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From The Socialist newspaper, 23 September 2008

Editorial

New Labour flounders in face of economic crisis

The Trades Union Congress took place less than a month ago. Its leaders reflected their members' anger at New Labour, demanding that the government introduce a windfall tax on the utility companies in order to help those who cannot afford to heat their homes. As Tony Woodley, joint general secretary of the union Unite, vividly put it: "If we don't, we'll be insulating old people's coffins this winter". As a result of an amendment moved by railway union the RMT, the TUC also called for renationalisation of the gas and electricity companies.

At Labour Party conference the union vote meant that a resolution was also passed there calling for a windfall tax. Chancellor Alistair Darling, however, has made it clear it is not worth the paper it is written on. In his speech he categorically ruled out a windfall tax, never mind considering the TUC's demand for the utilities to be renationalised. The resolution will be sidelined to a 'policy forum' never to see the light of day again.

As a result of New Labour's policies, millions of people will be choosing whether to eat or to heat their homes this winter. Yet, disgracefully, at the Labour Party conference many of the same trade union leaders are singing the 'loyalty to Gordon Brown' hymn. Brendan Barber, secretary of the TUC, declared: "It is at times like these ... that our country most needs the wisdom and experience of this Labour government - led by Gordon."

Few trade unionists and working class people agree. On current opinion polls New Labour is facing disaster at the next general election as millions blame the government for failing to protect them against the looming economic crisis. The crisis is only starting to hit in Britain but it is clear that it will be severe. As The Socialist warned, the inherent contradictions within capitalism - a system based on production for profit rather than need - could not indefinitely be disguised by the phenomenal growth of credit and the finance system.

The OECD predicts that Britain will suffer the worst crisis of any of the G7 countries. Unemployment is now rising rapidly, with 40,000 jobs under threat from the HBOS banking merger alone. House prices have fallen by over 10% already and could drop by 30% or more. Brown's claim to have ended 'boom or bust' is in tatters.

Labour cheerleaders

New Labour is attempting to lay the blame for the crisis across the Atlantic, as far from its own doorstep as possible. It is true that this profound crisis of global capitalism began in the US. New Labour, however, has been among the most enthusiastic cheer leaders for 'unregulated' capitalism. Brown's vague promises to ensure greater regulation of the City come after a decade of lecturing other capitalist powers against having too much regulation.

While New Labour refuses to even consider nationalising the energy companies, over the last week in the US, the most powerful capitalist country on the planet, the government has been forced to carry out state intervention and nationalisation on a vast scale. This, of course, is not to assist US workers, but in order to try and prevent a 1929 style economic catastrophe.

As the Financial Times put it in an editorial on 18 September: "The nationalisation of AIG has caused problems for future policy makers, but future systemic moral hazard is of secondary importance when the system itself is at risk."

The latest desperate scheme of US Treasury Secretary Paulson to avoid economic catastrophe, is to create a state run 'bad bank' that would buy up all the bad mortgage related debt of financial institutions operating in the US. This would be an unprecedented level of state intervention costing up to a trillion dollars. The Democrats and Republicans are currently haggling over the plan, widely described in the US as 'welfare for the rich'. The Democrats are under pressure to get the plan linked to at least some minimal relief for the up to ten million Americans who face losing their homes.

If this plan is agreed it may act to temporarily stabilise the finance and banking sector. However, even this is not guaranteed. There are many problems, including the price at which the debts are bought and the issue of non-mortgage related bad debts. A glimpse of the completely opaque world of the finance sector today was given by the nationalisation of AIG. A team of government analysts and investment bank accountants could not work out how much cash would be needed to collateralise the bank's credit-default swaps. Estimates were from $20 billion to $85 billion!

Profound crisis

It is clear that even in the most favourable scenario, this plan will only ameliorate, rather than prevent, a profound economic crisis. It will leave the US with a hugely inflated state debt, which will undermine the economy further and probably lead to a severe weakening of the dollar. US workers will be expected to pay for this over the coming years.

Capitalist crisis has brought to an end the neo-liberal era of Margaret Thatcher, Ronald Reagan and Tony Blair. Yet New Labour is trying to continue as if nothing too profound has happened. Such is their fear of anything with a whiff of 'old Labour', it took them six months to nationalise Northern Rock, despite demands from a majority of the capitalist class that they do so in order to help the British banking system.

Further nationalisations by New Labour to avoid financial meltdown are possible, but it will resist tooth and nail any nationalisation in the interests of the working class, for example of the privatised utilities. Instead New Labour is trying to ensure that working class people are the ones who pay for this crisis.

Brown's conference speech concentrated on attacking the unemployed and immigrants, rather than the City financiers. David Milliband, the ultra-Blairite who is being touted as a possible replacement for Brown, used his speech to talk about what New Labour does well - top of his list was going to war!

At a time of capitalist economic turmoil, the three main parties remain staunch defenders of capitalism. The Liberal Democrats have chosen this moment to move further to the right! Working class people desperately need their own mass party to put forward a socialist alternative to capitalism.

The trade unions need to break with Labour and begin to build such a party. It is not a coincidence that Tory leader David Cameron returned from Germany, where the Left Party is at 15% in opinion polls, talking about the need to "defend capitalism" from the "danger of the left". The potential for the 'danger' he sees in Germany exists in Britain as well - as a growing number of people look at the crisis in capitalism, and the devastating effect it is having on their lives, and begin to draw socialist conclusions.

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In The Socialist 23 September 2008:

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