In September, when he was touring Australia, Ernest Mandel was invited to join a radio programme in which, through a link-up with London, he and Bill Warren discussed the impending world recession: its immediate and long-run effects, and its consequences for the working class. Naturally, in a brief broadcast, no detailed examination of the issues was possible. Nonetheless, despite its obvious elisions, brevity and enforced conclusion, the dialogue has both immediate and more lasting interest. The contrasting prognostications are clear, sober and open to examination in the light of events. The directness of discussion is exemplary: there are none of the evasions or euphemisms characteristic of bourgeois panel programmes; while the tone of this argument, which literally traversed the globe, is a model for socialists. Despite the limitations of the format, neither participant attempts to separate his analysis of immediate and long-term economic developments from the strategy of class struggle. Below, we carry a slightly edited version of this brief debate between Ernest Mandel and Bill Warren.

ernest mandel: The capitalist class are now faced with the most serious generalized economic recession since the Second World War. I would not say that a depression on the scale of the thirties is likely, but there will certainly be a graver recession than anything we have known since 1945. The significant difference between this recession and the previous ones since the war is precisely that it is going to be a generalized one: it has started to occur in all the major industrialized countries of the West simultaneously. So far since the War we have only had recessions in a certain number of countries, these were then partially neutralized in their effect by the fact that the boom continued in others. Now I do not see any major industrialized country that is going to escape the recession. So I would make a very definite prognosis that this winter we will see this generalized recession; we will have between 13 and 15 million unemployed in the advanced capitalist countries, give or take a million according to the statistical methods which you use (which certainly in the United States make a difference of more than a million). The biggest worry for the capitalists is that inflation will continue while this recession takes place. Inflation may be a couple of percentage points lower, but it will continue at practically full speed. So for the first time in the history of capitalism we will not only have a ‘stagflation’ we will have ‘slumpflation’. This will be very serious indeed for the future of the capitalist economy.

bill warren: I would regard that prognosis as a statement of a possibility which is unlikely, however, to come about. I would make my prognosis in this way. I would argue that we are likely to see a continuation of present trends towards unemployment into the winter of this year, but during 1975 there should be a rise in general output and activity in the world capitalist economy. Such predictions cannot be made with any certainty by anyone, whether orthodox or Marxist economists. But in order to get some idea of the possibilities we have to have some idea of the causes of the present situation. My belief is that there is a series of temporary factors which are the cause of the present situation, and that there is a series of long-run factors which will bring us out of it.

The temporary factors relate fundamentally to the change in the terms of trade which have swung against the industrialized countries as a result of the very rapid rise in the prices of fuels, minerals, foodstuffs and industrial raw materials from agriculture. As far as these are concerned the latter two already seemed to have reached their peak, and it looks as if oil prices, although certainly not stabilized, are not going to rise nearly as fast in the future. The oecd, for example, expect that by 1975 the oil countries should be starting to spend a greater proportion of the revenues they have earned on exports from the West; and by 1980 the London Sunday Times estimates that the oil countries should be spending all their oil-money, including the surpluses which at the moment they are not spending. Consequently, I expect that the shortterm conditions that have given rise to this cutback in demand for the products of the West, and which have been a large cause of the recessionary factors, will begin to decline and will continue to decline until about 1980.

As far as the positive underlying long-run factors are concerned, I think it has to be recognised quite straightforwardly that, technically speaking, capitalist countries are able to raise demand and therefore employment, if only by reducing taxes and putting more money in people’s pockets, to put it at its simplest. Therefore, the question arises: will the capitalist countries decide that the social tensions caused by unemployment are more dangerous to them than the social tensions caused by inflation? If one is going to judge as to whether or not there is a longrun danger of a serious, lasting and deep recession, one has got to make a judgment about whether the social forces within capitalism insisting on full employment are going to be stronger than the social forces opposed to inflation. My opinion is that the social forces in post-war capitalism are such that no capitalist country can, for an indefinite period, resist the pressure to maintain full employment—precisely because of the political danger to capitalism of a reduction in full employment. Moreover, there are specific signs that individual capitalist countries are beginning to recognize the dangers, unlike the 1930s. Already Germany has lent Italy £2,000 billion, partly because it recognizes this. Germany itself is considering reflation, and it is not at all unlikely that the new Ford regime in the United States will begin to reflate too, because of its political weakness, while the oecd anticipates that Japan too will begin to reflate in 1975.

ernest mandel: First, let me get the general point clear. The capacity of bourgeois governments to raise demand through reflationary processes is not denied by serious Marxist economists. But there is a price to be paid for this. During the fifties and early sixties there was considerable confusion over this issue, which can be cleared up today. Today it is absolutely undeniable that reflationary policies to raise demand are, under the social conditions of capitalism—I don’t say this within the theoretical framework, but under the concrete conditions of capitalism as it functions in the West—always inflationary. Which is to say that Keynesian policies have succeeded in creating a high level of employment at the price of inflation. Nobody has yet proposed any solution, any miracle, whereby you can get out of a recession without increasing inflation.

Can one continue to do this for an unlimited period without losing the efficiency of these tools? From the long-term point of view the evidence is now overwhelming. Already in the 1970 recession, that is, long before the huge raw materials boom of the last year and a half, the efficiency of inflationary techniques was seriously questioned. You had a very strong increase in the money supply in countries like the United States and Britain without any immediate effect on industrial activity, for at least six if not twelve months. This was the moment the phrase ‘stagflation’ was coined. At that time it was shown that even a substantial increase in demand does not, under certain circumstances, significantly increase industrial activity.