Introduction to The Post War Boom: Origins, Effects and Decline

The most important feature of the entire post-war epoch, overshadowing and influencing all other factors, was the long, 25-year economic upswing. This represented the greatest explosion in investment, production, trade, science and technique in the whole of human history and it put its stamp on political developments in all the different parts of the world. In the advanced capitalist countries, as prosperity reached and then easily surpassed pre-war levels, it rekindled illusions in capitalism as a viable and 'natural' economic system. These illusions were transmitted to and articulated in the labour movement by the theoreticians of the right, who were indistinguishable from the spokespersons of capitalism.

But in the immediate post-war period, the longevity of the postwar boom could not have been anticipated. What was an issue within the Trotskyist movement was whether or not there would be any economic recovery at all. The material of the British Revolutionary Communist Party, and particularly the writings of Ted Grant, argued that there was a temporary political stabilisation in Western Europe, because of the influence of the social democratic and Stalinist leaderships, acting as a brake on the workers' movement. The political recovery of capitalism provided the political basis for, and was itself further underpinned by, economic recovery. (See the parts in Chapter Two, dealing with 'counter-revolution in a democratic form').

As on all the other main political issues dealt with, the international leadership of the Fourth International were incapable of facing up to new conditions. The European Executive of the International, based in Paris, argued in January 1945 that 'the revolutionary action of the masses' had removed the 'last possibilities for the bourgeoisie to restore the economy which has been ruined and dilapidated by the war.' In a further report in December, the same body argued that the countries of Europe, would remain on a level approaching stagnation and slump.'

Because Trotsky had argued before the war that capitalism could not further develop the productive forces, the leadership of the Fourth International, the International Secretariat, were loath to say otherwise. Rather than using the Marxist method that Trotsky had applied, they stuck rigidly to the letter of his writings, despite the increasing weight of evidence that an economic recovery was underway in the capitalist countries.

The draft resolution put forward by the IS for the International Pre-Conference of April 1946 stated: 'The most probable perspectives of the evolution of the world economy may be outlined as follows: The revival of economic activity in capitalist countries weakened by the war, and in particular continental European countries, will be characterised by an especially slow tempo which will keep their economies at levels bordering on stagnation and slump.'

Members of the IS, including supposed economic 'experts', doggedly argued that the 1938 production levels of the European countries would not be exceeded. Ernest Mandel, for example, wrote in 1947 that 'the situation in the British economy is not that of a boom if one wishes to give this term the significance that Marxists have always given to it…it is necessary to abandon right now any juggling with a boom that has not existed and that British capitalism will never experience again.'

The draft theses put forward in 1947 by the IS for the forthcoming world congress, still refused to acknowledge the new conditions that were staring them in the face. They harped on the same theme as the year before: that there would be 'increased disequilibrium', and that capitalism was 'incapable of restoring the world market and a balanced development of world trade.'

It was the RCP, as on other questions, that argued the theoretical line which was proved correct. Basing themselves on the figures for production, investment and growth, particularly but not exclusively for Britain, the RCP leaders demonstrated the irrefutable fact that a rapid economic boom was developing. The first item in this chapter is a statement on Economic Perspectives, put forward as an amendment to the IS resolution at the April 1946 International Pre-Conference. It was published in Workers' International News, November-December 1946. In contrast to the IS position, it argues that:

"…the laws of capitalism...ensure the upswing of economy and make a new 'boom' inevitable. Particularly in view of the fact that this crisis is not a crisis of over-production…It is not excluded that particularly for Western Europe (with the exception of Germany and Austria) the production figures can even reach and surpass the pre-war level in the next period…All the factors on a European and world scale indicate that the economic activity in the next period is not one of 'stagnation and slump' but one of revival and boom."

It is important to note that no-one in the Trotskyist movement internationally, including the RCP, believed that the post-war boom would last more than a few years, before it gave way to an inevitable downturn. The amendment (which, incidentally, was defeated at the conference) agreed with the IS statement in emphasising 'the epoch of the decline and collapse of world capitalist economy…there is not the least ground for the hope or fear that the economic revival, which in and of itself is inevitable, will be able to overcome the general decay in world economy and in European economy in particular.' In the early stages of the post-war boom, therefore, it was Ted Grant and the RCP leadership who were insisting, against the economic 'theoreticians' of the IS, that there was indeed a revival. But ironically, once the revival took hold, and unexpectedly developed into a fully-fledged upswing, the nature of the debate turned to its opposite.

It was in this period of upswing that the right wing of the labour movement - who always base themselves on the capitalist system, as opposed to socialist ideas - were given a new lease of confidence. The theoreticians of the right wing, in the Fabian Society, for example, fell over themselves to announce that class struggle was at an end and that the very concept of 'class' was losing its meaning. Slumps and mass unemployment were the horrors of the past that would never be repeated, society had learnt to overcome past conflicts and from now on, they argued, there would be a gradual and unbroken increase in living standards. The leadership of the Labour Party, around Hugh Gaitskell, even tried (unsuccessfully, because of the resistance of the rank and file and the trade unions) to remove the socialist Clause 4 from the Labour Party constitution.

The second part of this chapter consists of an article in the International Socialist (edited by Ted Grant), November-December 1952, commenting on the New Fabian Essays. In the Essays, writers like Richard Crossman, Anthony Crosland and Roy Jenkins, put forward the idea that the 'welfare state' or 'welfareism' had superseded class society. 'By 1951', Crosland argued, 'Britain had in all essentials ceased to be a capitalist country'.

Cutting through the superficiality of the Fabian theories, Grant defends the basic Marxist position, that as long as the market dominated the economy, then there would inevitably be cycles of boom and slump. Explaining the causes for the longevity of the boom, he also points out its limitation and the inevitability, at a later stage, of new recessions and slumps. This article, although directed particularly towards the British economy, was no less relevant to the other main capitalist countries, where similar conditions prevailed and similar arguments raged.

Nearly forty years later, the arguments in the article have lost none of their relevancy, because in all their essentials, the so-called 'modern' policies put forward by the right wing in the Labour Party in the late 1980s are the same as the discredited notions of their 1950s predecessors.

The third article in the chapter is a development on the same theme as above. Written as a discussion document in 1960, at the height of the boom, and published by Sussex University Socialist Society in 1967, Will There Be a Slump? was a major contribution to the debate on economic perspectives. The right wing and the Fabians, arguing from the basis of the economic theories of John Maynard (later Lord) Keynes, alleged that the capitalist state - by limited nationalisations, economic intervention and state expenditure such as on social welfare - could smooth out the natural economic cycle and thus overcome crises.

They were also echoed on the left, by alleged 'Marxists' who effectively adopted similar Keynesian theories. Influenced by what seemed to be an endless expansion, the same economic gurus who had originally denied the possibility of recovery now went to the opposite extreme. After having belatedly acknowledged the upswing, they also came forward with wonderful new theories describing how capitalism had been fundamentally changed so as to be able to avoid crises and slumps. It was argued, for example, (by Tony Cliff, and others) that arms expenditure represented a means by which the capitalist state could stimulate the economy so as to avoid slump: thus a 'permanent arms economy' was coming into being.

In the pamphlet Will There Be a Slump?, all these arguments are debunked. State intervention, it is explained, can increase the scope and scale of an upswing, but only if the fundamental conditions for capitalist upswing are present. In conditions of crisis, state expenditure (including spending on arms), rather than a benefit, becomes a monstrous incubus that tends to drag the economy even further down.

Once again, the fundamental perspective of an inevitable slump was put forward: 'Whatever the exact date, it is absolutely certain that the unprecedented post-war boom must be followed by a catastrophic downswing, which cannot but have a profound effect on the political thinking of the enormously strengthened ranks of the labour movement.'

The validity of these arguments have been well demonstrated by the onset of economic crisis in all the advanced capitalist countries since the mid-1970s. At the same time, it is now clear that the level of state expenditure of the boom period, rather than acting as a means of avoiding slump, has become a source of unbridled inflation, a destabilising factor that the capitalists of all countries have tried to avoid by slashing government spending on welfare, education, health and so on.

As postscripts to the above documents, the fourth and fifth parts of the chapter are relatively brief extracts from discussion documents, dealing with world perspectives in the post-boom period. The Marxists had not been able to predict the long duration of the post-war boom, but what was clear was that the first recession to affect all the advanced capitalist economies simultaneously, in 1974-5, marked the end of one epoch and the beginning of another. Later than may have been anticipated, events nevertheless vindicated the correct stand that had been made by Ted Grant on the fundamentals of capitalist economics.

As these two extracts argue, and as subsequent events have demonstrated, the outlook for world capitalism has changed fundamentally since the mid-1970s. The present epoch is one of stagnation and slump, interspersed with periods of recovery that are weak and anaemic compared to the boom period of the 1950s and 1960s. In all capitalist countries there has been a return to mass unemployment, economic instability and social crisis.

Moreover, the crisis facing the advanced capitalist countries is paralleled by crisis in the under-developed countries and in the Stalinist states, especially Eastern Europe. For the first time, because of the interpenetration of economic and political crises in all the main parts of the globe, there is the perspective, in the full meaning of the term, of world revolution.

Go back to contents page or go on to next section, Economic Perspectives 1946