1. The Decline of Britain
Capitalist Britain was formed by the political revolution in the middle of the seventeenth century and the so-called “industrial revolution” at the end of the eighteenth century. Britain emerged from her civil war and Cromwell’s dictatorship as a small nation numbering hardly 1,500,000 families. She entered the 1914 imperialist war as an empire containing within its frontiers a fifth of humanity.
The English revolution of the seventeenth century, the school of puritanism , Cromwell’s harsh school, prepared the British nation, and its middle classes in particular, for their subsequent world role. From the middle of the eighteenth century Britain’s world power was undisputed. Britain ruled the ocean and in the process created a world market.
In 1826 a British Conservative publicist depicted the age of industry in the following terms:
The age which now discloses itself to our view promises to be the age of industry ... By industry, alliances shall be dictated and national friendships shall be formed ... The prospects which are now opening to England almost exceed the boundaries of thought; and can be measured by no standard found in history ... The manufacturing industry of England maybe fairly computed as four times greater than that of all the other continents taken collectively, and sixteen such continents as Europe could not manufacture so much cotton as England does ... 
Great Britain’s colossal industrial domination over the rest of Europe and the whole of the world laid the foundations of her wealth and her unequalled world position. The age of industry was at the same time the age of Britain’s world hegemony.
From 1850 to 1880 Britain became the industrial school for Europe and America. But her own monopoly position was undermined by this very fact. From the 1880s Britain visibly began to weaken. Onto the world stage came new states, with Germany in the front rank. At the same time the fact that Britain was the first-born of capitalist states began to reveal its pernicious, conservative aspects. The doctrine of free trade was dealt a heavy blow by German competition.
It became clear during the final quarter of the last century that Britain was being elbowed out of her position of world domination: and by the beginning of the present century this had produced an internal uncertainty and ferment among the upper classes, and a deep molecular process of an essentially revolutionary character in the working class. At the centre of these processes were mighty conflicts between labour and capital. It was not only the aristocratic status of British industry in the world, but also the privileged position of the “aristocracy of labour” within Britain that was shaken. 1911 to 1913 were years of unparalleled class battles by miners, railwaymen and other transport workers. In August 1911 a national, in other words a general strike developed on the railways. During those days a dim spectre of revolution hung over Britain. The leaders made every effort to paralyse the movement. Their motive was “patriotism”: the strike was on at the time of the Agadir incident  which threatened to lead to war with Germany. Today it is well known that the Prime Minister invited the workers’ leaders to a secret meeting, and called on them to “save the nation”. And the leaders did all they could to strengthen the bourgeoisie, and thereby to prepare for the imperialist slaughter.
The 1914-1918 war seemed to cut the revolutionary process short. It put a stop to the development of the strike movements. By bringing about the break-up of Germany it had apparently restored Britain to her role of world hegemony. But it was soon to be revealed that Britain’s decline, while temporarily checked, had in reality only been deepened by the war.
In the years of 1917 to 1920 the British labour movement again passed through an extremely stormy period. Strikes took place on a broad scale. MacDonald signed manifestos from which, today, he would recoil in horror. Only after 1920 did the movement return within bounds; after “Black Friday”, when the Triple Alliance of miners’, railwaymen’s and transport workers’ leaders betrayed the general strike. Paralysed in the sphere of economic action, the energy of the masses was directed on to the political plane. The Labour Party grew as if out of the earth itself.
In what does the change in the external and internal situation of Britain consist?
During the war the gigantic economic domination of the United States had demonstrated itself wholly and completely. The United States’ emergence from overseas provincialism at once shifted Britain into a secondary position.
The “co-operation” between America and Britain is the momentarily peaceful form within which Britain’s continuing retreat will proceed.
This “co-operation” may at this or that moment be directed against a third power; nonetheless, the fundamental antagonism in the world is that between Britain and America, and all the other antagonisms which seem more acute and more immediately threatening at a given moment can be understood and assessed only on the basis of this conflict of Britain with America.
Anglo-American co-operation is preparing the way for a war just as a period of reforms prepares a revolution. The very fact that, by taking the path of “reforms” (i.e., compulsory “deals” with America) Britain will abandon one position after another, must force her in the end to resist” Great Britain’s productive forces, and most of all her living productive forces, the proletariat, no longer correspond to her place in the world market. Hence the chronic unemployment. The commercial and industrial (and the military and naval) pre-eminence of Britain has, in the past, almost safeguarded the links between the parts of the empire” As early as the end of the last century Reeves, the Prime Minister of New Zealand, wrote: “Two things maintain the present relations between the colonies and Britain: 1) their belief that Britain’s policy is in the main a policy of peace, and 2) their belief that Britain rules the waves.” The second condition was, of course, the main one. This loss of the “rule of the waves” goes hand-in-hand with the build-up of centrifugal forces within the empire. Imperial unity is increasingly threatened by the diverging interests of the dominions and the struggles of the colonies.
The development of military technique militates against Great Britain’s security. Aviation and chemical warfare is reducing the tremendous historical advantages of an island position to zero. America, that gigantic “island” walled off on both sides by oceans, remains invulnerable. But Britain’s greatest centres of population, and London above all, can face a murderous air attack from the continent of Europe in the course of a few hours.
Having lost the advantages of inaccessibility, the British government is compelled to take an increasingly direct part in purely European matters and in European military pacts. Britain’s overseas possessions, her dominions, have no interest in this policy. They are interested in the Pacific Ocean, the Indian Ocean and to some extent in the Atlantic but not in the slightest in the English Channel. At the first world clash this divergence of interests will turn into a gaping abyss in which imperial links will be buried. The political life of Great Britain is, in anticipation of this, paralysed by internal frictions and is doomed to be essentially a policy of passivity, with a consequent worsening of the empire’s world position.
Meantime, military spending must form an ever-growing share of Great Britain’s shrinking national income.
One of the conditions of Britain’s “co-operation” with America is the repayment of the gigantic British debt to America, without any hope of ever receiving repayment of the debt owed her by the continental states. The balance of economic power will thereby swing still further in America’s favour.
On 5th March this year the Bank of England raised the Bank Rate from 4 to 5 per cent following the example of the New York Federal Reserve Bank, which had raised its rate from 3 to 3½ per cent. In the City of London this sharp reminder of financial dependence on their cousins from across the Atlantic was felt very painfully. But what were they to do? The American gold reserve is approximately $4,500 million, while the British is approximately $750 million, six times less. America has a gold currency, while Great Britain can only make desperate efforts to re-establish one. It is natural that, when the rate is raised from 3 to 3½ per cent in America Britain is compelled to reply by raising her rate from 4 to 5 per cent. Such a measure strikes at British industry and commerce by raising the cost of essential materials. In this way America at every step shows Britain her place: in one case by the methods of diplomatic pressure, in another by a banking decision, and always and everywhere by the pressure of her colossal economic domination. [1*]
At the same time the British press notes with alarm the “striking progress” of various branches of German industry, and of German shipbuilding in particular. Arising from the latter, The Times of 10th March wrote:
It is probable that one of the factors which makes for the ability of the German yards to compete is the complete “trustification” of the material, from the mine to the fitted plate, from the financing bank to the sale of tickets. This system is not without its effects on wages and the cost of living. When all these forces are turned in the same direction the margin for reduction in costs becomes very considerable.
In other words The Times here states that the organic superiority of the more up-to-date German industry will once again be fully demonstrated as soon as other countries give Germany the possibility of displaying signs of life.
There are indications, it is true, that the order for ships had been placed with the Hamburg yard with the object of frightening the trade unions, and thus preparing the ground for reducing wages and lengthening working hours. Needless to say, such a manoeuvre is more than likely. But that does not weaken the force of our general contention regarding the irrational organisation of British industry and the overheads resulting from it.
It is now four years since the number of officially registered unemployed in Britain fell below 1,135,000; it has fluctuated between 1½ and 1¾ million. This chronic unemployment is the sharpest revelation of the system’s insolvency; it is also its Achilles’ heel. The Unemployed Insurance Act introduced in 1920 was designed to meet exceptional circumstances which, supposedly, would quickly pass. But meanwhile unemployment was becoming permanent, insurance ceased to be insurance, since spending on the unemployed was not covered by the payments of contributors. The British unemployed can no longer be regarded as a “normal” reserve army, contracting and expanding and constantly changing its composition, but must be seen as a permanent social layer created by industry during the period of growth and discharged in a period of recession. It is a gouty growth on the social organism, stemming from a weak metabolism.
The President of the Federation of British Industries, Colonel Willey, declared at the beginning of April that the return on industrial capital had been so insignificant during the last two years that it could not stimulate businessmen to develop industry” Business enterprises do not yield any higher return than fixed-interest paper values (gilt-edged securities and so on). “Our national problem is not a problem of production but a market problem.” But how do you resolve a market problem? It is necessary to produce more cheaply than others. Yet to do this it is necessary either radically to re-organise industry, to reduce taxes, to cut workers’ wages or to combine all three methods. Cutting wages, which can give only an insignificant result in terms of reducing production costs, will produce firm opposition since the workers are today fighting for wage rises. It is impossible to reduce taxes since it is necessary to pay off debts, to establish a gold-based currency, and to maintain the apparatus of empire and 1½ million unemployed to boot.
All these items enter into the cost of production. Industry could only be reorganised by investing new capital; meanwhile low profits drive free capital towards state and other loans.
Stanley Machin, the President of the Association of British Chambers of Commerce, recently declared that the solution to unemployment was emigration” The benevolent fatherland tells a million or so workers who, together with their families, make up several million citizens: “Stuff yourselves in the hold and clear off somewhere overseas!” The utter bankruptcy of the capitalist regime is stated here without the least equivocation.
We must examine Britain’s internal life from the standpoint of the abrupt and continuously declining world role of Great Britain which, while holding on to her possessions, and the apparatus and tradition of world domination, is in actual fact being relegated increasingly to a secondary position.
The break-up of the Liberal Party crowns a century of development of capitalist economy and bourgeois society” The loss of world domination has brought whole branches of British industry to a dead end and has struck a lethal blow at self-sufficient medium-sized industrial and commercial capital – the basis of Liberalism. Free trade has reached an impasse.
In the past the internal stability of the capitalist regime was in large measure assured by a division of labour and responsibility between Conservatism and Liberalism. The break-up of Liberalism exposes all the other contradictions in the world position of bourgeois Britain at the same time as it reveals the internal crisis of the regime. The upper circles of the Labour Party are politically very close to the Liberals; but they are incapable of restoring stability to British parliamentarism since the Labour Party, in its present form, itself expresses a temporary stage in the revolutionary development of the working class. MacDonald’s seat is even shakier than Lloyd George’s.
At the beginning of the 1850s Marx thought that the Conservative Party would soon quit the scene and that political development would follow the line of a struggle between Liberalism and socialism. This perspective presupposed a rapid revolutionary development in Britain and in Europe. Just as, for example, our own Cadet Party (Constitutional-Democrats) became, under the pressure of the revolution, the sole party of the landowners and the bourgeoisie, so British Liberalism would have absorbed the Conservative Party and become the sole party of property, if a revolutionary onslaught by the proletariat had developed in the course of the latter half of the nineteenth century. But Marx’s prophecy was made on the very eve of a new period of rapid capitalist development (1851-1873). Chartism finally disappeared.  The workers’ movement took the path of trade unionism. The inner contradictions of the ruling class took on the appearance of a struggle between the Liberal and the Conservative Parties. By rocking the parliamentary swing from right to left and from left to right, the bourgeoisie found a vent for the opposition feelings of the working masses.
German competition was the first serious threat to British world hegemony, and dealt it the first serious blow. Free Trade ran up against the superiority of German productive technique and organisation. British Liberalism was only the political generalisation of Free Trade. The Manchester School had occupied a dominant position  from the time of the bourgeois, property-qualified, electoral reforms of 1832  and the repeal of the Corn Laws in 1846. Over the course of the next half-century the doctrine of Free Trade seemed to be an immutable programme. Accordingly the leading role belonged to the Liberals. The workers tailed behind them. From the beginning of the 1870s the pattern was upset: Free Trade was discredited; a protectionist movement set in; the bourgeoisie was increasingly seized by imperialist tendencies. Symptoms of the Liberal Party’s decay appeared as early as Gladstone’s time, when a group of Liberals and Radicals led by Chamberlain raised the banner of protectionism and joined with the Conservatives.  From the middle of the 1890s trade took a turn for the better. This delayed Britain’s political transformation. But by the beginning of the twentieth century Liberalism, as the party of the middle classes, had cracked. Its leader, Lord Rosebery, placed himself openly behind the banner of imperialism. However, the Liberal Party was destined for one more upsurge before leaving the scene. Under the influence of the evident decline of British capital on the one hand, and of the mighty revolutionary movement in Russia on the other, there developed a political re-awakening of the working class which, in applying itself to the creation of a parliamentary Labour Party, also poured flood-water into the mill of the Liberal opposition” Liberalism came to power again in 1906. But this upsurge could not, by its very nature, last for long. The political movement of the proletariat led to the further growth of the Labour Party. Before 1906 the Labour Party’s representation had grown more or less in step with the Liberals’; after 1906 the Labour Party was clearly growing at the expense of the Liberals.
It was formally the Liberal Party which, through Lloyd George, led the war. In fact, the imperialist war, from which even the sacred regime of Free Trade could not save Britain, inevitably strengthened the Conservatives as the most consistent party of imperialism. Thus the conditions were finally prepared for the Labour Party’s entrance onto the scene.
While impotently hovering over the question of unemployment the Labour Party daily newspaper, the Daily Herald, draws from capitalist admissions such as we quoted above, the general conclusion that, since British capitalists prefer to give financial loans to foreign governments rather than for domestic industrial expansion, there is nothing left for the British workers to do but to produce without the capitalists. In a very general sense, this conclusion is perfectly correct, only here it is drawn not at all with the intention of arousing the workers to drive the capitalists out, but merely to urge the capitalists along the road of “progressive efforts”. As we shall see, the whole of the Labour Party’s policy turns on this. To this end the Webbs write a whole book, MacDonald delivers his speeches and the editors of the Daily Herald supply daily articles. Meanwhile if this pathetic scaremongering has any effect at all on the capitalists, it is in the opposite direction. Every serious British bourgeois understands that behind the mock-heroic threats of the Labour Party leaders there lies concealed a real danger from the deeply stirring proletarian masses. It is precisely because of this that the shrewd bourgeoisie concludes that it is better not to tie up fresh resources in industry.
The bourgeois fear of revolution is not always and under all circumstances a “progressive” factor. For there can be no doubt that the British economy would derive great benefits from the co-operation of Britain and Russia” But this presupposes a comprehensive plan, large credits and adapting a considerable section of British industry to the needs of Russia. The obstacle to this is the bourgeoisie’s dread of revolution, and their uncertainty about the future.
The fear of revolution drove the British capitalists along the path of concessions and re-organisation as long as the material opportunities for British capitalism were, or seemed, limitless. The shocks of the European revolutions have always found a clear reflection in Britain’s social development; they led to reforms as long as the British bourgeoisie, through their world position, retained in their own hands gigantic resources for manoeuvre. They could legalise trade unions, repeal the Corn Laws, increase wages, extend the franchise, institute social reforms and so on. But in Britain’s present radically altered position in the world the threat of revolution is no longer capable of pushing the bourgeoisie forward: on the contrary, it now paralyses the last remnants of their industrial initiative. What is necessary now is not threats of revolution but revolution itself.
The factors and circumstances set out above are not of a chance and transient character. They are developing in one and the same direction, systematically aggravating Britain’s international and domestic situation and making it historically intractable.
The contradictions undermining British society will inevitably intensify. We do not intend to predict the exact tempo of this process, but it will be measurable in terms of years, or in terms of five years at the most; certainly not in decades. This general prospect requires us to ask above all the question: will a Communist Party be built in Britain in time with the strength and the links with the masses to be able to thaw out at the right moment all the necessary practical conclusions from the sharpening crisis? It is in this question that Great Britain’s fate is today contained.
1*. Since this was written the British government has taken a series of legislative measures in the fields of banking and finance to guarantee the change to the Gold Standard. Here we seem to have a “great victory” for British capitalism actual fact Britain’s decline is nowhere expressed more clearly than in this financial achievement. Britain was compelled to carry out this expensive operation through the pressure of the gold-backed American dollar, and the financial policy of her own dominions which were orientating themselves increasingly towards the dollar and turning their backs on the pound sterling. Britain could not have accomplished this recent step towards gold currency without extensive financial “aid” from the United States. Bur that means that the fate of the pound sterling is becoming directly dependent on New York” The United States is taking into its own hands a mighty weapon of financial impression. Britain is being compelled to pay a high interest rate for this dependence. The dividends will be charged against an already ailing industry. In order to hinder the export of her own gold she is forced to cut back the export of her own goods” At the same time she cannot refuse to transfer to gold currency without hastening her own decline in the world capital market” This fatal combination of circumstances brings on a feeling of severe malaise among the British ruling classes and gives rise to malevolent but impotent grumbling in the Conservative press itself. The Daily Mail writes: “By accepting the Gold Standard the British government is giving the Federal Reserve Bank (which is in practice in the power of the United States government) the possibility of creating a monetary crisis in Britain at any moment it chooses. The British government is bringing the whole financial policy of its own country into submission to a foreign nation ... The British Empire is being mortgaged to the United States”. “Thanks to Churchill”, writes the Conservative newspaper, the Daily Express, “Britain is falling under the heel of the American bankers”. The Daily Chronicle expresses itself more decidedly: “Britain is in fact demoted to the position of being the forty-ninth state of America”. It could not be put more clearly or vividly! To all these reproaches (which lack conclusions or perspectives) Churchill, the Chancellor of the Exchequer, replies to the effect that there is nothing else for Britain to do but to bring her financial system into conformity “with reality’. Churchill’s words signify: we have become immeasurably poorer, the United States immeasurably richer; we must either fight America or submit to her; in making the pound sterling dependent on American banks we simply translate our general economic decline into the language of currency; we cannot leap over our own heads; we must conform “with reality”. – L.D.T.
1. The Puritans were those sections of English Protestants in the 16th and 17th centuries who considered that the Protestant reformation had not gone far enough. They wanted less ritual and more democratic forms of church organisation. Their opposition to bishops was of a piece with their political opposition to the rule of monarchy, an intellectual opposition to reliance on tradition and superstition, and a social ethic which combined a belief in the virtues of work and individual small-ownership. They were in effect the English bourgeoisie and provided the ideology of the various opposition groups in the 1640 Revolution.
2. Quoted in M. Beer, A History of British Socialism (1919), Vol.1, p.283, from Quarterly Review, June-August 1826, pp.92-9
3. On July 1 1911 a German warship visited the Moroccan port of Agadir allegedly to protect German interests against French expansion. The British government threatened action against a German presence so close to Gibraltar, and the threat of imperialist war was averted by a deal under which Germany was conceded part of French Congo to compensate for her withdrawal from Morocco.
4. The first political movement of the British working class. Chartism took up the traditional demands of universal manhood suffrage and other Parliamentary reforms, and tried to achieve them by methods including petitions, strikes and armed insurrection during the period from 1837 to 1848. The strikers were beaten back to work and the insurrectionists were transported to Australia. The three petitions presented to Parliament in the period had enormous working class support, but were contemptuously rejected with large displays of force and arguments about the sanctity of property and the constitution.
5. The Manchester school of economics represented the interests of the industrial bourgeoisie at the height of British economic supremacy in the mid-19th century. It comprised an extreme form of laissez-faire, considering that prosperity would follow the lifting of all barriers to capitalist enterprise. Its most famous exponents were the Liberal politicians Richard Cobden, a calico printer, and John Bright, partner in a firm of cotton spinners. Its policies triumphed with the lifting of virtually all British tariff barriers in the 1840s, culminating in the repeal of the Corn Laws in 1846.
6. The demand to put an end to the system whereby seats in Parliament could be bought and tiny groups could elect MPs came to a head with the election of a reforming Whig government in 1830. Under intense popular pressure, and the threat to flood the House of Lords with new peers, a measure was passed abolishing the worst of the “rotten boroughs” and extending the franchise to some of the middle class.
7. The issue of Irish Home Rule and the support for it by the Liberal Party leadership, especially Gladstone, resulted in this break-away by the more pro-imperialist Liberals led by Joseph Chamberlain, who set up the Unionist Party and ultimately united with the Conservatives.