The Socialist 19 July 2002

Unite To Defend Public Services

GORDON BROWN'S announcement of extra cash for education will be welcomed by parents and teachers - but many will be wondering why it's taken so long to deliver extra funding when education was meant to be New Labour's top priority!  By Martin Powell-Davies, Lewisham NUT

NEW EVIDENCE of the responsibility of private contractors for the Potters Bar rail crash emerges almost daily, but still tube-workers have to walk out on strike to stop the government handing control of London Underground's tracks to the same firms. Bill Johnson, RMT

Not So Generous Gordon

Public spending review: GORDON BROWN, or 'Gorgeous Gordon' as he is now being called by some in the media, has just announced the biggest sustained rise in public spending since the 1970s.

Student funding: A REPORT by MPs on student funding has tuition fee hikes and high interest loans as its main proposals. The New Labour-dominated committee that wrote it is preparing for new attacks on the right to higher education.  More ...

Putting University Out Of Reach: STUDENTS TODAY have to choose between working long hours in jobs on top of their studies or building up large debts at the start of their working lives.

A LEAKED Pentagon paper revealed plans for a massive US-led invasion of Iraq to try to remove Saddam Hussein. This "regime change" could kill more than 10,000 Iraqi civilians. Dave Carr

THE TRIAL of top snooker player Quinten Hann for rape, highlighted all the prejudices, backward attitudes and myths which still surround this issue. By Christine Thomas

World Economy: ARE THE colossal financial frauds exposed recently just the swindles of a small minority or a symptom of the collapse of the boom of the 1990s? Socialist Party general secretary PETER TAAFFE analyses developments in the world economy.

TO MARK the end of two centuries of iron and steelmaking at Ebbw Vale in South Wales, BBC Wales started a series Hearts of Steel, dealing with the aftermath of the job cull in the steel industry last year. Rob Williams

Kent Steel Jobs Threatened:  ASW, THE steel works on the Isle of Sheppey, is in receivership, a situation which has been building up for over two years.

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Unite To Defend Public Services

• Use Brown's billions to rebuild the comprehensive education system.

• Fight for decent pay and conditions for all public sector workers.

• Stop privatisation - bring privatised services back into the public sector, under the democratic control of workers and service users.

GORDON BROWN'S announcement of extra cash for education will be welcomed by parents and teachers - but many will be wondering why it's taken so long to deliver extra funding when education was meant to be New Labour's top priority!

Martin Powell-Davies, Lewisham NUT

Brown says he wants to tackle past decades of chronic under-investment. Well successive governments - including his own - have certainly left schools under-funded and understaffed. Most of Brown's promised £15 billion will be needed just to repair the damage done by years of under-funding. It will still fall well short of the 7% of national income even Blairite Peter Mandelson has admitted is really needed.

Schools have only been kept going by teachers putting in 50-60 hour working weeks. Small wonder many are quitting the job. Only a guarantee of manageable workload and decent pay will reverse the haemorrhaging of qualified staff. But Education Secretary, Estelle Morris, calls a 35 hour week for teachers "potty".

Brown also made clear that he has no intention of rewarding the staff that are keeping our public services going, demanding responsibility in setting public sector pay. Council workers and teachers need to take united action to win the salary increases they deserve.

Teachers are also being driven out by the drudgery of lessons dictated by the demands of National Curriculum tests. Yet Brown's cash will be dependent on schools meeting even more targets. This will mean more pressure to concentrate on sterile teaching to the test.

Successful schools will be rewarded with more money - like the specialist schools New Labour propose to use to break-up comprehensive education. Other cash will be directed to divisive schemes like City Academies.

But it's the schools at the bottom of the league tables, in areas of greatest poverty, that need the most support. Instead Brown threatened them with closure, apparently resurrecting the discredited Fresh Start scheme.

Of course, while state schools struggle, independent schools can rely on better resources and smaller class sizes! Every child should have the same chance of a decent education as the sons and daughters of the wealthy!

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Safety Before Profit!

NEW EVIDENCE of the responsibility of private contractors for the Potters Bar rail crash emerges almost daily, but still tube-workers have to walk out on strike to stop the government handing control of London Underground's tracks to the same firms. Those firms, Jarvis, Balfour Beatty and others have brought disaster and chaos to the mainline railways.

Bill Johnson, RMT

Rail, Maritime and Transport Workers' Union (RMT) members have voted by eight to one to strike on Thursday 18 July against the safety implications of the government's PPP scheme to part-privatise the Tube.

RMT and drivers' union ASLEF took strike action against PPP last year. That dispute was settled when London Underground (LU) promised not to make redundancies amongst workers maintaining track, signals and rolling stock.

This time around only RMT has balloted. ASLEF members should ask their union's leaders why they have abandoned the fight against PPP. ASLEF has seen at first hand what happens when train drivers are forced to run over an unsafe system.

Trade unionists should be doing everything possible to stop the crisis of privatised railways spreading to the tube.

Many ASLEF drivers will respect RMT picket lines and join other drivers who are in RMT, together with station, signal and infrastructure workers.

RMT is at present limiting its demands to a period of consultation over safety arrangements (known as 'the safety case'), before PPP can go ahead.

The RMT leadership should be applauded for organising further strike action. But they must make sure that it does not accept a fudged deal that LU and the government can use to defuse strike action before going ahead with PPP after nominal 'consultation'.

Management's deals cannot be trusted. Last year's 'no redundancy' agreement is already unravelling as management continue to re-write their interpretation of the deal.

This round of strike action must be supported by both tube-workers and passengers. The government is bent on privatisation at any cost while the servile Health and Safety Executive (HSE) has given the go-ahead for PPP just as it did for Railtrack.

HSE is incapable of securing workers' or passengers' safety. It is now up to tube-workers to strike for a safe Tube

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Public spending review: What we think

Not So Generous Gordon

GORDON BROWN, or 'Gorgeous Gordon' as he is now being called by some in the media, has just announced the biggest sustained rise in public spending since the 1970s. Total public spending will, he says, amount to £511 billion by 2006 - a rise of nearly £100 billion.

Increased health spending of 7.4 % over five years was announced in the budget earlier this year. Now education is set to secure a rise to £12.5 billion by 2006 - an average increase of 6%. As a proportion of gross domestic product (GDP) (5.6%) this is higher than the EU average.

This increased spending on public services is welcome but it is not enough. Because of five years of 'prudence' (code for holding down spending on public services) public spending as a share of GDP will still be lower than it was under the Tories in 14 out of the 18 years they were in government. In no way does this represent a return to Old Labour policies.

The latest figures are based on rates of economic growth which Digby Jones, director of the bosses' club the CBI, says are "too optimistic". As Brown was giving his speech share prices were tumbling on the world stock exchanges. Plummeting shares prices could have a profound effect on the real economy (see Behind The Financial Scandals). According to fund manager Gerrard, a further 20% fall would knock nearly 1% off projected growth next year.

Working-class people will already be paying for the latest increases through a hike in national insurance contributions which takes effect from April next year. If the economy doesn't grow as expected, New Labour will have to either increase taxation or borrow money to plug the gap, or cut spending or, most likely, a combination of all three.

Brown has made it clear that the payoff for extra money for public services has to be more 'reform' and 'modernisation' - privatisation. In education this will mean the end of comprehensive education and a return to the inequality of the era of secondary modern and grammar schools.

Much of the new money will in fact find itself in the pockets of private profiteers. Since New Labour came to power in 1997, private financing of public/private projects has gone up from £3.5 billion to more than £14 billion.

According to the Financial Times (FT) (11 July), policing, prisons and asylum policy will mean "decent pickings" for the private sector. "Secondary schools are likely to be the big winners" they explain "... and the biggest operators in the £5 billion a year outsourcing market will benefit".

Of course many of these private companies are seeing their shares fall and investors are getting nervous (see also page 4). However the FT reckons that "... the billions of pounds on offer through the spending review are likely to be too tempting for many companies to shun them". If companies fail however, it will be public money that will be used to bail them out as with Railtrack and the air traffic control service.

While the privateers profit, public sector workers will be expected to pay through the attacks on jobs, pay and conditions which privatisation brings. This 'generous' spending review was announced just as 1.3 million public sector workers went on strike against low pay.

The average pay of local government workers is less as a proportion of average earnings than it was in the 1970s. The lowest paid local government workers, most of whom are women, earn just £4.80 an hour.

The employers (and behind them the New Labour government) have refused to budge even though it would cost just £500 million to meet the workers ' demands of 6% or £1,750 a year, whichever is greater.

But public-sector workers have had enough. This was the biggest industrial strike in Britain for 20 years. RMT workers on London Underground are also striking over safety and privatisation and London teachers are being balloted for further action over pay.

There is huge unrest amongst postal workers, firefighters, college lecturers and health workers.

What is needed now is a one-day public sector strike, which can unite together public sector workers with service users to demand that services are adequately funded with public sector money, that public-sector workers are paid a decent wage and that services are fully publicly owned and democratically run in the interests of workers and users rather those of the private corporations.

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Student funding

New Labour Targets Students - Again

A REPORT by MPs on student funding has tuition fee hikes and high interest loans as its main proposals. The New Labour-dominated committee that wrote it is preparing for new attacks on the right to higher education.

Kieran Roberts

The government review of the student funding system later this year is likely to introduce some measures proposed by the report.

Tuition fees and abolition of the grant are a highly unpopular failure, leading to dramatic falls in the numbers of students from working-class and poor backgrounds going to university. Increasing fees or the interest rates on students' loans can only drive thousands more young people out of higher education.

The report claims that the proposed fee rises and high interest loans will raise badly-needed funds for universities. That's no consolation to the many young people who can't afford to go to university in the first place.

In any case, the vice-chancellors call for an extra £9.9 billion to be injected into higher education over three years. Raising interest rates on loans by 2% would raise just £400 million. Fees also raise £400 million - even if they doubled the money wouldn't come near what's required.

Both New Labour and the Tories have repeatedly slashed spending on higher education. Now New Labour wants students to pay the cost of filling the funding gap.

Students must build a mass campaign of action and non-payment of fees to win decent funding of higher education, the abolition of tuition fees and for the introduction of a decent grant.

If the government tries to implement higher fees, top-up fees or higher interest rates on loans, we will respond alongside students with immediate protests nationwide. Students must also put pressure on the NUS to call an immediate national demonstration against any attacks.

Putting University Out Of Reach

STUDENTS TODAY have to choose between working long hours in jobs on top of their studies or building up large debts at the start of their working lives.

Robert May

Everyone's heard of the conditions that many students live in. This isn't a chosen lifestyle, most students just can't afford any better.

For middle- to upper-class families who can afford to put their children through higher education this is not really a problem.

But working-class families are battling to put their children through university - you'd think that the government would help them out, especially if they hope to achieve their goal of getting half of all under 30 year-olds in higher education by 2010.

Why are they even considering raising tuition fees, putting university further out of the reach of thousands? They say it's for more funding for universities, but can't this money come from those who can afford it? Axing the royal train for example would put many people through university.

Blair seems intent on destroying his own idea of "a classless society".

With only the wealthy being able to afford a university education, only the wealthy will gain top paid jobs. Without an equal education for all, this cycle is very unlikely to be broken.

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No To Bush's War For Oil Profits

A LEAKED Pentagon paper revealed plans for a massive US-led invasion of Iraq to try to remove Saddam Hussein. This "regime change" could kill more than 10,000 Iraqi civilians.

Dave Carr

It could also further politically destabilise the Middle East which, ironically, would jeopardise the strategic interests of US and Western imperialism.

US President Bush tries to justify this naked imperialist aggression by citing the Iraqi dictator's refusal to let in UN weapons inspectors and unsubstantiated claims that he possesses "weapons of mass destruction". Bush also claims that Saddam Hussein had plotted with al-Qa'ida terrorists.

But journalist John Pilger (Observer, 14 July) points out: "The coming attack has nothing to do with Saddam Hussein's 'weapons of mass destruction', if these exist at all. The reason is that America wants a compliant thug to run the world's second greatest source of oil."

Hypocritically, the US and Britain still back many other dictatorships and repressive regimes world-wide who share Saddam's alleged transgressions.

Moreover, in the 1980s the West supported Saddam's bestial regime. During the 1980-88 Iran/Iraq war the US, Britain, France, Germany and the former Soviet Union armed and financed him to contain Iran's 'Islamic revolution'.

Over a million died in this war. The West, including Thatcher's government looked the other way when Iraq used deadly nerve gas on the battlefront and against Iraqi Kurdish civilians.

But when Saddam invaded oil-rich Kuwait, the West, led by US president Bush senior, embarked on a costly, destructive war to drive Saddam's forces out.

However, having routed the dictator the West stopped short of his overthrow fearing the dismemberment of Iraq and the dominance of Iran. This meant abandoning armed uprisings by Shi'ites and Kurds who were brutally suppressed by Saddam's Republican Guard.

Now Bush junior and Blair are promoting a motley crew of exiled Iraqi dissidents as a successor regime to Saddam. In Kensington, London last week, the US-financed Iraqi National Congress and assorted former Iraqi army chiefs declared their wish to lead Iraq post-Saddam.

Shaky regimes

UNLIKE Afghanistan's Northern Alliance who fought the Taliban regime, these stooges have no significant presence nor support within Iraq.

Most were former Iraqi Baathist party leaders or armed forces officers. The Independent uncharitably called them "a disparate bunch who know more about the price of a BMW than the situation in Baghdad."

Scott Ritter, the right-wing American former UN arms inspector was even more scathing about the Iraqi opposition's fate under a US backed regime, saying: "There is no viable opposition and... once Saddam is removed - if he is removed through military action - anybody who meets in Kensington will have a zero future in Iraq.

"The opposition is merely a political foil used by those in Washington who are trying to foist the war on the American people for their own ideological reasons".

An invasion and occupation could enrage the Arab and Muslim world. It could topple shaky regimes such as Saudi Arabia and lead to more reactionary clerical dictatorships.

Even Turkey, the only Muslim country in NATO, and expected to support the invasion, is currently racked by a deepening economic, political and social crisis (see page 9).

Meanwhile the region's masses suffer from imperialism's foreign policy - crippling UN sanctions against Iraqi civilians; support for Israeli state oppression of Palestinians; backing the House of Saud and many other rotten dictatorships.

Workers in the West should show solidarity with the region's working masses against Western governments' war plans and also support the masses' democratic movements to rid themselves of dictatorial regimes and imperialist domination and fight for a socialist alternative.

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Rape: "No" Really Does Mean No

THE TRIAL of top snooker player Quinten Hann for rape, highlighted all the prejudices, backward attitudes and myths which still surround this issue.

Christine Thomas

Hann was eventually acquitted. During the trial two women came forward to say that they had also been attacked by him but their claims were not put before the court. Whatever the truth surrounding this particular case, the publicity it engendered has reinforced the mistaken but commonly held view that large numbers of women are falsely crying rape.

In the Hann case the defence QC, former Tory MP Sir Ivan Lawrence, labelled the accuser a "spiteful, lying young lady". The Daily Mirror declared that Hann was the real "victim" and repeated the call, which often follows such high-profile cases, for the accused to have anonymity as well as the accuser.

One in four women will be raped or suffer an attempted rape at some time in their lives. Despite scientific advances such as improved DNA testing the number of reported rape cases resulting in conviction by the courts has drastically fallen over the last two decades from 33% in 1977 to just 7.35% today.

There are two conclusions that could be drawn from these figures. The first is that nearly 93% of women who report a rape are "spiteful and lying"; the second that the criminal justice system is badly failing.

The first conclusion is clearly ridiculous and yet the media peddles the myth that if the accuser is acquitted then he must be innocent and the woman lying. In fact a study by the New York sex crimes analysis unit found that just 2% of reported rapes are false allegations, the same percentage as for any other criminal offence.

The idea that women would lie about rape is rooted in backward stereotypical ideas about women and their 'natures'; that they feel guilty or ashamed about having sex for example or are out to get 'revenge' on the man, for whatever reason. Judge Michael Hyam when summing up the trial of a student accused of rape in 1993 said: "experience has shown that complainants make up such allegations for various reasons and sometimes for no reason at all".

That this idea still holds sway prevents women from receiving justice in the courts and can deter women from pursuing cases or reporting them in the first place. One US study carried out in 1992 found that only 16% of rapes were actually reported.

In fact prejudices and myths about women, which are often reinforced by the media, heavily influence rape trials and go some way to explaining why so few cases actually result in a prosecution.

"Sometimes, in the heat of passion when the woman says no she doesn't necessarily mean no" declared Sir Ivan Lawrence during the Hann trial. "Sometimes a woman says no to make it more exciting to the man" he told the judge.

Incredibly this backward myth that no really means yes is still raring its ugly head in rape trials even in the 21st century.

Another misconception is that rape results from irresistible male sexual urges rather than it being at root an action of sexual power and control. In a previous high-profile rape case, DJ Richard Baker admitted: "I'd seek lone females and terrorise these poor girls... I put so much fear into them they wouldn't resist me. I wanted to be in complete control".

Social attitudes

The idea that men should have control over women, in particular over their sexuality, has its roots in the development of private property, the division of society into classes and the rise of the family as an institution for maintaining and perpetuating both these things.

Of course, society is not the same as it was in Roman times for example, when men's control of women sexuality was deeply entrenched. Attitudes have changed as society itself has changed. But ideas can become quite deeply embedded within society and continue to have an effect even after the material basis for them has disappeared.

So until just ten years ago, for example, it was legal for a man to rape his wife because once married, she was considered his property and therefore he had the right to force himself on her sexually.

Even though the law has now been changed, courts are still reluctant to find men guilty when they are in an intimate relationship with the victim. This can have serious implications since most rapists are known to their victims.

The very term 'date rape', which is used by the media to describe rape where the people concerned know each other (although often it might be for only a few hours), trivialises acquaintance rape.

The Sentence Advisory Panel has proposed that sentences for acquaintance rape should be more lenient than those for 'stranger' rapes. Yet many women have explained that being raped by someone who was known and trusted can be just as dramatic as rape by a stranger.

Court injustice

The whole court process can be an extremely intimidating and humiliating experience for women. Some have described the cross-examination they have to endure as like being raped for a second time. In 1999 the law was changed to make it more difficult for a woman's previous sexual history to be raised in court but this has been undermined by its subsequent judgment.

It's considered acceptable for a woman's sexual past and general lifestyle to be dragged through the courts even though they have no bearing on the case concerned. Defence lawyers hope, of course, that if they can persuade the jury that the woman is 'sexually promiscuous' then they will believe that she must have consented this time.

Yet it is extremely unlikely that the alleged perpetrator will be cross-examined about his previous sexual experiences or attitudes towards women, even though these could be very relevant in a rape case.

Often prosecutors do not even speak to the complainants until just hours before the trial because they are supposed to represent the state and remain impartial. According to Sue Lees, a university professor who has written a book on rape, prosecutors rarely ask the right questions when cross-examining defendants.

A study carried out in ten police forces in April 2000 recommended more sensitive treatment of rape complainants. It proposed better training for police, forensic and medical examiners, prosecutors etc as well as recommending specialist teams of prosecutors. When these were introduced in Queens, New York conviction rates increased to 85%.

These recommendations should be implemented and expert witnesses should also be called on in rape trials to dispel many of the myths related to this issue. Changes in the whole criminal justice system, from the police to the Crown Prosecution Service to the courts are necessary if rape victims are to get a fair deal.

But ultimately this economic and social system, which is based on inequalities of power wealth and reinforces backward attitudes towards women, needs to be changed.

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World Economy

Behind The Financial Scandals

These are excerpts from a document from the Committee for a Workers' International, the international organisation to which the Socialist Party is affiliated. The full text is available from www.socialistworld.net

THE LATEST financial collapses and scandals show how correct Karl Marx was well over a century ago to write in Capital that the "principal spokesmen of credit" had the "character of swindlers and prophets"... who engage in the "purest and most colossal form of gambling".

However, these collapses - Enron, Global Crossing, World-Com, Xerox, Vivendi - have thrown up modern swindlers - Kenneth Lay of Enron, Bernard Ebbers of WorldCom - who make the swindlers of Marx's day appear like house burglars compared to bank robbers.

Even the Daily Mirror [29 June 2002] concedes: "How Karl Marx must be rubbing his hands with glee and saying 'I told you so'."

The vast majority of capitalist commentators, however, are rushing to defend their system with such headlines as "US capitalism down, not out" [Financial Times]. The capitalists and their hirelings fear that the whole house of cards, built up in the 1990s, is facing collapse.

When the Asian crisis broke in 1997, US economic commentators growled about 'crony capitalism'. Now however the much-vaunted neo-liberal Anglo-Saxon model of capitalism is an even more blatant example of crony capitalism and lies in ruins.

The parasitical character of this model - decisions on the basis of shareholder pressure and value, the colossal process of mergers and acquisitions amounting to at least $1 trillion in Europe and the US alone in 1999 - is clear. It has now produced the world's largest bankruptcy (Enron) and the world's greatest accounting fraud (WorldCom).

In addition, the two largest acquisitions in history, Vodaphone-Mannesmann and AOL-Time Warner, have "destroyed hundreds of billions of dollars of shareholders' funds." [The Guardian].

Will Hutton, former editor of The Observer, and defender of 'European capitalism' against the US model, remarks acidly: "The majority of mergers and takeovers in this stock market dominated (US) economy have proved destructive; few had any value and most lower it.

"Between 1993 and 2000, Wall Street had brought 3,500 small hi-tech companies to the stock market; even before the dotcom bubble had burst, more than half were trading below their initial offer price or had gone bust. While dividend distributions have doubled as a proportion of profits, investment in the core of American business was troublingly low, the US has less invested capital per employee than France or Germany".

The US giants, largely financially driven and slaves to 'shareholder value', have done everything to maximise the share value of a company, including lining the pockets of the chief executives (CEOs).

Share prices slump

CAPITALIST COMMENTATORS comfort themselves with the notion that all booms bring with them 'overheads' (read swindling on a massive scale). Yet, never has financial chicanery, fraud and 'crony capitalism' taken place on such a scale as during the 1990s boom..

As The Guardian commented: "...The late 1990s ...was a time when many turned a blind eye and levels of corporate governance and auditing clearly became, in many cases, lax."

The term "lax" is a massive understatement. Accountants are the alleged watchdogs of industry, yet accountancy firms like Andersen are complicit in the cover-up which allowed the perpetuation of massive fraud, in the case of Enron for instance.

The huge fees paid out to accountancy firms, which are themselves multinationals, ensures their complicity in the fraud taking place.

CEOs, with more than 50% of their salary in the US paid in 'stock options', also have an interest in ensuring a rise in the share price, which in turn ensures a rise in their income.

This led to the covering up of a $4 billion 'black hole' in the case of WorldCom as shares were boosted to unprecedented levels of 30, 40 or even 50 times the real value of assets.

No matter; the bosses' salaries soared. In 1980, a chief executive (CEO) in the US made $42 for every $1 earned by one of his or her blue-collar workers. By 1990 that had stretched to $85 and by 2000, CEOs were earning $531 for every $1 taken home by an ordinary worker!

The average industrial worker has been impoverished, relatively speaking, and many in real terms. But most voters in US elections have also lost out in the share collapse. 50% of those who voted in the last US elections own stocks and shares.

The drop in share prices affected them but the process has not finished yet. In 1996, the chairman of the Federal Reserve, Alan Greenspan, attacked the "irrational exuberance" of investors in equities. But the value of shares kept rising, at one stage reaching 50% above the level of 1996.

Even with the recent drop it has still not returned to the 1996 level. Further drops in equities are likely which will not be compensated for completely by a rise in house prices.

False picture

WHAT THESE events underline is the completely false picture of the 1990s boom presented by capitalist economists at the time.

US capitalism, they said, had initiated a new long-term phase of growth, stretching into the indefinite future and buttressed by an unparalleled growth in the productivity of the US in particular. All of this has now been shown to be bogus, with profits artificially inflated and the balance sheets of companies 'poisoned'.

The much vaunted 'productivity miracle' was accepted as a fact at the time, but the CWI and Socialist Party argued strongly against this idea in written material.

Of course, the ruling class claim that all these developments are so much 'froth' because the 'fundamentals' of the US and world economies remain 'healthy'.

Capitalist economists have claimed that we have gone through the "recession that never was". Comparing the world economy to an aeroplane, they argue that rather than landing - a recession - it merely experienced "touch down" on the runway and was poised once more to soar into the heavens.

This is entirely false. Not only has there been a considerable slowdown in the growth of the world economy but the increase in world trade contracted from 12% to almost zero in 2001. This is an even bigger drop than in the 1990-92 recession.

The OECD now expects employment in the advanced capitalist countries to fall this year for the first time in two decades.

The US economy is still the key. US consumers were the consumers of last resort, which managed to bale out the world through the Asian financial crises of 1997, the financial collapse of Russia in 1998, the problems of Brazil in 1999 and even during the latest slump.

They sucked in imports from the rest of the world and more importantly, foreign investors were happy to pour money into the US markets to cash in on booming hi-tech industries. Now, they are deterred from pumping more money into the US economy.

The huge current account deficit of 4.3% of US gross domestic product in the first quarter of 2002 was plugged by the $1 billion a day which foreign investors poured into the US markets.

However, the recent depreciation of the dollar, precisely because the 'fundamentals' of the US economy are far from sound, threatened to go into freefall without the intervention of the Bank of Japan and probably, behind the scenes, other central bankers as well.

If the dollar were to go into freefall that could trigger a world financial crisis which could choke off even the first 'shoots' of a claimed recovery in the world economy.

Stagnant profits

THE COLLAPSE of equities and the decline of the dollar, which will push up the price of imports into the US, are bound to hit the US population's famed propensity to consume at ever faster rates.

Some capitalist commentators take comfort in the fact that US manufacturing industry appears to have slightly improved in the past period.

However, this is largely accounted for by the rebuilding of stocks with a slight improvement in employment, particularly in temporary workers. The US, in effect, is now suffering from triple deficits: households in debt, the government in debt and the nation as a whole in debt.

Will the consumer be allowed to continue 'consuming'? If Greenspan has his way this will continue to be the case as the Fed has pursued a policy of reducing the cost of credit with rates of interest below inflation.

The boom in the housing market in Britain and the US in particular is a factor in allowing house owners to borrow against the increased value of their house and hence to keep spending. On the other hand, the deflation of equities could convince consumers, particularly in the US, to pull in their horns and rebuild their savings.

'Hot money' went into the US in the recent period but is now leaving for the safer and more lucrative haven of Europe. The Financial Times sums up the US economy's prospects with the headline: "The Eagle is landing".

Once more, capitalist economists have begun to worry about the dreaded 'double dip' in the US economy, which they dismissed up to recently. Some now say that this crisis is 'systemic'.

Crucially, profits and investment have dropped in the last two years and are now stagnant. The Experian company, which analysed the profitability of 2,000 businesses generating three-quarters of the UK's non-financial GDP, reports that "the average return on capital of companies fell to 8.37% compared with 9.05% the previous quarter and 10.84% in the first quarter of last year.

It continued: "Profitability among engineering companies dropped from 6.93% to 4.81% year-on-year, taking the decline to about 60% over three years.

"However, the sharpest fall in returns was among motor dealers, hit by price-cutting by manufacturers which also triggered a drop in used car prices. Here, return on capital declined by more than a third during the year to 6.16% ...The ratio of household debt to incomes is at an all-time high". [Financial Times]

This is against the background of large-scale redundancies of failing firms, particularly in the ailing telecoms and technology sectors of industry.

A period of insecurity

IF THE US economy should go into a tail-spin - a slump or serious recession - it will tip over countries and even regions of the world economy, which are either in economic meltdown - Argentina - or threaten to lever others over the abyss, like Brazil, Uruguay and Paraguay in Latin America.

The Bush administration, despite disclaimers to the contrary, is one of the most interventionist in recent US economic history. It has ploughed in huge liquidity, through the measures of the Fed in cutting interest rates, tax cuts, increases in military spending, etc., in the aftermath of 11 September.

Indeed, one consequence of this crisis worldwide is the compulsion felt by different capitalist governments to sin against the 'non-interventionist' creed which was supposed to be the 'holy of holies' of seamless globalisation.

Now, with the crisis in just its first stages, the capitalists are touching the economic gear stick which threatens to throw it into reverse. Even Chirac's right-wing regime in France intervened, behind the scenes, in the collapse of media conglomerate Vivendi, and is examining the possibility of renationalising privatised France Telecom.

This is the music of the future in the event of a serious economic recession or slump. It is an indication of the uncertain period for capitalists that they move out of equities into the 'safe haven' of so-called real assets: property, gold, mining shares and long-term securities in the form of bonds.

Whether or not this betokens a new deep slump of capitalism or a serious recession, a double dip, remains to be seen. A leading share analyst in Britain has predicted stagnation in equities for the next 10 years ˆ la Japan.

The economic future for the foreseeable period is one of stagnation, rising unemployment, of contracting living standards for significant sections of the population.

The fall-out from the deflation of the 1990s bubble has already been felt in the pensions sector. Millions of workers in the US and Europe have had the prospects of a relatively secure future snatched away as the pension funds have lost billions.

At the same time the ruling class, faced with a so-called demographic time bomb - people living longer - as part of the general offensive against the living standards of the working class, are attempting to extend the age of retirement for women and of men. A major battle by workers in defence of past gains is posed.

Make the rich pay

AFTER EVERY series of major financial scandals, the cry goes up from the capitalist commentators that the financial 'watchdogs' have not done their job in sounding the alarm bells about companies' financial improprieties.

The Financial Times wrote: "The [Enron] board also failed to ask questions about conflicts of interest that harmed shareholders' interests. Executives were allowed to run off-balance-sheet partnerships that realised hundreds of million of dollars at Enron's expense."

Their solution is to appoint further 'watchdogs'. After the 1929 Wall Street Crash, the US Congress passed the 1934 Securities Exchange Act. But as John Galbraith comments in his book The Great Crash of 1929 it was "not at that time especially necessary. Markets and financial adventures were then and for a long while after restrained not by the SEC but by the memory of what happened in 1929."

However, these 'controls' did not deter the "prophets and swindlers" from carrying out greater and greater fraud later, no more than appointing 'watchdogs' to watch over the 'watchdogs' will today. The capitalists will find ways to circumvent any restrictions on them.

The very minimum that should be demanded by working people - who pay for these swindles - is the opening of the books of big business to committees of workers, trade unionists and representatives of consumers.

So-called 'business secrets' should be abolished. They are a means of keeping the dark secrets - financial chicanery - hidden from public gaze. When we are all 'whistle-blowers' about the financial cheating and crimes of big business, then there will be no need for any more 'whistle blowing'.

This financial crisis is already having an impact on working people. Jobs are being lost as companies implode and millions face losses in their savings and pensions.

The call for the defence of jobs and the taking into public ownership of companies cutting employment needs to be taken up by the labour movement. Above all the demand that only the rich should pay for this crisis needs to be heard, and the state should guarantee decent pensions for all.

Capitalism offers a period of insecurity and uncertainty. It is a blind system, with even its 'experts' consulting the 'tea leaves' for predictions for the future. Lodged in the situation today is the possibility of another devastating slump like 1929.

On the other hand, a period of stagnation, of deflation, of an extended period of economic depression with only small anaemic growth in production and a growth in the social malignancy associated with this, of poverty, rising unemployment, increased class conflict, etc., is possible.

We must be prepared for a change in the situation, which will present big opportunities for socialists and Marxists.

The Socialist 19 July 2002 | Top | Home | News | The Socialist 

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Steel Jobs Massacre

TO MARK the end of two centuries of iron and steelmaking at Ebbw Vale in South Wales, BBC Wales started a series Hearts of Steel, dealing with the aftermath of the job cull in the steel industry last year.

Rob Williams

The programme was in the form of a video diary showing how a number of Corus (formerly British Steel) workers and their families dealt with the closures of Ebbw Vale and Llanwern 'heavy end' (actual steelmaking) plants. Other plants in South Wales were affected, notably Bryngwyn, outside Swansea, which was closed.

The first programme showed how the families reacted to the decision and reflected their feelings of shock, anger and insecurity.

Many workers could identify with their fear of the future when they realised how their lives would have to change after losing relatively well-paid jobs.

One of the mothers asked how they were going to be able to support their daughter who was starting university in a few months time. Others started to think about moving from the area but of course, where to?

The impact on Ebbw Vale in particular was heartbreaking. Workers there faced the same bleak prospect experienced by the miners after 1985, another valley with no industry, jobs or hope.

The most interesting part of the programme was the thoughts of a Llanwern shop steward who was also an ex-miner. The defeat of the miners' strike was used by right-wing trade union leaders, like those of the steel union ISTC, to tarnish the idea of militant trade unionism. Their strategy of compliance in the steel industry has seen a gradual worsening of conditions and leakage of jobs.

The last few years have seen management emboldened by and dismissive of the union, launch a major offensive against conditions, including seniority, in steel plants.

The closure and redundancy programme was the ultimate proof that weak trade unionism cannot protect workers' jobs.

The programme showed that there is no automatic resistance from workers. Years of the 'dented shield' approach effectively disarmed the workers in the steel industry. As in many industries, the right-wing leaders became divorced from the membership who had no confidence in their ability to lead a serious fight against Corus.

No-one would argue that any union leadership would have guaranteed a victory or belittle the task facing the workers but the shop steward himself contrasted the reaction of the ISTC with that of the NUM in 1984 to the Tory-sponsored pit closure programme: "What we haven't got is a Scargill figure."

More importantly, what was lacking was a well-organised trade union, able to keep its members informed and actively involved over a whole period before and during the dispute. Corus workers had to find out information from snippets on the news rather than at mass meetings or from union sources. Inevitably, any mood to resist was dissipated.

The programme also highlighted the role of New Labour, who complained about the decisions of big business, rather than having any sort of programme to even contemplate re-nationalisation.

In fact, as we now know, a few hundred thousand pounds donation from one steel entrepreneur meant more to New Labour than the working-class communities facing devastation.

Hearts of Steel is a must-see for workers and their families, particularly in South Wales.

It is a visual text-book of the reality of the decisions of big business and their effects on workers and their families.

If it makes people angry and determined that our class should avoid further meek surrenders in the future, then some good would have come out of it.

ISTC members in a Tredegar factory started a 'work to rule' in a dispute over changes in their pensions just two days after the programme was aired.

Kent Steel Jobs Threatened

ASW, THE steel works on the Isle of Sheppey, is in receivership, a situation which has been building up for over two years.

Anne Ursell

330 people stand to lose their jobs, which will have a big effect on Sheerness and the surrounding area.

When I asked an official from the steel union ISTC if they were going to do anything to fight the sell-off or closure of the steel mill, he said in a posh accent: "I'm not going to give you anything you could use to incite our members!"

But I know workers are angry that the situation has got so bad at the mill.

The Socialist 19 July 2002 | Top | Home | News | The Socialist 

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