The Socialist Issue 160June 2nd 2000 |
End The Class Divide |
NEW LABOUR are panicking. They had hoped to call
and win a general election next spring. There’s just one problem. Labour’s focus
groups tell them that people are “unhappy because they felt that living standards
were worse, there had been no improvement in health and education.” |
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THE GOVERNMENT are sending out 12 million leaflets this week, asking people what their top three priorities are for the NHS. They want us to think they have an open attitude to critical views of the NHS but the opposite is the case. |
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THROUGHOUT THE 1990s, investors in shares just assumed that share prices would go ever upwards. But in recent months all the froth of the ‘booming’ internet companies -- known collectively as dotcoms - has evaporated. Last week, the US Nasdaq high-tech share index fell by 5.9% in one day. It is now 35% off its March high. KEN SMITH, editor of The Socialist, writes. Analysis: A Giant Gambling den |
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After 22 years
of military occupation the Israeli Defence Force (I D F) finally quit Lebanon. During the
occupation tens of thousands of Lebanese civilians were killed and hundreds of thousands
made refugees. The IDF lost nearly 1000 soldiers and yet Israel's northern settlements
continued to suffer rocket attacks from Hizbollah guerrillas. Kevin Simpson
assesses the implications of Israel's historic withdrawal. Followed by: Palestinian
teachers fight |
New Labour's phoney attack on elitism:
End The Class Divide
NEW LABOUR are panicking. They had hoped to call and win a general election next spring.
There’s just one problem. Labour’s focus groups tell them that people are “unhappy because they felt that living standards were worse, there had been no improvement in health and education.”
Blair is apparently having sleepless nights over the ‘rise’ in Hague’s ‘popularity’. So, in a transparent attempt to try and win back some ‘popularity’, New Labour are attacking the elites of Oxford and Cambridge and claiming they will spend an extra £28 billion in the public sector.
Labour ministers are attacking the class system and snobbery that prevents a working-class student from admission to Oxford because it is a soft target for them. They must think we’re soft if they believe we’re fooled that they’re launching a crusade against the real vested class interests that dominate Britain.
It is New Labour particularly who are carrying out measures that deny working-class children the right to a decent education. Labour continues to prop up the elitism that exists in Britain’s education system and has reinforced it.
The continuation and deepening of selection in schools means that it’s likely Tony Blair’s newest born will enter a high-flying educational establishment, while millions of working-class kids will go to underfunded, overcrowded state secondary schools, staffed by teachers who are expected to meet unrealistic targets before they get pay increases.
The introduction of tuition fees is just as responsible for the low proportion of state school pupils going to university as elitism. Their introduction means that any child lucky enough to make it through the state system will either have to choose between a lifetime saddled with tens of thousands of pounds of debt or of not going to university.
If Labour was going to be really radical it would abolish private education and scrap tuition fees and restore the maintenance grant at a decent, living level. It would not only promise more money for public services it would also ensure a radical shift of wealth towards working-class people.
We need to remove the power of big business to dictate what opportunities working-class people have. Such an approach is the real, radical, socialist way to end elitism and privilege.
Revolt grows at Labour's health plans
THE GOVERNMENT are sending out 12 million leaflets this week, asking people what their top three priorities are for the NHS. They want us to think they have an open attitude to critical views of the NHS but the opposite is the case.
Numerous health workers have been disciplined for blowing the whistle on inadequacies in the NHS. Most notably Lord Winston, the famous fertility specialist, was recently given a rocket for saying the government's promise to end the internal market was "deceitful".
NHS trusts are being packed with New Labour acolytes. Can we be confident that they will listen to working-class people's priorities?
The government's promises of new money for the NHS look increasingly threadbare as each "injection of funds" turns out to be a recycled version of the last one.
Secretary of State Alan Milburn used to say that the Private Finance Initiative (PFI), introduced by the Tories, was "the only game in town" for building new hospitals.
But since its expense and inefficiency has been exposed, the propaganda has calmed down. "The government is not driven by dogma" the NHS website says "(PFI) will only be used in cases where it offers value for money to the taxpayer and the NHS". But no explanation is offered for this 'U' turn.
The revolt over Labour's 'modernisation' of the NHS is building. Already local referendums have rejected PFI, in the case of Wakefield hospitals. In Grantham a council-run poll got an overwhelming majority for a call for the resignation of local managers, after cuts to the mother-and-child services at Grantham hospital.
Ten of the 42 councillors, doctors and other health care workers, at Wyre Forest, Kidderminster have been elected from campaigns to save local NHS facilities.
These show Labour can be made to sit up and listen if mass campaigns are organised to rebuild the NHS as an excellent service, free to all at the point of need.
Our top priorities for the NHS:
§ To ensure that a massive injection of funding reduces waiting lists, improves care and treatment and pays all health workers a living wage with decent hours and conditions.
§ Kick private profit out of the NHS. Abolish the internal market, ditch PFI and run the NHS under democratic working-class control and management.
§ Nationalise the drug companies, again under working-class control and management, so their huge profits can be used for public health not private gain.
§ Eliminate poverty and inequality – the biggest killer and cause of ill-health.
THROUGHOUT THE 1990s, investors in shares just assumed that share prices would go ever upwards. But in recent months all the froth of the ‘booming’ internet companies - known collectively as dotcoms - has evaporated. Last week, the US Nasdaq high-tech share index fell by 5.9% in one day. It is now 35% off its March high. KEN SMITH asks:
Are the dotcoms deadcoms?
BOO.COM’S DEMISE is the latest European example of an e-commerce company’s collapse. But many others are starting to fill up out trays in Britain and Europe.
And in the US, so-called innovative e-tailers like grocer Peapod and music retailer CD Now are close to collapse. CD Now has to spend an estimated $70 to secure one customer, who may spend less than half that with the company.
In recent years starting a dotcom company has been seen as a licence to print money through a combination of raising venture capital and a shares launch. Earlier this year a record $122 billion was invested in the US stock market, more than half of it in high tech shares.
Free fall
Now, spectacular falls in high-tech shares prices throughout this year has convinced the high-tech economy’s high flyers that the free ride is over. Many of these companies’ share prices have collapsed to 50% or 75% below their initial offering price.
Even the temporary resurgence after the 14 April collapse on Wall Street hasn’t reversed the overall downward trend in all stock markets. The likely break-up of Microsoft, rising interest rates and currency fluctuations all combined with a crisis of confidence in the start-up dotcoms to push down share prices in high-tech stocks in recent weeks.
These shares took a particular hammering in March and April. High-tech funds fell 25% in four weeks. Internet stocks fell 35% on average in the three weeks before 14 April; some individual stocks fell by 60% or more.
In the USA the Dow Jones, the main stock market charting the biggest US companies’ progress, fell by 12.1% between mid-January and the end of April. The Savings and Poor (S&P) 500, a broader measure of stock market values encompassing more companies, lost 11.1% after peaking in mid-March.
The prices-earnings ratio, which measures share prices against yearly profit earnings reached 44.3 this year. This means shares were far more overpriced even than just before the 1929 Wall Street crash when the ratio reached 32.6.
The Nasdaq high-tech share index fell most - 25% down on a year ago. The Nasdaq was only established in 1973 but it had shown the most rapid growth of any stock market measure in recent years.
More sober economic commentators had warned for months that the internet share bubble needed to be rapidly deflated, maybe even burst. They claim that this “necessary adjustment” in over-inflated share prices won’t hit the real, manufacturing economy. But is this true?
‘New Paradigm’
DESPITE MANY similarities with the 1920s stock market boom, which led inevitably to the 1929 Wall Street Crash, investors and even relatively restrained economists got carried away with the delusion that a ‘new paradigm’ was at work.
They believed that a new economy existed of computerisation, new technology, the internet and e-commerce, which guaranteed an uninterrupted and upward curve of growth for capitalism. In turn they concluded that capitalism’s cycles of boom and bust had ended.
They argued that as more and more people bought the so-called ‘fireproof’ IT shares and their value increased, that wealth found its way into consumption and sustained the US economic ‘boom’.
Certainly the strong but uneven US economic growth in recent years has decisively depended on the "wealth effect". The gains made from speculative activity by the top 10% have fed into the economy.
But once these ‘miraculous’ gains disappear - as they have started to - inevitably the reverse must happen. US growth will decline sharply and there will be a massive debt hangover and credit crunch in the US economy.
The US is the world's most important market. Any prospect of economic growth in Asia and of Japanese capitalism’s resurgence depends on it. A US downturn will have dramatic effects.
Bubble Bursting
THE SPECTACULAR fall in IT shares in the US high-tech share indices, the Nasdaq, shows that the IT bubble has well and truly burst. As panic hit the markets, all the earlier exuberant acclamation disintegrated.
Michael Krantz, who had recently left Time magazine to work for a dotcom start-up, described to his former employer the doom that hit the dotcoms: “I'm hypnotised at my computer, watching the Nasdaq collapse...
“The fact that the Nasdaq may have hit a new high by the time you read these words doesn't erase the vague sense in dotcomland that the party, if not quite over, is definitely winding down...
“The Web bubble is bursting. Has burst. Which means that some of us now roaring toward online glory may instead face that Wile E. Coyote moment when you look down and realise you just sprinted off a cliff... New economy, my ass.”
Krantz added that last year his new company could attract $60 million venture capital (ie money to help start up the company) at “a drop of the hat”, now the “easy money was getting scarcer”.
Many e-companies were consuming vast quantities of start-up cash to try and create an identified company brand, to achieve a high recognition factor through saturation advertising. Many were planning public flotation this year, listing the company on the stock market and issuing shares to raise more capital. These plans have subsequently been abandoned.
An analyst for US firm JP Morgan says that many of these companies are now losing $10 million to $30 million per quarter. What’s more these companies’ commercial strategy is increasingly revealed as hollow.
One reason for the panic about the share valuation of internet companies was precisely the huge amounts the dotcoms were consuming. Their frantic start-up costs weren’t consistent with what the company would achieve in future.
While their share valuation put them under immense competitive pressure to deliver bumper profits in the long run, the truth was that many of these companies would flare up and burn out quicker than a shooting star.
But it’s not just the owners and workers in these dotcom companies who are getting burned by this collapse in confidence.
In recent years more and more middle-class people have followed the lead of the wealthy and ploughed any spare cash they had, even from credit cards and re-mortgaging properties etc., to cash in on the internet share boom by becoming ‘margin traders’.
They buy, say, $5,000-worth of shares, but may only pay for half of it upfront. This works fine as share prices rise. But when they fall margin traders owe more for the shares than they’re worth. A lot of margin traders’ accounts have been called in recent months as stock market dealers got the jitters.
Global effect
DOES THIS mean the new e-economy is finished? Earlier this year the Economist warned investors to “remain agnostic about the new economy”, adding that “the risks this time are big and getting bigger”.
Many of the frothy companies who once hogged the headlines are likely to go to the wall before the year is over. There is also a trend for the traditional giants of the old economy to move in to colonise the e-commerce market pioneered by smaller highflyers. This could also speed up the killing of the dotcom e-tailers.
However, when the International Monetary Fund (IMF) released its annual report on the world economy, coinciding incidentally with the stock market freefall, it concluded the US boom may slow down but it would still pull the rest of the globe along at a steady rate.
But the world’s leading capitalists who previously looked at the global economy’s prospects through the rose-coloured glasses of the 1990s are increasingly worried.
They used to believe that the ‘new economy’, along with a hoped-for resurgence of the Asian economies after the 1997 currency crisis and slump, would avert a traditional capitalist crisis of overproduction or overcapacity.
They are now more pessimistic, mainly because of the fall in share prices. But there are other worries beside the perishing of the dotcoms.
When it was announced that US inflation was rising, a panic ensued on the stock markets which led to the loss of $1.1 trillion in share values, primarily but not exclusively the dotcoms.
The capitalist class see rising inflation as a sign that the economy is ‘overheating’, they fear this will tip it over from boom to bust. Inflation above a certain level also decreases capitalism’s earnings and profits.
The US Federal Reserve (the Fed) had been raising interest rates over a sustained period; they hoped to gradually deflate share prices and ‘cool down’ the economy. But this had had little effect.
Greenspan, the Fed’s chairman, in particular wanted to see a big ‘readjustment’ of the new economy stocks; he wanted their share prices to fall because he felt they helped overheat the economy.
However, raising interest rates increases borrowing and running costs for both the old and the new economy. It also makes people less likely to borrow money to invest in shares. The eventual cumulative effect will be a drop in consumer spending which could tip the US into recession, dragging the rest of the world economy down with it.
Computerisation, new technology and the potential of the internet could mean a brighter future for society. But with the capitalist whiz-kids in charge, their race for fast bucks is likely to pauperise millions once the bubble bursts.
The real question for socialists is: why should new technology merely swell the bank accounts of a few? Under working-class control and management, in a socialist society, it could remove hours of wasted time and allow the development of a whole new world of opportunity.
Analysis
A Giant Gambling den
WHEN TV news bulletins try to explain financial matters they tend to lose their audience in a complex fog of FTSEs, Nasdaqs, trade deficits and so on.
Small wonder that it took Karl Marx over 30 years’ work to produce the three volumes of Capital and associated notebooks over 130 years ago.
Since then capitalism has become even more complex but socialists need to understand the capitalist system in order to pose a more rational, socialist alternative.
In particular, the stock exchanges and related institutions of financial capitalism appear to have gained importance in recent decades as indicators of capitalism’s health. So what are the various stock exchanges, how important are they, how do they work and do socialists think they should be abolished?
Most countries have a stock exchange, some countries have more than one. Stock exchanges are marketplaces for buying and selling shares in public companies, those firms that allow other people to buy a stake in themselves by purchasing shares.
Companies sell shares to raise money supposedly for them to develop and expand their business. Investors choose to buy shares rather than putting money in a bank or building society because they hope for a better return for their money.
There are two ways this happens. Firstly any company that issues shares is expected, after they publish their annual report, to issue a dividend on their profits. So, for example, if a person had 100 shares at £1 a piece and announced a dividend of 8% then you would get an £8 return on your shares.
But this can also increase your wealth in another way. If this company result is seen as being good then that can make those shares more sought after. This will push the share value up. So say the shares may increase in price from £1 to £1.50 a share.
This now means that after one year you get an £8 return from the company you invested in and notionally at least - depending on whether or not your shares are sold - you could get another £50 back.
Shares are bought and sold extremely frequently on stock markets. Basically big financial institutions, including pension funds for unions and companies, play the market every day trying to get the best return.
They take these massive gambles, trying to predict using all the available information how well a company is doing, what their future prospects are likely to be and whether their shares will increase or decrease in value given the current state of the stock exchange and capitalism generally.
The main factor in determining this is how profitable they think a company will be. This is known as the prices-earnings ratio.
Socialist Planning
In the US and Britain the largest 100 companies are on the Dow Jones index and the FTSE 100 respectively. In both countries there are other stock markets such as the US Nasdaq, the second biggest financial market in the world after the Dow Jones, and the Techmark 100 in Britain. Again, there are national variations of these stock markets in all the major advanced capitalist countries.
Socialists believe that stock markets are essentially giant gambling dens for capitalists to raise and make more money.
They rarely invest their own money to gamble with, instead utilising the money in working-class people’s savings and pensions funds. But these parasites are quick to take the profits and quickly pass on any losses to small investors.
Under a socialist society there would be no need for such parasitic excesses as the stock markets and financial institutions. Manufacturing and services in society would be financed under a national plan where the surplus produced in society, now creamed off by the capitalists as profit, would be used for research and development, expansion and creating new wealth.
This socialist plan would be managed and controlled by working-class people, the majority in society, who stand to benefit from a harmonious development of society’s productive capacity and wealth.
22-year Israeli occupation comes to inglorious end
IN THE end one of the world’s most efficient and well-armed fighting forces - the IDF - was defeated by a Islamic volunteer guerrilla force of about 5,000 men - Hizbollah (funded mainly by the Iranian regime but also influenced and supported by the Syrian government).
The main reason for this was that the IDF was an occupation army relying on a brutal, surrogate, mercenary militia, the South Lebanon Army (SLA), notorious for extortion and other crime.
In recent years Hizbollah’s support has soared as many Lebanese saw them as the only people resisting the hated occupation forces. As a result of this support, Hizbollah were able to launch lightening raids to strike hard and quickly against the SLA and IDF forces and then melt away into the surrounding Lebanese villages.
Hizbollah fighters were also ideologically motivated by the desire to drive out what they saw as Zionist imperialist occupiers in South Lebanon. As Brigadier General Benny Gantz (Commander of IDF forces in the Lebanon) commented: “Hizbollah is a very well trained guerrilla organisation. I am not sure that too many regular armies would have done as well as against them”.
The IDF occupation also became increasingly unpopular in Israel. Many working-class Israelis saw it as a bloody quagmire for conscripts and making Israel’s northern towns and villages vulnerable to Hizbollah attack.
The unpopularity of the occupation led Ehud Barak, now Prime Minister of Israel’s coalition government, to promise during last year’s election campaign to withdraw from Lebanon within 12 months. However, he wanted to link it to a peace agreement with the Syrian government and withdrawal by the IDF from the Golan Heights occupied by Israel since the 1967 Arab-Israeli war.
When the recent round of negotiations between the Syrian government and Israel broke down, Barak was faced with insurmountable pressure to fulfil his promise to complete the withdrawal. This was especially the case since the Barak government had promised to create 300,000 jobs with free education from kindergarten to the end of university for all Israelis. Instead, the government launched a series of vicious attacks on working-class living standards which led to a plummeting of support for his government.
In the end, a two-week staged IDF withdrawal became a 48-hour disorderly scramble back across the border. The SLA, in a state of semi-collapse for a number of months, disintegrated. Thousands of SLA militia men, together with their families, streamed to the border to seek sanctuary in Israel, leaving their heavy weaponry, Mercedes and BMW cars, as well as their luxury villas, behind.
Immediately, tens of thousands of elated Lebanese Shi’ite Muslim civilians, together with Hizbollah fighters, streamed into the security zone, taking over villages left two decades ago. Hizbollah were able to capture a large amount of high quality military equipment left by the departing SLA.
Undoubtedly, the perception of the majority of the Arab masses of the Middle East is that this was a major military defeat for the IDF. Exaggerated comparisons were made with the ignominious withdrawal by US imperialism from Vietnam.
Nonetheless, perceptions are important and this political defeat and military setback for the Israeli ruling class will have increased the confidence of Palestinians struggling for genuine statehood in the former Occupied Territories and the Palestinian Authority. It will have also increased the confidence amongst Israeli Palestinians to struggle against discrimination and poverty within Israel.
At first, amongst ordinary Israeli Jews there was a widespread mood that the government had bungled the withdrawal and a sharp rise in feelings of insecurity as Israeli Jews saw hundreds of Hizbollah fighters and thousands of their supporters taking over villages in south Lebanon. However, with IDF troops increasingly seeing Lebanon as a dangerous place the mood changed into one of relief as all the soldiers returned to their homes.
Contradictions
IN THE short term, Ehud Barak’s support will increase and his government will be stabilised. However, in the coming months the instability in Israeli society will resurface.
Israeli working-class Jews feel increasingly betrayed by the capitalist, Zionist state. The attacks on living standards goes hand in hand with a massive polarisation in wealth and growing corruption scandals which have involved President Ezer Weizmann (who has now resigned) and Prime Minister Barak.
The generals, previously seen as examples to follow amongst Israeli Jews, have had their reputation tarnished. Many ex-generals are now politicians (including Barak himself) who are implicated in corruption and enriching themselves on the backs of poor Israeli workers. The generals heading the army are implicated in bungled military operations and scandals.
The withdrawal has not solved any of the contradictions in the Lebanon either. It is still a country with a patchwork of different religious and ethnic groupings whose population still suffers from the social and economic effects of the civil war. 80,000 Lebanese had jobs in the security zone and in Israel. Their addition to the unemployment figures will further destabilise the Lebanese economy.
Despite Hizbollah’s victory, the reactionary policies it proposes (ie, a dictatorial, cleric-dominated state) won’t solve the social and economic problems of the masses in South Lebanon.
Lebanese Christians’ fears for their safety have been increased by Hizbollah’s victory in south Lebanon. Parliamentary elections are scheduled for the summer and if its present levels of support continue it will increase its representation in the Lebanese parliament. This could destabilise the delicate balance of power in the whole of Lebanon.
Western Imperialism, Israeli capitalism, and the rotten semi-feudal Arab regimes are responsible for the decades of conflict and violence in the Middle East. Only the overthrow of capitalism and feudalism can lay the foundation for the eradication of the cycle of bloodshed, violence and poverty that has been visited on the working class and peasant masses of the region.
A socialist federation of the region could utilise the human and natural resources that exist to create a harmonious existence where, over time, the type of conflicts previously seen, would become a fading memory.
Palestinian teachers fight
SINCE FEBRUARY, 27,000 Palestinian teachers from the West Bank have been on strike, demanding the implementation of the Service Law, and for democratic elections to the teachers’ union.
The Service Law, approved by Arafat in 1998, raised teachers salaries to NIS 2,000 a month. It has been implemented in Gaza but not in the West Bank.
In fact, Palestinian teachers in the West Bank only received this pay rise for one month, after which their salaries were reduced back to the original NIS 1,500 ($350), which is a poverty wage. The Palestinian Authority gave funds as an excuse for not implementing the Service Law.
Teachers are also demanding that the union leadership be democratically elected, instead of being personally appointed by Arafat, as at present.
The teachers elected an alternative leadership, the teachers coordinating committees, to run the strike.
In February, thousands of students demonstrated in solidarity with their teachers, and against the dismissal of striking teachers. They clashed with Palestinian police and some were arrested.
The teachers’ strike has currently been suspended because of the recent Palestinian uprisings against the Israeli army, which left six Palestinians dead and 1,000 injured. Unless the Palestinian Authority meets the teachers’ demands, the teachers will resume their strike at the start of the new school year in September.
Two of the strike leaders, Omar Sharouf and Omar Assaf, were arrested during the strike and are still being detained without charges ever having been brought against them. Furthermore, tens of teachers who are active in the co-ordinating committees have been called in by Palestinian security forces and threatened.
Mandy Rabin, Maavak Sozialisti, CWI Israel