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Ed Balls announces that the next Labour government will cap numerous benefits and end universal entitlements to some in what is being described as the return of means-testing (as if it had ever gone away). Balls and Miliband are determined to prove to the City of London that they are fit to rule us. The response of those on the Left is to cry “Betrayal" (once again and so predictably).
Welfare in Britain is a complex of legislative measures, passed for many different reasons and at different times over the last hundred years. Generally, the elements contained in the body of welfare legislation are very wide – more commonly, the health service, housing policy, education, unemployment and sickness benefits etc., are items most people would think of but also laws limiting exploitation, setting minimum standards of work and quality of goods, controlling public health etc. Thus, the Factory Acts, Shop Acts, Mines Acts, minimum wage legislation, laws on the arbitration of disputes as well as trade union legislation are often included. The motives at stake in any given piece of welfare legislation range from the crudely opportunistic to the sincere reform. However, whatever the stated reasons, the effects of welfare legislation add up to an evasion of the real problem – they serve as a substitute for the transformation of society. The problem of poverty remains untouched – its effects being simply partially ameliorated. Welfare legislation as a whole takes the question of ownership of wealth off the agenda.
Political memories are strange things, full of lapses and false recall. Memories of past follies fade and grow dim, until the next betrayal is administered. Time has allowed the magical allure of Labour left-wing rhetoric to once again rehabilitate itself.
In 1945 millions of workers voted Labour and resulted in a massive majority of 146 seats. Myths and illusions make up the history of the Labour Party. Nowhere is the matter of myth so pervasive than in the record of the Labour government of 1945. The establishment of the Welfare State was claimed to be the crowning achievement of the Labour Party and confirmation of the success of reform politics. It was widely believed that Labour’s stated objectives could now be achieved; and indeed nationalisation of the basic economic services and an advanced social welfare programme was put on the statute book within the first three years of office. Twenty per cent of industry was nationalised. The National Health Service was established and was completely free. The de-mobilisation of the armed forces and the transition to a peace time economy was carried through relatively smoothly, and between 1946 and 1950 industrial production increased by fifty per cent. The legislation of the 1945 Labour Government was labelled “socialist” and this attribution of “socialist” given to the measures of nationalisation and “free” social security benefits, led many in the labour movement to accept the propaganda.
As for the claim that the Welfare State is an early form of a socialist society, it must be emphasised that social security schemes are firmly placed within the framework of a market economy. Contrary to Labour’s propaganda claims, welfare legislation is common to most industrialised countries. The reformers have degraded the socialist movement by aspiring merely for a “welfare state” by tinkering with capitalism. This identification of socialism with social welfare and full employment has remained a major source of confusion to this day. Nationalisation measures are not socialist, despite the popular belief that this is so. In fact, the first nationalisation bill put through Parliament was brought in by a Tory Government in 1857 when they nationalised the Indian railways. The motive of the Tories was certainly not to improve the living standards of the Indian workers, let alone to introduce socialism! In fact the real issue which has divided Labour and Tory has not been the question of state intervention, as such, but the question of the form which this takes. In this debate the latter party have been supported by both big and small capitalists who have defended the setting up of formalised corporate planning and intervention in industry by representatives from government and the employers as opposed to the centralised and more bureaucratic parliamentary control favoured by Labour. Neither party have been in favour of real control by the workers themselves.
As far as the development of the Welfare State is concerned both parties have a history of welfare legislation. The basic platform of the welfare state was sketched out by the Tory dominated post-war reconstruction committee, which planned the system of social insurance and the health service in addition to placing the 1944 Education Act on the statute books. Again, during the enactment of subsequent measures by the Labour Government during the years 1945-51 there was no opposition in principle to the welfare state. Why is this? In addition to providing facilities for health and education which are of obvious benefit to the working class, the measures passed were fully in accord with the requirements of the capitalist for a healthy work force, and an educated one, and over and above this, were the minimum reforms which any party would have granted during this period, given the radicalism of the post-war mood. It is in later periods, when capitalism has found itself in crisis, that these benefits have come under attack, by both parties. In fact it was a Labour Government which launched the first erosion of welfare rights, imposing NHS prescription charges, ending the free NHS.
Of the industries which were nationalised, coal and the railways were virtually bankrupt, and any government would have been forced to provide massive financial support for the large scale investment that was required to achieve some degree of efficiency. if British capitalism were to survive old and obsolete machinery had to be modernised. In cases where these industries were not only in a position to attract the requisite new investment, the only alternative was for the state to take over, and to set about the modernising process itself, milking more profitable concerns in order to do so. In the case of both the railways and the mines, nationalisation was absolutely essential, since the British economy rests on cheap coal and cheap transport. The way it was carried through in these two industries left unaltered the structure of industrial relations, rapidly increased the burden of debt, which provided an increasing rentier income to property owning individuals and corporate institutions, and offered a cheap service to the capitalist sector of industry. Gas and electricity were already partly nationalised (by a Tory Government) as a recognition that the type of operation demanded a national and standardised distribution network, in addition to a level of planning and, finance, beyond the means of individual private capitalism.The nationalised industries were subordinated to the short run needs and interests of capitalist industry. The compensation paid was much too generous, the structures of control established were highly bureaucratic, and workers’ control or a minimum of worker-participation was never seriously discussed, let alone implemented.
The principal industrial advisor to the Board of Trade was the chairman of the British Rayon Federation. The Capital Issues Committee functions was to approve or deny new issues on the capital market, and it was composed of bankers, stock-brokers and industrialists. The leather controller at the Board of Trade was an official of the United Tanners’ Federation. The match controller in 1946 was an official of Bryant and May, Britain’s largest producer of matches, and for a time had his offices on the firm’s premises. The paper controller was the Chairman of the largest paper manufacturing firms. The footwear controller was a director of the shoe manufacturing firm of Dolcis, and the hosiery, furniture and tobacco controllers or advisors were trade officials. Distillers Ltd., occupied the top posts in the Molasses and Industrial Alcohol Control of the Board of Trade, and the Cotton Control was largely recruited from Liverpool’s cotton firms. Timber Control, was almost entirely staffed by industry people, a number of whom, occupying senior position, were unpaid. Unilever alone filled ninety posts in the Ministry of Food, twelve of them, senior posts. The list goes on and on. Big Business trade bodies administered the controls over business. As soon as a favourable opportunity occurred, profitable industries like steel and road transport were handed back, at a handsome discount, to Big Business as it was thought fresh profit could be made. The Conservative Government promptly de-nationalised them after it came to power in 1951.
The world had experienced a war many times more destructive than the First World War. Consequently almost every country in the world was crying out for goods with which to reconstruct their battered economies. Even the industrial capacity of the United States was unable to fully satisfy the unprecedented demand. Britain, therefore, was also able to cash in upon the world market. The capitalist class of this country, amassing more profits than at any other time in their history, were willing to permit, without much opposition, some concessions to the workers, thus allowing the Labour government to maintain the guise of being progressive, of creating a “welfare state”, and also to retain the mass support of the workers. The ruling class could afford crumbs of concessions from the feast of profits in the post-war boom. By 1948, however, conditions had gradually began to change. The world markets were being replenished, and countries which had been buyers of British goods rapidly became competitors in the dwindling market.
The Labour Government was able to assist the capitalist class to regain its balance by the maintenance of labour discipline. The workers, having certain class loyalty to the Labour Party, restrained, albeit somewhat grudgingly their demands for improved conditions and higher pay. Their loyalty was somewhat bolstered by a series of reforms that the government carried through. In the six years after 1918, (excluding 1926 the year of the General Strike), some 187 million days were lost through strikes and lock-outs: in the comparable period after 1945 the figure was just short of 13 million. There can be no doubt that a Conservative Government in office after 1945 would have been unable to extract the high degree of industrial discipline and the general loyalty to the Government that the Labour Party was able to achieve.
Did the Welfare State redistribute wealth? The figures show that in fact the distribution of wealth has hardly changed at all in the last century. What redistribution does occur was from the higher paid to the lower paid workers i.e., within the working class itself. It was a re-distribution of poverty. There is no significant redistribution from one class to another.
Welfare benefits, and nationalisation are double-edged weapons. They can both provide certain basic services such health and safety but also act as diversions of class struggle. On the one hand the Welfare State benefits workers but on the other it is also in capitalism’s interest. It is in capital’s interest to maintain the conditions for the reproduction of labour power, but this imposes a cost on capital and so there is a constant tension between the desire for healthy, well trained workers and the costs of such provision. It is also recognised by some capitalists that their exissts a price to be paid for political security and social peace. The ruling class bought political stability and achieved a reasonable degree of economic efficiency by the erection of society shock-absorbers of the Welfare State whose function is to offset the more extreme inequalities and insecurities of the capitalist system. For reformist capitalist instability is subject to cure within the system; for socialists it is not. As socialists, we are concerned with how to create a society in which poverty cannot arise. For that reason, the welfare legislation of Britain, like nationalisation measures, is not related in any way to socialism.
We should point out that nationalisation etc., makes no difference to the fact of exploitation. Private capital or state capital – what is the real difference? It however cannot be dismissed either as a capitalist bribery or as concessions wrung from the ruling class in times of acute class struggle, although it includes both aspects. The central point is that the Welfare State performs important functions for capitalism at the same time as it maintains the illusory appearance of an equalising mechanism. Anything that would undermine workers’ willingness to sell their labour power is likely to be resisted by the ruling class. While workers have an interest in fighting to improve their housing, health, education and protection from destitution. The shape of the welfare state therefore reflects contradictory pressures. It represents a gain under the pressure of workers’ demands. But the capitalist class ensure that the scheme would not interfere with market forces and had limits imposed upon the costs of the reproduction of labour power. There is a general bitterness about the squalor of public services compared with the affluence for the few and this countered by a deliberate campaign of scape-goating sections of the poor as to set worker against worker and divert attention.
Attempts to cut welfare spending are often described as attacks on the “social wage”. The concept of social wage is useful in so far as it correctly emphasises that benefit cuts are a collective attack on workers’ living standards for the cuts hurt the entire working class, but particularly for whom welfare services are a substantial slice of their real standard of living. But the term “wage” is misleading however. Welfare spending is not directly linked to the sale of labour power, although it forms part of the reproduction of labour power. The link for the capitalist is therefore an indirect one. Capital in general does benefit, although individual capitalists may bitterly oppose specific measures. Marx describes the fierce struggle of capitalists against me Ten Hours Act and other factory legislation which in the longer term benefited capital by protecting the conditions for the reproduction of labour power. Social security payments that go to those who are too old to work and those unable to work is from the capitalist’s point of view expenditure which is without even indirect benefit. Although distinctions between the “deserving” and “undeserving” is attempted the impact of cuts, however, are across the board and falls on all claimants. From the capitalist’s view-point the old and disabled are unproductive and are therefore only maintained by the state at the lowest level that is politically acceptable. Means-testing, now described as “targeting, has been a feature of welfare provision since Beveridge.
Today we witness a resurgence in the advocacy of the 1945 reforms by the Left. As humanitarians, we may support measures to try and help the sheer misery of the poor, but this support does not of itself change society or relate directly to our aims as socialists.
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