From International Socialism (1st series), No.97, April 1977, pp.27-29.
Transcribed & marked up by Einde O’Callaghan for ETOL.
The Socialist Challenge 
A MAJOR change is taking place on the reformist left in Britain. That section of the political arc which lies between Transport House and King Street (headquarters of the Labour Party and the Communist Party respectively) is going through a long and painfull crisis. The policies and ideas which have dominated the Labour Party for the last twenty years, and which were given a theoretical form in Anthony Crosland’s The Future of Socialism, have run into the sand. It is manifestly clear that the Labour Government has no policy more coherent than to stagger from crisis to crisis: Callaghan and Healey no longer even pretend to have a strategy of reform. At the same time the left reformists are mounting a challenge. Inside the Parliamentary Labour Party the future leader of the left is undoubtedly Tony Benn, and he too has his theoretician. Stuart Holland’s book The Socialist Challenge is a deliberate attempt to replace Crosland as the pivot around which debate in the Labour Party will take place.
Holland’s argument runs something like this: Britain is a class society in which there are gross inequalities of wealth and power. The economy is in crisis. The methods of Keynesian economics, which worked fairly well after the war are no longer effective. This is because of the rise of very large, and usually multinational, firms. This meant that the government attempts to control and expand the economy by the use of government expenditure are thwarted by profiteering of these huge firms. They are able to move capital in and out of the country. They manipulate exchange rates. They hoard raw materials. They fiddle the prices at which they exchange goods between the different national sections of the same multinational company to wreck the balance of payments. They defy government regulation by means of the threat to move their operations abroad. They do generall behave in a thoroughly unpleasant, but profitable, way.
It therefore follows, according to Holland, that any strategy for social reform and socialism must be based on taking control of at least some of these firms. Old-style nationalisation was all very well, but in practice it left manufacturing industry to private enterprise and it was also one of the ways in which the state subsidised private profit. The new-style nationalisation will take over large and profitable firms and use them to push forward investment and growth in the economy as a whole. The government will also conclude a series of planning agreements with firms left in private hands, backed up if need be with legal coercion, to direct their growth and modernisation. To this a degree of ‘workers’ control’ will be introduced, including ‘opening the books’, which will begin to change relations inside the industry.
The result will be more jobs, more investment, new technology, more exports, fewer imports and a lower rate of price rises. Selective import controls will be used to break the resistance of any recalcitrant multinationals. There will thus be better living conditions all round, more democracy, and progress towards socialism.
This analysis is, of course, a gloss upon the 1974 Labour Party election manifestos. Indeed, Strategy for Socialism is dedicated: ‘To those in the Labour movement who are fighting for the socialist strategy of the 1974 manifestos, and against the pseudo-manifestists who fear to challenge capitalism’. It is also a powerful and persuasive argument – a very fine statement of the case for reformist socialism. If Holland is right, then we might as well wind up the Socialist Workers’ Party and start looking for safe Labour seats. The possibility of moving from capitalism to socialism by means of reform not only makes social revolution unnecessary for the liberation of humanity, it also make it impossible.
In showing why Holland is wrong it is necessary to demonstrate the errors in his own argument, to look at the logical consequences of an attempt to implement his policies, and to discover the social roots of such ideas.
The central question in any debate about the possibility of reformism is the state, and as Holland is an honest and intelligent reformist he meets the issue head on. The Devil can quote Scripture for his purposes, and Holland quotes Marx. In his account, Marx was right to point out that the state is the instrument of the ruling class. However, under certain conditions, the state apparatus is able to exercise a certain autonomy of its own. This is what he calls ‘Bonapartism’ and it arises in situations when the struggle between classes is at such a level that the ruling class is unable to exercise direct control over the state machine. According to Holland the postwar period had features of this Bonapartism: the state balanced between the capitalists on one hand and the power of the organised working class on the other. In this situation it was both possible and necessary to make big concessions to the working class, in the shape of higher wages, reforms, etc. ... 
This balance, which was the basis for Crosland’s Social Democracy, has been eroded, partly by the economic crisis and partly by the rise of multinational companies. Unless this new power is challenged, the future is grim:
Without confronting this new domination with a major extension of public ownership and control, governments will be forced into an increasing confrontation with organised labour. In their attempts to make the prevailing system work, they will employ wage controls, anti-trade union legislation, attempts to limit the effectiveness of strike action and the other trimmings of proto-fascism. 
Thus the state, if it wished to continue to exercise its directing functions, will be forced to take over a number of the pernicious companies and use their economic power to determine economic development This, as Holland recognises, is a form of ‘state capitalism’.
State capitalism is not itself a panacea. Technocracy cannot transform society; it can only mediate and qualify pressures from within society itself. If confronted with sufficient force, as in Italy in the hot autumn of 1968, and in France in May the same year, it can itself be checked, qualified and countervailed within the limits of the prevailing system and the prevailing mode of production. With more force, in some countries, it can be transformed. 
Thus the pattern of social change becomes clear. Such a massive state intervention in the economy is only possible if a sufficiently strong counterweight to the power of the multinationals is developed. This will consist of a determined Labour government, with a clear idea of what it wants to do, controlling the state from above, and a mobilisation of workers from below, which will give it the power to carry out its plans. As Holland puts it:
In practice, a Labour government is only likely to introduce such a major transformation of British capitalism if it is pressured both by the current economic crisis and by its own supporters in the unions and the party. But, to realise such pressure, workers ... must ensure that they can secure more than a British variant on either state capitalism or state socialism. They must be directly involved in the process of transformation, or the transformation itself is unlikely to occur. 
The working class must be mobilised in order to ensure that the social force necessary for such a development is present and, in order for it to be mobilised, it must believe that it is fighting for something worthwhile. 
There are a number of obvious objections to this: for example the question as to whether this mobilisation will inevitably coincide with the date of a General Election and the likely response of the British capitalist class to the fact that a Labour government will ‘insist on the unionisation of the army and a breakdown of the isolation of soldiers from the normal sanctions for the defence of their rights through union action.’  Whatever the answer to those difficulties may be, there remain problems even in Holland’s own account. We have to ask: what exactly is meant by this mobilisation of the working class?
In the middle of an economic crisis the Labour Party is going to make a determined effort to win the working class to take control of their own lives, to fight the entrenched power of the multinationals, to change the whole course of British society. This is a programme for class struggle, for unleashing the energy of millions of workers, for challenging every aspect of capitalist society. Surely it is a programme for social revolution? Not according to Holland. This immense outpouring of human effort will do the following: elect a left-wing Labour government; nationalise 20-odd big companies; make some changes at the top of the Civil Service; conclude a few planning agreements; elect some workers to management boards and win additional rights to information and consultation for the unions. Eventually, in the long term, a classless society will emerge, but just now there are going to be a few reforms. 
Holland is in a contradiction. If there is no mass mobilisation of the working class then there cannot be, on his own admission, any real prospect of his programme succeeding. But if ihere is such a mobilisation, then how is it to be stopped at the programme? How do you stop a social revolution? In that sort of situation the half-way house is next door to the graveyard.
But just suppose that Benn could pull it off. Suppose that Frank Kitson had sat quietly in barracks while his friends were expropriated. Suppose that the SWP was not strong enough to lead a revolution and we had our skulls crushed like Rosa Luxemburg. Suppose that the US Marines got lost somewhere in the Atlantic. Benn is sitting in Downing Street and Stuart Holland is in the Cabinet Office.  What would be the effect of the proposed measures?
That attack on excessive wealth would improve matters. Restrictions on the multinationals would improve matters.  The concentration and rationalisation of selected industries would improve matters. None of this, however, would solve the problem. Whatever the internal structure of British capitalism, it would still remain a single, small, outdated capital competing on the world market with the greedy giants of Germany, Japan and the USA. In order to compete it would have to become competitive. 
That means massive investment, and the surplus for that could only come from increased exploitation of the working class. All of the desirable social goals which Holland sets himself would have to be sacrificed to the drive to accumulate capital. Speed-up, falling real wages and cuts in the social services follow logically from the attempts to compete, whether by private or by state capital. In that situation Holland’s ‘workers’ control’ would be in a cleft stick. Either it would be subordinated to the imperatives of international competition demanding attacks on the working class, in which case the unions and representatives would gradually become cut off from their members and incorporated into the state apparatus. On the other hand, they could attempt to defend their members, thus coming into conflict with the state and once again meeting the sort of opposition which they do today. Either Holland’s ‘island of socialism’ collapses into a fully developed state capitalism on Russian lines or it becomes the site of yet another revolutionary upheaval. 
The fact that Holland’s ideas are demonstrably Utopian does not prevent them having a wide following. The ideas are influential because they correspond to certain tendencies in the development of capitalism.
The latest phase of the development of monopoly capitalism is marked by two contradictory tendencies. On the one hand there has been the development of the large-scale multi-national firm operating on a world scale. On the other hand the logic of capitalist competition means that each national state is forced more and more to prop up and subsidise the ailing sectors of its own capitalist class and to intervene in order to assist other chunks of the national capital to compete on the world market. These two tendencies can and do come into contradiction; one example of this is that British Leyland, now a state-owned multi-national, continues to derive profits from currency speculation against the pound.
Holland’s resolution to this contradiction is to plump firmly for the interests of the national capital against the multinationals. He argues that, up until now, nationalisation has been one of the ways in which the state has been used to prop up an ailing capitalism, and in this he is correct.  However, his suggestions that the state should take the lead in directing and owning profitable sections of industry, which is the key to his plan, is neither particularly new nor particularly socialist.
The comparison which he chooses is the Italian State Holding Company, the IRI. The socialist provenance of this is doubtful, as it was set up under Mussolini in 1933 and has been administered since 1948 by the hyper-reactionary Christian Democrats. Doubtful, too, is its ability to stave off the rigours of capitalist crisis – Italian capitalism suffers from problems as severe as those of British capitalism. 
However, a similar process has been going on, on a much smaller scale, in Britain for a very long time. It was not, as is sometimes thought, a product of the Wilson government:
The difference between the 1962-4 Conservative administration and the Labour one that followed, was one of emphasis and scale, rather than one of principles ... Labour extended many of the policies they inherited and initiated many of their own, but the fact remains that much of what they inherited was the result of Conservative innovation. 
One of the differences was the more interventionist role of the Ministry of Technology, under Benn; others included the shortlived National Plan – whose goals look surprisingly similar to Holland’s – and the Industrial Reorganisation Corporation. 
There is, then, a well-established tradition of state-capitalist intervention. This arises from the dynamics of modern capitalism and is true for Britain as much as Italy or Peru – although here it is still far short of realisation. The remarkable thing is that is should be considered left-wing. The reason for this is the way in which the problem is set up in Britain. To argue that drastic state intervention is the only way of saving British capitalism is one thing: to convince or to force a bunch of reactionary private capitalists of that is quite another. It is only because of the need for a big stick to persuade this or that capitalist that he has to give up his niche to save British capitalism as a whole that the working class come into the picture at all – they are the ‘countervailing power.’
That is the objective basis for Holland, but there is also a subjective factor. Those who stand to gain, as a group from Holland’s Brave New World are not the private capitalists – it is the capitalist sytem and not the capitalists who are going to be saved. It is rather a section of the intelligentsia – the teacher, the lecturer, the middle-manager, the scientist, the expert. In the crisis-ridden capitalism of the 1970’s these people can no longer find the glittering prizes that were open in the fifties and sixties. Private capitalism has clearly failed and the state is their natural home, frequently their employer, and an apparently firm rock. At the same time, proletarian socialism, with its stubborn insistence on workers and revolution, does not look at all attractive. These people genuinely and honestly believe they are fighting for socialism. The problem is that what they call socialism is a bigger, better state machine. It is a very long way from the messy business of soviet power. 
These are the people to whom and for whom Holland is speaking. They are also playing an increasing political role. They provide a fast-growing section of the Parliamentary Labour Party, they are queuing up for safe seats, and they are the new backbone of the constituency parties. They also provide the new, intellectual, right-wing in the British Communist Party.
It is at this point that the full political implications of Holland’s position stand out. It is obvious that there are many points of convergence between his analysis and that of the right-wing of the Communist Party. They have very similar notions of social change, a common hostility to monopolies and multinationals, a common nationalism, a common belief that socialism in one country is difficult but not impossible, a common rejection of workers’ councils and armed revolution. To spell things out exactly, Holland’s intention is not merely to provide the theoretical framework which will enable the Labour Party to re-group around Benn; it is also to draw into that fold as much of the Communist Party as is possible.
That may sound a wildly ambitious project, but Holland is deadly serious. This is clearest in his discussion of ‘Socialist Internationalism’. He has followed the evolution of the French and Italian Communist Parties very closely, and points to convergences between their ideas and his. A left-wing government in any of these three countries, he argues, would benefit from the support of the Labour movement in the other two. The labour movements in France and Italy are still split between Socialists and Communists but steps should be taken to set up a ‘permanent international committee of the executives of the parties involved – both Communist and Socialist, acting in liaison with the main national unions’. 
The logic of that argument is transparent. If relations between Communist and Socialist parties have reached the point where permanent discussions and joint actions are on the cards, then re-unification must be lurking somewhere not too far away. Neither the French nor the Italian socialists can initiate such a process because they are terrified of being swallowed by their mass Communist rivals. But the British Labour party can give a lead – after all, the British Comminist Party is not going to swallow anybody. 
Holland’s ideas may be confused, contradictory and wildly impractical, but they do have a real base. They are likely to be with us for some time and they could have important political consequences. We need to be on our guard against this modern form of Utopian ‘socialism’.
1. The Socialist Challenge (hereafter TSC) is a massive and detailed study costing £2.95. The main argument is summarised and simplified in his Strategy for Socialism (Spokesman, 1975), for a mere 95p.
2. Marx certainly used the term ‘Bonapartism’. For him it was an exceptional form existing in periods of crisis. Even though the ruling class did not directly exercise state power, the state was still a capitalist state and acted on behalf of the ruling class. It was also, for Marx, a repressive state wich dispensed with elections, democratic rights, etc. In Holland’s account any capitalist state which acts in the interests of capitalism as a whole, for example by attempting to plan growth, is to some extent ‘Bonapartist’, irrespective of its political form.
3. TSC, p.134.
4. TSC, p.153.
5. TSC, p.155.
6. Holland recognises a variety of paths to socialism. Some lead like the Russian through workers revolution; others through peasant wars, like China; others are imposed by Russian tanks, as in Eastern Europe. None of these, Holland states, are appropriate to Britain.
7. TSC, pp.163-64.
8. Holland in fact makes it very clear that there is not going to be any real challenge to the capitalist mode of production as such. It is true that he sees the need to conduct a purge of the boardrooms of dead wood and a need to reduce inequalities of income, but the structure of production is to remain the same, despite the election of some workers’ representatives. Thus, in speaking of the future of managers, he writes: ‘Put bluntly, the carrot in a wide-ranging public sector through manufacturing is a big one. The wider the range and the larger the number of holdings, the higher is it possible for a cooperative specialist manager to rise. It raises the executive’s ceiling from his own company board to the board of a holding incorporating several companies the size of his own. For many of the younger generation managers, such upwards access and a wider range for responsibility amounts to a greater incentive than a red robe in the Lords. For a high proportion of those who might otherwise find their way to the company board blocked by redundant peers and non-executive directors, it would offer a career structure genuinely open to talent.’ (TSC, p.201)
9. ‘The establishment of a Cabinet Committee for Economic Planning, serviced by the Cabinet Office’ (TSC, p.247) appears to be the major change in the machinery of the state which will result from this social ‘transformation’.
10. In reading Holland, one gets the sense that the multinational companies, which do these horrid things, are an organised conspiracy against Britain alone. In reality they do not serve ‘other countries’ but profit. Therefore it could well turn out that although some of the activities damage British capitalism as a whole, others benefit it. The balance might not then be so great as Holland seems to think.
11. There is, of course, one other option. An attempt at ‘autarky’ – complete withdrawal from the world market and an attempt to rely on national resources alone – can be imagined. The consequences would of course, be terrible.
12. In other words, contrary to Holland’s belief, socialism in one country is today, as it always has been and always will be, impossible. All of the problems faced by Holland’s version of socialism would, of course, be faced by a genuine workers’ state. It is for this reason that we believe in the necessity of world revolution: without the socialisation of the world economy any single workers’ state will be forced, sooner or later, into production for profit in order to compete on the world market. With that imperative counterrevolution in one form or another is inevitable.
13. This is not only true of the nationalisation of ailing firms and industries, like Rolls Royce, or the ship-building industry. The ‘old’ nationalised industries have been used to push up the profits of private industry too. One example, from the 1950’s, is the state-imposed ban on British coal exports in order to provide cheap fuel for British manufacturers. (See L. Tivey, Nationalisation in British Industry, p.177)
14. Holland has written extensively on Italian state capital. His claims that the IRI has been able to solve some regional problems probably owe more to the political horse trading inside the Christian Democracy than to the superiority of state-capital. The state sector is notoriously the home of C. D. corruption and placemen (See G. Podbielski, Italy: Development and Crisis in the Post-war Economy, p.153.) Fully-fledged state capitalism does not stave off the rigours of capitalist crisis, although it alters its form, as Chris Harman has recently proved. See Poland: Crisis of State Capitalism, International Socialism 93 and 94.
15. S. Young and A.V. Lowe, Intervention in the Mixed Economy, p.14.
16. According to Harold Wilson, the key goals of the National Plan were: ‘production, exports, import saving’ (H. Wilson, The Labour Government 1964-1970, p.186). The fairly mild pressures of the world market wrecked this fairly mild plan. The IRC was set up to help rationalise British industry. It was different from the Italian model in that it was not designed as a holding company and it was on an extremely small scale.
17. This group is extremely heterogeneous and does not necessarily do what Holland wants it to do. In some backward countries in which the national capitalist class is unable to undertake ‘development’ and the proletariat has no independent leadership, it has been able to play this role. On a much bigger scale, that is the scenario that Holland has in mind for Britain. It is much more likely that the intensity of the class struggle in a country like Britain will pull this group apart. A section will side with the working class and revolutionary politics and a section will go over to the right wing. We have to make sure that we win as many as possible to marxism.
18. TSC, p.346.
19. Dave Leigh, reviewing the book for the CPGB in Comment (February 5 1977) is rather embarrassed by this fact. He admits that Holland has a case and notes that ‘he is no anti-Communist’, but he is then very irritated by the fact that Holland is prepared to take the French and Italian Communist Parties very seriously but not the CPGB – ‘Strange, therefore, that not one comment is made on the policies of the CPGB and among many hundreds of references not one is made to The British Road to Socialism.’ Not at all strange, Holland is only interested in the big battalions.
Last updated on 1.3.2008