The evolution of the British situation since the Second World War

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An analysis of the current situation at any time -- whether at the international level or in any one country -- can never be a simple snapshot; conjunctural events are only moments in a dynamic interplay of forces which develops over a period of time. Our previous analyses of the situation in Britain have been located within a view of its development through the period since 1967 when the sterling devaluation heralded the opening-up of the present open crisis of the world capital­ist system1. This text attempts to gain a broader perspective on the situation in Britain by examining its evolution since the outbreak of the Second World War.

The general significance of the period for Britain

1. The general significance of this period can be summarized by the following:

-- Britain’s capacity to remain a global imper­ialist power was broken by the systematic efforts of the US during the Second World War and its aftermath. This was done in such a way as to bring Britain to a position of total economic and military subservience to the US in the constitu­tion of the western bloc after the war.

-- The mantle of the ‘natural party of govern­ment’ has been irreversibly transferred from the Conservative to the Labour Party. This corres­pondence of the Labour Party to the overall needs of British capital has not been a product merely of conjunctural circumstances in the past few years, but has been the true state of affairs during and since the last world war. Indeed, it is the periods in which government power has rested with the Conservatives that have been the product of specific conjunctural circumstances.

-- The balance of forces between the bourgeoisie and the proletariat has undergone a change of historic proportion. If the Second World War marked the bourgeoisie’s zenith and the prolet­ariat’s nadir, the proletariat has now streng­thened to the point where it not only stands as a barrier to a third global war, but is develop­ing to go further and pose its own revolutionary solution to the historical crisis of capitalism. Although this shift of forces is an international one, its manifestations in Britain have had a profound effect on the situation.

These are the main themes of this text.

Britain and the formation of the US bloc

2. The Second World War changed the physiognomy of the world imperialist system of capital. It transformed the pre-1939 pattern of several competing ‘mini-blocs’ into two great global blocs each under the unassailable hegemony of its major national bourgeoisie, the US and Russia. The war was pursued not only militarily between the Allied and Axis powers, but economically among the Allies themselves, or rather between the US and each of the others. For Britain, its ‘war’ with the US was the crucial determinant of its post-war position.

3. The lynchpin of the British economy in the thirties was still the Empire which included outright colonies (such as India) as well as semi-colonies (such as China or Argentina). Its increasing importance as a primary source of wealth to the economy was irreplaceable and can be easily illustrated. With a base of 100 in 1924, the index of total national income had risen to nearly 110 in 1934 while the index of national income earned abroad had risen to nearly 140. In 1930 its level of investment abroad was higher than any other country in the world and 18% of the national wealth was derived from it. And throughout the thirties Britain retained the greatest share of world trade -- in 1936 it was 15.4%

In absolute and relative terms Britain’s foreign investments greatly exceeded those of the US. For example, in 1930 (on the eve of the depress­ion) the UK’s foreign investment was between 50 and 55 billion marks while that of the US was between 60 and 65 billion marks. In 1929 Britain’s income from long-term investment abroad amounted to 1219 million gold dollars while for the US it was 876 million gold dollars. However, the giant US economy (whose national wealth in 1930 was 1760 billion marks compared to Britain’s 450 billion marks) had been expanding far faster than the British economy and its need for foreign markets was becoming more and more pressing, as can be seen for example in the relative growths of capital invested abroad. British capital invested abroad in 1902 was 62 billion francs (at pre-war parity) and this rose to 94 billion francs in 1930; the equivalent figures for the US were 2.6 billion francs in 1900 and 81 billion francs in 1930. With such an appetite for foreign markets the US could only lust for the Empire clutched so desperately by the British bourgeoisie for its markets and raw materials.

With increasing competition (especially from the US and Germany) the loss of the Empire would have been catastrophic. Yet, at the same time, the cost of maintaining it was enormous. Threats came from all sides: German and Japanese military expansion; colonial bourgeoisies fighting to enlarge their own position at Britain’s expense; pressure, particularly from the US, for ending Imperial Preferences and opening the markets up for their own economic expansion. Some sections of the British bourgeoisie had been arguing for years for a less onerous way of maintaining British advantages but they were fighting against very entrenched interests. Consequently, right up to the beginning of the war, and even well into its first year, the British bourgeoisie was markedly divided about what was the best course to follow.

The basic ‘choice’ was: to go to war or to avoid war. Of those who wished to go to war there was a small pro-German faction in the Conservative Party, but far larger factions of the bourgeoisie saw greater gains to be made by defeating Germany. These included the left wing of the Labour Party and the faction of the Conservative Party led by Churchill. However, other factions of the bourge­oisie saw that whichever side Britain chose, the war would certainly lead to the dismemberment of the Empire to the advantage either of Germany or the US. This latter view was the one held by the Chamberlain government and led to the policy of appeasement, epitomized by the action at Munich in 1938. Only by avoiding war could Britain escape becoming a dependency either of the US or Germany.

However, for global, historic reasons, war was inevitable and the only question was: who was Britain to be allied with and against whom? In trying to avoid the question Chamberlain took up the ridiculous role of a Canute, and the rest of the bourgeoisie has despised him for it ever since.

4. In the event, a combination of German inter­ventions into Austria, Czechoslovakia and Poland, combined with the non-aggression pact between Hitler and Stalin, meant that further German expansion would be towards the west. The threat to Britain’s own shores was clear, and Chamberlain declared war on Germany. However, a period of indecision followed during which the British bourgeoisie was led by those who had wanted to avoid war while, on the other hand, the German bourgeoisie hoped that the situation could quieten in the west so that they could expand to the east -- at the expense of Russia. This period was the ‘phoney war’ which ended with the advance of the German army through the Ardennes in May 1940 and the subsequent fall of France. These events pre­cipitated the fall of Chamberlain and the rise to power of a coalition of forces under Churchill which was totally committed to finding the solut­ion to British capital’s problems through the defeat of German expansionism. As it was clear that Britain’s productive capacity was not suff­icient to meet the requirements of the war the British bourgeoisie was forced to ask the US for help.

5. The objectives of the US bourgeoisie’s policy in regard to the war were:

-- to defeat Germany and Japan;

-- to prevent the rise of Russia in Europe;

-- to turn Britain and its Empire into depend­encies of the US.

In pursuit of these goals the US bourgeoisie’s policies were engineered to secure victory at the least possible cost. ‘Least possible cost’ meant: bleeding its allies as much as possible for repay­ments for war materiel without destroying their commitment to the war effort; using the massive market created by the war to stimulate the US economy and absorb the unemployed back into the process of production; minimizing domestic dis­content with the war by ensuring that the brunt of the slaughter on the battlefields would be sus­tained by the armies of its allies.

During the early stages of the war the application of these policies hit the British economy harder than the German bombers could. Through the cash-and-carry system, British financial reserves were steadily depleted to pay for war materiel, fuel and food, a substantial proportion of which never even reached Britain because of the shipping losses sustained by the North Atlantic convoys. The US bourgeoisie was thus able to systematically weaken the British bourgeoisie’s resistance to the cond­itions put on the economic and military arrangements which followed, and so, when in 1941 the Lend-Lease arrangements came to replace the cash-and-carry system (which had cost British capital nearly 3.6 billion dollars) Britain had only 12 million dollars in uncommitted reserves left. In the Lend-Lease Master Agreements the US began a whole program of schemes to force Britain to abolish Imperial Preference after the war, and to dismantle the Empire. And to ensure that Britain could not postpone all repayment until the end of the war, Reverse Lend-Lease was provided for in the summer of 1943. These were demands in kind placed by the US for raw materials, foodstuffs, military equipment and support for the US army in the European theatre of operations. On top of this, regular assessments of Britain’s reserves were made so that when the US government consid­ered they were ‘too large’, immediate cash pay­ments were demanded under the Lend-Lease arrange­ments.

The advantages gained by the US over Britain throughout the war were pressed home immediately the war ended. On VJ Day Trueman terminated all Lend-Lease, with the account standing at 6 billion dollars due to the US from Britain. Although the US wrote off a substantial proportion, the sum outstanding was left sufficiently high to ensure a continued US domination of Britain’s economic options. This residual sum was 650 million doll­ars which was greater than British foreign curr­ency reserves. In addition, the US refused to share the cost of amortizing the sterling balances (worth nearly 14 billion dollars) built up as part of the allied war debt.

By the end of the war the US was well on its way to achieving its wartime goals regarding Britain and the Empire, though they were not fully accom­plished for some years more. These goals became interwoven with the need to construct and consol­idate its bloc against that being built up by Russia, particularly since, in the second half of the 1940s, the possibility of a third world war was very real.

6. The US did not intend to repeat its post-World War I mistakes where it had bankrupted Europe by forcing repayment of war debts and rais­ing its tariff barriers. Its main objectives were to apply coordinated financial measures to the reconstruction of the countries in its bloc in such a way as to stimulate the US economy. The reconstruction of Europe and Japan would thus provide markets for US industry and agriculture, while making it possible for these countries to contribute to the military capacity of the bloc. These plans were set into motion even before the war finished -- mainly through the Bretton Woods systems (the IMF and World Bank).

However, in the context of this overall strategy, the US singled Britain out for special treatment. Since Churchill’s rearguard actions had resisted the US efforts to prise the Empire free from the grip of the British bourgeoisie, the US maintained the squeeze on the British economy. In return for the 3.75 billion dollar loan to offset the rigors of the end of Lend-Lease, the British government had to agree to help to impose the Bretton Woods plans on the rest of the bloc. It also had to make sterling convertible by mid-1947, which the US wanted in order to make Britain more vulnerable to calls on its reserves. (Indeed, this was too successful: when Britain lost 150 million dollars in gold and dollar reserves in one month, the US had to permit a suspension of convertibility.)

As the rivalry between the US and Russia became more intense, the US saw the need to accelerate the reconstruction process and to increase Euro­pean military spending. The Marshall Plan pro­vided the funds to do this between 1948-51 and in conjunction with this NATO was formed in 1949. Pressure was maintained on the British bourgeoisie throughout the 1940s to make a high contribution to this military force. So, while the US demob­ilized at a very high speed, Britain had to support substantial forces in Europe -- indeed, Britain still had one million men at arms as late as 1948. In 1950 the US committed first its own and then other allied (including British) troops to the Korean War; it also demanded an enormous increase in the British military budget -- to £4.7 billion that year. With German rearmament in 1950, the bill for the British army occupation was taken from the German bourgeoisie and pre­sented to the British bourgeoisie.

Several other measures were taken to keep up the economic pressures on British capital: for example, when the US gave the go-ahead to Japan­ese rearmament in 1951 it waived Japanese repar­ations to Britain; when Britain tried to waive its own debts to its colonies (created through non-payments for materials and services received during the war) the US blocked the move.

7. With greater or lesser degrees of success, successive British governments tried to defend the economy from the US bourgeoisie’s onslaughts on the home and colonial markets. They also tried to sustain Britain’s position as a global imperialist power.

But with the US cynically putting itself forward as the champion of anti-colonialism and national independence, war-drained Britain was completely unable to maintain its anachronistic colonial system. The war had given a huge impetus to national movements in the colonies -- movements supported by Russia and America, both of whom had a vested interest in the dismemberment of the British Empire. The British withdrawals from India and Palestine were the most spectacular moments in the breaking-up of the Empire, and the Suez fiasco in 1956 marked the end of any illus­ions that Britain was still a ‘first class power’. The US made it quite clear that it would not sanction any independent actions that did not correspond to its own requirements. The British government was helpless against this position and had to withdraw, and in doing so acknowledged that it was unable to defend its trade routes and colonies.

The dismantling of the British Empire gathered speed and the sixties saw a steady trail of colonies lining up for their ‘independence’. The final withdrawal by British forces from ‘East of Suez’ overseen by the 1964 Wilson government was only the last formality in a process which had begun decades previously.

8. The major conclusions we can draw from the process of the formation of the bloc regarding Britain can be summarized as follows:

-- The US bourgeoisie set out to reduce the British nation state to a secondary economic and military power. The main objective was to demolish the British Empire which was regarded as the main obstacle to American expansionism. By developing the appropriate policies and using its enormous economic and political power, it achieved this goal in the course of the war and the recon­struction which followed.

-- Cash-and-carry and Lend-Lease were used to generate claims on British concessions and access to raw materials. By these means control of deposits of strategic materials such as oil, minerals and rubber was transferred from the British to the US bourgeoisie. A state of permanent financial indebtedness was also created and maintained.

-- Post-war ‘aid’ was channeled into Europe in a manner which both stimulated the US economy and increased the military capacities of the western bloc. Thus Britain’s economic policies were dictated primarily by the needs of a permanent western war economy controlled by the US bourg­eoisie.

-- Although the reconstruction brought an appar­ent boom to the western economy, the benefits to the British economy were substantially tempered and carefully tailored by the US for its own interests. The loss of the Empire and the onset of the world economic crisis in the sixties thus found British capital in a very weak position, far less able than most other major economies (such as Germany, Japan or France) to face up to it.

-- The ‘special relationship’ which the British bourgeoisie has so often claimed it has with the US bourgeoisie is simply one of complete US hegemony. In the reinforcement of the bloc which has taken place in recent years as a result of the heightening inter-imperialist antagonisms, Britain has consequently been the most compliant of the US’ major allies.


(To be continued)

1 See ‘The Crisis in Britain’ in World Revolution number 1, and ‘Britain: Crisis and Class Struggle’ in World Revolution number 7.