact and are crucial means for the working class to defend its interests. To do so effectively, however, trade unionists need to exert enormous pressure on the right-wing leaders of the TUC who are even more integrated into the capitalist system than in the past.

The profound crisis of capitalism is, however, pushing a new generation into searching for an alternative. The revolutionary wave that has swept North Africa, and the mighty uprising in Greece, represent the dramatic beginnings of a new stage of struggle. In Britain, we have already seen the biggest student movement in a quarter of a century, the biggest trade union organised demonstration in history and, most importantly, 750,000 workers taking co-ordinated strike action. One lesson that can be drawn from 1931 is that, despite the difficulties, the capitalist class could still not carry out its savage programme without mass and heroic resistance from the working class. Even against the background of a savage assault on the working class, the resistance forced the capitalists to retreat, at least partially. When the working class was blocked in the official trade unions it found other means of struggle, including the so-called bread riots, and the biggest naval mutiny in Britain for 150 years. The same kind of struggles will undoubtedly develop today as part of the current battle against cuts and could be central to it if, as in 1931, the trade union leaders succeed in blocking serious industrial struggle for a period.

The 1929-31 Labour government

IN THE AFTERMATH of the general strike, a defeat in the industrial struggle, the working class first turned to the political arena to try and defend itself. In May 1929, the second Labour government in history came to power as a minority government, backed by the Liberals, with ‘moderate’ Labour politician Ramsay MacDonald as prime minister.

The Labour Party at that stage was a capitalist workers’ party. While the leadership acted in the interests of the capitalists, the mass, working-class base of the party was able (unlike today) to influence it through the party’s democratic structures. This was to be graphically demonstrated by the events of 1931. Trotsky anticipated what would develop in Where is Britain Going? “The masses will liberate themselves from the yoke of national conservatism, working out their own discipline of revolutionary action. Under this pressure from below the top layers of the Labour Party will quickly shed their skins. We do not in the least mean by this that MacDonald will change his spots into those of a revolutionary. No, he will be cast out”.

The Labour Party had come to power in a period in which capitalism could not afford to carry out reforms: “Without reforms there is no reformism, without prosperous capitalism no reforms”, Trotsky explained. “The right reformist wing becomes anti-reformist in the sense that it helps the bourgeoisie, directly or indirectly, to smash the old conquests of the working class”. (Once More on Centrism, 23 March 1934, Writings of Leon Trotsky 1933-34)

From the start, the MacDonald government disappointed the millions of workers who had voted for it, not least on the central issue of the day, unemployment. Even Hugh Gordon, a right-wing Labour MP, later admitted: “The government ran away from its programme [on unemployment] from the first day”. (Nick Smart, The National Government 1931–40) A bill introduced by the Minister of Labour, Margaret Bondfield, Britain’s first woman cabinet minister, did not deal with any of the central issues facing the unemployed. Some of the most brutal aspects of the benefit system were left in place, such as the waiting period before benefits could be claimed and the onerous proofs of ‘genuinely seeking work’. Anger was such that, at the Labour Party conference in October 1929, an attempt to stage a protest against the Bondfield bill was only narrowly defeated.

This shows the difference between Labour at that stage and New Labour today. New Labour was able to carry out numerous attacks on the working class, including cutting disability benefits, introducing unprecedented privatisation in the NHS, and invading Iraq and Afghanistan, with barely a ripple at the Labour Party conference. When one lone pensioner dared to shout ‘nonsense’ at the occupation of Iraq in 2005 he was physically evicted from the conference and arrested!

In July 1931, as unemployment soared, the Labour government commissioned the May report into the public finances. This called for huge public-sector cuts, including a 10% cut in unemployment benefits. Like the Pasok government in Greece today, Labour was being told it had no choice but to dance to the tune of the markets. As Henry Pelling puts it in his Short History of the Labour Party: “In August [1931] the government faced the alternatives of abandoning the gold standard or securing fresh loans in Paris or New York; but the New York bankers would only help if they were sure that the government was taking sufficient measures of retrenchment to restore confidence on orthodox lines. This meant, in fact, cuts in civil service pay and in the pay of the forces, and also in unemployment benefits”.

A narrow majority of the cabinet were in favour of implementing the May report, but senior figures who opposed it made it clear that they would resign if it was implemented. More to the point, the power of the organised working class, the trade unions, within the party made it impossible for the Labour government to go ahead and implement the report. Ernest Bevin, general secretary of the largest trade union, the Transport and General Workers’ Union and very far from being on the left, was among those who met the chancellor to report on behalf of the TUC that they could not accept the cuts.

In Britain, the so-called ‘cradle of capitalist democracy’, the capitalist class, when it could not use the Labour government as a reliable servant of its interests, did not hesitate to find another, more reliable, instrument in the form of a national government headed by MacDonald. On 23 August, MacDonald resigned. Early the next morning he accepted the invitation of the king to form a new government with the Liberals and the Conservatives. MacDonald and those Labour MPs who went with him were expelled from the Labour Party and gave themselves the name National Labour. This betrayal was burned into the consciousness of broad sections of the working class. Today, Ed Miliband and the leadership of New Labour clearly believe, wrongly, that a majority Labour government is ruled out and dream only of a coalition with the Liberals. However, up until the development of New Labour, no post-war Labour leader dared to support a coalition or national government, such was the memory of MacDonald’s betrayal. Tony Blair had hoped to change this, and to involve the Liberal Democrats in government in some form after the 1997 general election. The scale of Labour’s majority, however, made this impossible.

In any case, New Labour in power was such a reliable capitalist party that there was no need for a coalition. The leadership of the party was able to completely isolate itself from the pressure of the organised working class. The party conference had all of its powers taken away, while the trade union conference vote was reduced below 50%. Yet Miliband is now launching a campaign to remove even the few vestiges of democracy that still exist within the Labour Party, including the election of the shadow cabinet. While a Lib/Lab government is more likely in the future than a national government, the scale of the crisis means it can no longer be excluded despite the ingrained hatred of the Tories among big sections of the working class. Unlike in 1931, a majority of the current Labour Party could probably accept this in a ‘national emergency’.

In Europe, all the ex-workers’ parties have become safe tools for the capitalist class. In Greece, it is Pasok which is loyally trying to meet the demands of the ‘troika’ by implementing 33% wage cuts, benefit cuts and mass privatisation in a country which is already suffering an economic crisis of 1930s proportions. On 21 June, while a 48-hour general strike paralysed the country, the Pasok government used so much tear gas to clear the streets that, had the country been at war, it would have been illegal under the Geneva convention. Only one Pasok MP voted against the cuts, and was expelled from the party on the spot! Meanwhile, it was the traditional capitalist party, New Democracy, which has refused to join a national government, at this stage, and has cynically stated it would vote against the cuts.

Mutiny in the navy

AT THE END of August 1931 a national government was formed ‘to defend the gold standard’. Its slogan, like the Con-Dems’ ‘we’re all in this together’, was ‘equality of sacrifice’. It immediately introduced an emergency budget which demanded no sacrifice by the rich and meant starvation for the poor. It was incredibly similar to the budget of the government in Greece today which is, supposedly, to defend the euro. It is also echoed in the Con-Dems’ benefit cap and campaign to declare the disabled ‘fit to work’. In 1931, unemployment benefits were cut by 10% and the dreaded means test led to 193,542 men and 77,995 women immediately having all their benefits stopped. The means test meant that benefits were denied to the unemployed if anyone in the family – parents, grandparents, siblings – were judged able to keep them or if they had any goods, including basic furniture, which could be sold to buy food. At the same time, public-sector workers were told their pay would also be cut by 10%.

Mass opposition to these measures was given form, not by the trade union leaders, but in a dramatic naval mutiny. Sailors were facing pay cuts of between 10% and 25%. On 11 September, when ten warships of the Atlantic fleet arrived in Invergordon in Scotland, the sailors read about their pay cut in the newspapers. The next night a group met on shore at a football field, voted to organise a strike, and left singing The Red Flag. On 15 September, four warships refused to leave on manoeuvres and the mutiny had begun. It ended in the evening of 16 September when the navy conceded that sailors’ pay would be cut by no more than 10%, along with some other concessions.

The end of the mutiny was not the end of the story. The world financial markets panicked, and exerted huge pressure on the pound. On 21 September, the three-week old national government was forced to abandon the gold standard and the value of sterling fell by 25%.

Even those capitalist academics who try to deny that the Invergordon mutiny was responsible for Britain coming off the gold standard actually accept that it was the sailors’ determination which was the trigger for what followed. Nick Smart, for example, says: “The political impact of the Invergordon ‘mutiny’ was considerable. It is doubtful, however, whether the event, in itself, caused… the suspension of the gold standard on the Monday. What is more likely is that foreign holders of sterling… interpreted ‘disobedience in the fleet’ as a symptom of government unpopularity”. Exactly! Compare the sailors’ spontaneous determination not to accept the misery being heaped on them with the pathetic servility of the right-wing Labour leaders, summed up by their Fabian guru, Sidney Webb, who when he heard Britain was off the gold standard whined: “No-one ever told us we could do that”. In 1931, the British ruling class came up against the inner resistivity of the working class in the form of the naval mutiny and was forced to abandon its long held goal of sticking to the gold standard. Workers’ refusal to accept the scale of misery being demanded of them was bound to find an outlet, if not through the naval mutiny, by other means. The same will be true of the working class in Britain today, who will not be able to swallow the scale of cuts being demanded by the capitalist class.

It is possible that the police or armed forces will again play a role in the struggle. This is the first attempt since 1931 to cut the pay and conditions of the armed forces and the police. Margaret Thatcher did the opposite, stuffing the mouths of the police ‘with gold’ to ensure their loyalty. The current government proposes cuts of over 10% in real terms in the average police officer’s pay, plus major pension ‘reform’. The £4.7 billion that is being cut from the armed forces is mainly being found by cutting the conditions of ordinary soldiers and the pensions of ex-soldiers, not least those who have been disabled in Iraq and Afghanistan.

The police and armed forces ultimately play the role of ‘the armed bodies of men [and women]’ defending the interests of the capitalist class. The student movement has already suffered police brutality. The importance of organised, democratically controlled mass stewarding of demonstrations to protect them from police attack and agent-provocateurs will be an increasingly important demand. At the same time, socialists stand against cuts in all workers’ pay and conditions, including those of the police and armed forces. In a period of heightened class struggle it can be possible to split the forces of the state. We should support the moves of the Police Federation to campaign against the cuts, and to demand the right to be a real trade union. Police strikes, last seen in Britain in 1919, could be posed in the coming period and would make it far harder for the government to implement its cuts, just as the sailors’ mutiny of 1931 sent the government into retreat within 48 hours.

Other outlets of resistance

JUST AS MEMBERSHIP of a common currency is for the euro ‘periphery’ countries, the gold standard was a disastrous deflationary straitjacket for British capitalism. Coming off it, however, did not mean an end to the crisis or to deflationary policies. The capitalist class continued with its assault on workers’ living conditions. It was met with ferocious resistance. The left Labour MP, Nye Bevan, demanded in parliament to know if the unemployed would receive the same concessions as the sailors if they showed the same “rebellious tendencies”. Over the coming years they did.

Over recent years, socialists have warned that, unless a determined mass movement of the working class against all cuts is organised by the trade union leaders, riots were inevitable as a cry of despair against mass unemployment, poverty and police brutality. This summer we have seen communities burn as a ‘lost generation’ rage against their lot. However, the riots of 2011 are on a far lower level and scale than the mass uprisings of whole communities which took place in the 1930s. Socialists and the trade union movement need to begin again to organise the unemployed around a clear programme in order to channel their anger into an effective movement. Youth Fight for Jobs (YFJ) has already begun important work in this direction.

In the 1930s, the CP, despite its political failings, played a crucial role in organising the unemployed in the National Unemployed Workers’ Movement (NUWM). Two of its leading activists, Fred Copeman and Len Wincott, were first brought into activity and then membership of the CP after they helped to lead the Invergordon mutiny and were thrown out of the navy as a result. Today, it is the march of the unemployed from Jarrow to London in 1936 which is most remembered but, prior to this, the NUWM organised a whole series of marches of the unemployed. The first, in 1932, was greeted when it arrived in London by a brutal police assault, snatching the petition to parliament from the marchers, and subjecting them to a vicious beating.

In Birkenhead, in 1932, the labour movement, led by the CP, organised a magnificent struggle around clear demands: abolition of the means test; extension of work schemes, including building houses, schools and road repairs; a 25% rent reduction for corporation (council) houses and no evictions. They marched with clear slogans: ‘fight the means test’; ‘unemployed workers – struggle or starve’. The so-called ‘bread riots’, in fact a mass uprising of the Birkenhead working class, forced the council to make significant concessions, including an increase in unemployment benefits by two shillings a week. (See: Struggle or Starve, by Peter Taaffe, The Socialist No.656, 2 February 2011) In the aftermath of the Birkenhead victory, unemployed workers in many other towns and cities followed suit, including in Salford, Birmingham, Belfast and Glasgow. The 1934 reversal of the 10% cut in unemployment benefit, limited as it was, would not have taken place without these heroic struggles.

The workers’ political response to the experience of 1931 was multi-faceted. Superficial historians report that Labour suffered a massive defeat in the general election of October 1931. In terms of MPs this was true, but Labour’s vote only fell from 8.3 million in 1929 to 6.6 million. This showed the loyalty of the majority of the working class to the Labour Party, seeing it as a party that, unlike the betrayers MacDonald and Philip Snowden, stood in their interests. In that election, all the capitalist parties stood as a bloc, including National Labour, and an avalanche of vitriol poured forth from the capitalist class against the Labour Party. Former leader, MacDonald, gave an election broadcast describing the Labour Party’s programme as “Bolshevism run mad”.

Trotsky had predicted in 1925 that, in the first instance, MacDonald would be replaced as leader of the Labour Party by “people of the ilk of [George] Lansbury…[who] will inevitably reveal that they are but a left variant of the same basic Fabian type”. This was exactly what happened. However, under the impact of the crisis of capitalism and the experience of the 1929-31 Labour government, the Independent Labour Party moved rapidly to the left. In 1931, it disaffiliated from the Labour Party taking with it over 16,000 members. Although its failure to adopt a clear Marxist position meant that its membership dwindled over subsequent years, its rapid development in the immediate wake of the MacDonald betrayal gave an indication of the potential for a sizeable Marxist party to develop in Britain in the 1930s. The number of brave militants who were attracted to the CP despite its leadership also shows the revolutionary conclusions that were being drawn by the most advanced sections of the working class.

The weakness of the capitalist parties was shown by the fact that variations on a national government remained in power until the end of the second world war. The next government by a single party was the 1945 Labour government which, under the mass pressure of the working class – determined not to return to the misery of the 1930s – carried out a ‘quarter of a revolution’ by nationalising 20% of industry and creating the NHS. Successive governments, including New Labour’s, have systematically undermined the gains of 1945-50. Now the Con-Dem government intends to finish the job. However, it will face mass opposition from the working class. All kinds of heroic struggles will develop against the cuts, just as they did in the 1930s. The potential for many tens of thousands of workers to be won to Marxism, and for a mass party of the working class to develop again, will arise from the mighty battles that are coming.

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September 2011