Socialist Party documents

British Perspectives 2013: a Socialist Party congress document


[Next]

Economy in crisis

9. British capitalism, and therefore the working class, faces a bleak future. Five years into the crisis, UK gross domestic product (GDP) is still 12-15% below the pre-crisis trend.

The economy stuttered into growth for only the third quarter last year, fuelled by the massive expenditure on the Olympics.

Further developments in the on-going Eurozone disaster will at a certain stage trigger a new deeper stage of the crisis in Britain.

But even without that, the government's own quango, the OBR, only expects the economy to grow by a puny 1.2% in 2013.

Most economic commentators, however, consider this wildly optimistic. As the IPPR has pointed out this would only be possible if consumers started to spend more which "would be a significant change from the trend for the last four years, and is very unlikely".

On the contrary, inflation, particularly in food, power and fuel bills, will further eat into to the purchasing power of the majority in the coming year.

10. Mervyn King, governor of the Bank of England, has predicted a decade or more of economic misery. British capitalism is in a dead end, with its best scenario being to keep 'bumping along the bottom' as it has since the autumn of 2010.

Britain has become a new Japan, with its lost decades of stagnation, except that the Japanese crisis took place against the background of growth in the world economy; Britain today is one of many Japans in a stagnant, crisis-ridden world.

As Larry Elliot put in (Guardian 30 November): "Japan ended up with a zombie economy in which zombie banks were lending to zombie companies.

"Worryingly the UK is showing signs of heading in the same direction. One in 12 companies are able to repay only the interest on their debts."

11. In a world of crisis, there is a particular crisis of British capitalism, which is paying the price for its refusal to invest in industry over decades.

Today, manufacturing only accounts for 10.5% of Britain's economy. Despite the CBI and Lord Heseltine's call for the government to fund ways to increase investment in manufacturing, there is no prospect of rebuilding Britain's feeble manufacturing base.

On the contrary, manufacturing shrank by 2.1% in the first three quarters of 2012 and exports continue to decline. At the end of last year industrial output reached its lowest level since 1992.

12. The weakness of British capitalism is summed up in the 'mysterious' dramatic fall in productivity figures since the crisis began.

In the private sector productivity per hour worked fell an incredible 4% in the first nine months of last year.

UK productivity has long lagged behind other advanced capitalist countries, as British capitalism has relied on cheap labour rather than investing in developing technology.

During the crisis investment has fallen to record lows, with 750 billion sitting idle. The productivity gap is the biggest since 1990, with UK workers 20% less productive than the G7 average.

Economists have deduced that the latest fall in productivity is largely as a result of the crisis in the finance sector, which drove UK economic growth during the last boom, as it "adjusts from the unsustainable business models of the last decade" (Financial Times, March 2012).

In other words, Britain's previous productivity figures were artificially high because they were based on the massive bubbles in the finance sector which dominates the British economy. The economic crisis has revealed the real weakness of British capitalism.

13. The service sector accounts for a massive two thirds of the UK economy, and is entering a new phase of the crisis as workers are forced to tighten their belts.

Retail sales over Christmas were down markedly with average British household spending 80 less than expected in December.

Debenhams described it as the toughest Christmas for 40 years. The only supermarkets to do well over Christmas were the very cheapest - Aldi, Lidl and Iceland - and Waitrose, the supermarket of the wealthier.

Before Christmas, the collapse of Comet left 7,000 workers without jobs and, in the immediate aftermath, Jessops has gone into administration axing 2,000 jobs. As 2013 unfolds, more firms are likely to follow.

14. The small decrease in unemployment figures at the end of last year will not last. In any case the real levels of unemployment are disguised by the huge levels of under-employment, which has increased by at least one million since the crisis began to a massive 8.1 million.

This includes workers who have been kept on by employers on reduced hours, in the hope that the crisis will be short.

Many of these will be laid off in the next period. However, the part-time army is predominantly made up of millions of workers trying to exist on a few hours of casual work every week.

These are now a permanent feature of British capitalism. Marx's conception of a 'reserve army of labour', designed to keep wages down because there is always someone desperate enough to work for less, has been recreated.

As we comment on later, there is a burning need for the trade union movement to take seriously the organisation of the part-time casual workforce, and also to attract the unemployed to the banner of the labour movement.

Measures such as 'UNITE community' could have the potential to play an important role in this.

15. The disastrous effect of government austerity in exacerbating the economic crisis has even led the IMF to call on Osborne to switch to 'Plan B'.

Cameron and Osborne have rejected this, saying they are adopting Plan A+, continued austerity combined with measures to 'assist business'.

Of course the Bank of England has implemented a kind of Keynesian policy with 'quantitative easing', but to date the government's claims to help the economy by investing in infrastructure have not amounted to a hill of beans.

The idea of a state bank has remained a dead begging letter from Cable to the government. The 5 billion extra capital spending announced in the autumn statement was predicted to have "a minor, almost negligible" impact on overall economic growth, by the Ernst and Young Item Club.

The same puny figure was announced in last year's spending review, but less than half that was actually spent on buying goods or services or paying wages.

It is not excluded that the protracted economic crisis could force the government, under pressure from business, particularly from the construction companies, to carry out more sizeable investment into infrastructure.

However, this will be combined with a drive to continue with savage public sector cuts.

16. Former Tory Chair, Lord Ashcroft, let the cat out of the bag when he blogged that the odds were stacked against his party winning the general election and that, "Ed Miliband ought to be able to put together 40% of the vote without getting out of bed".

Knowing that they stand little chance of winning the next election the Tories are attempting a scorched earth policy, creating a wilderness and knowing that Labour in power would not reverse their policies.

In doing so they have the support of short-sighted British capitalism. The CBI has made it clear that it continues to "stand shoulder to shoulder" with the government on austerity.

As we have pointed out previously, there is an ideological element to the government's cuts and privatisation programme.

Recently released papers show that 30 years ago the Thatcher government considered almost every policy that is now being implemented by the Con-Dems in the name of 'austerity'.

Thatcher, however, did not dare to go so far. But Miliband's 'one nation' Labour would not have pursued a fundamentally different policy to the Con-Dems.

Miliband defends capitalism which sees the road to increasing profits to be over the living conditions of the working class, particularly by driving down the 'social wage' - that is benefits, pensions, the NHS etc - despite the fact that this will further shrink the UK market! At the same time, as we have pointed out previously, the capitalists are clamouring for the further privatisation of public services in order to find a profitable field of investment.

17. One section of the ruling class, voiced by Mervyn King, has been pushing for even harsher austerity, arguing that the Tories are too worried about electoral popularity! King has talked in brutal terms about the Japanisation of the UK economy, saying that a sharper 'readjustment' is needed.

The Financial Times summed it up by saying that, "Bank of England insiders fear that the recession did not generate sufficient destruction to enable the creation of more productive companies in the upswing...At the heart of the new thinking lies the remarkably low mortgage repossession and corporate liquidations in this downturn."

18. King is arguing that not enough outmoded value has been destroyed in the recession to create the basis for new investment, leading to a new upswing with a higher rate of profit.

He is making a call for more companies to close, more people to be thrown out of their jobs and homes so that, trampling on our misery, capitalism might be able to find a new stability.

In attempting to carry out this policy, however British capitalism would face powerful and determined resistance by the working class.

Keynes himself said that his theories were designed to 'avoid revolution', and the capitalist class could be forced to move in a Keynesian direction under the huge impact of the workers' struggles against austerity that are coming.

Concessions would be given which the capitalists would then attempt to take back at a later stage if the working class had not yet succeeded in taking power.

19. The working class today faces a weak, divided government, ultimately reflecting the capitalists' inability to find any way out of the crisis and, flowing from that, the increasingly weak social base for all the capitalist institutions in Britain.

All of the capitalist parties, including Labour, are inherently unstable with the potential for fissures to open which could become splits at a later stage.

The politicians head up the unpopularity poll, but trust in the capitalist media, church, the police and even the BBC has all been markedly undermined in the last year as scandal after scandal has revealed their feet of clay.

The Leveson enquiry, in particular, for all the timidity of the final report, has exposed the corrupt character of the relationships between different sections of the capitalist state.

The renewed attempt to popularise the royal family, via 'Kate and Will', is partly a conscious attempt to strengthen the social reserves of the capitalist state. The queen attending cabinet is a deliberate politicisation of the monarchy's role.

20. There are growing splits in the state, particularly the antagonism between the government and the police, shown in 'plebgate', in reality a police conspiracy against the elected government and a Tory one at that.

Imagine the kind of conspiracy that they would be prepared to organise against a government that threatened the interests of the capitalist class! The stupidity of the government that, unlike Thatcher, has attacked the conditions of the police force along with the rest of the public sector, has opened a divide in the police which the workers' movement needs to attempt to widen.

This does not in any way diminish our opposition to the way the police are used against workers on strike and protests and demonstrations.

Nor does it lessen our campaigns against police racism, as mostly recently indicated by the complaint of Stephen Lawrence's brother that, because he is black, he has been stopped and searched 25 times in the last few years.

This is all too common, it is estimated that black men are, on average, 28 times more likely to be stopped and searched than white.

We have to campaign against all police brutality and harassment. At the same time, it is in the interests of the workers' movement to increase the class divisions in the police.

Polls have shown 87% of police officers in favour of fighting for full industrial rights, including the right to strike.

21. The government's weakness will not prevent them stepping up their assault on the working class, unless the working class stops them.

The cuts experienced so far, devastating as they have been, are small beer compared to what is coming in the next year.

There are so many attacks facing the working class it is not possible to give full justice to them in this short document.

Nor is it possible to say definitely which attacks will be met with the biggest fight back. The need to generalise the struggle, via a 24-hour general strike against austerity in the first instance, is absolutely clear.

In the meantime, however, we could see explosions on a multiplicity of issues. Where the organisations of the working class fail to give movements an organised cohesive form we are likely to see inchoate rebellions, including further riots, perhaps even on a bigger scale than the summer of 2011.

We do not condone rioting, which gives the capitalists' a whip to strengthen repression, as well as damaging working class communities and small businesses, but we understand why they are inevitable if a generation of youth are left with no future.

We have to aim to win the most oppressed sections of youth to the banner of socialism. We should also be prepared for social protests and movements, including the kinds of raids on supermarkets and occupations of empty properties that are starting to place in other countries in Europe.


[Next]