From The Notebook, International Socialism (1st series), No.33, Summer 1968, p.6.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
John Palmer writes: The short term prospects for western capitalism have improved significantly in the past three months. The improvements, however, carry their own danger signals and there can be little optimism that world growth rates will recover to their levels of the early 1960s – in the foreseeable future. For the moment the worst – a collapse of the international monetary system – has been avoided. The haemorrhage of gold from the American reserves has been staunched by means of the two-tier price system, which effectively denies the metal to private speculators. Gold can still be claimed by State central banks however and the Americans know that they will do so for as long as those banks accumulate more dollars than they want. Foreign banks will continue to accumulate ‘surplus’ dollars for as long as the Americans run a balance of payments deficit of the order of $1,000 million each quarter. Hence the US action to cut overseas investment (a tougher measure than the British Labour Government felt able to impose), taxes on US tourists going abroad and lastly the 10 per cent surcharge on incomes and the heavy cuts in public spending. Both will reduce the economic temperature in the United States – and so through the rest of the world market. But if the reduction of imports into the US is not big enough, quickly enough, the White House will approve either import quotas or more likely an import surcharge. Either way British exports to the American market – a vital sector in the post-devaluation strategy – are likely to suffer. And if British exports do not start accelerating fast soon the British Government may be overtaken by a new run on sterling. The Americans are also looking to the Vietnam talks to provide them with the opportunity to reduce their chronic military commitment there. Although Vietnam war spending is by no means the only cause of the US payments deficit it is big enough. But if there was a sudden withdrawal by the Americans from Vietnam, the effect – in the short term – would be to strengthen the deflationary forces in the US economy. And since the dollar is likely to remain under suspicion for a long time yet the American Government might not feel free to reflate its way out of trouble by increasing social welfare spending or cutting taxes. The same consideration applies to Wilson and Jenkins if by the autumn they find a higher level of unemployed in Britain than they had bargained for. Of course if the Vietnam war continues and if the US payments gap is not appreciably narrowed by the autumn, then the whole cycle of gold/dollar speculation will start again. This time it may not prove possible to hold the line without more massive deflation which would mean a world recession. At best, the outlook in Britain is economic stagnation, lower social service spending, and a continued wages straitjacket.
Last updated: 19.6.2008