Editorial

Era of illusions in capitalism ending

So the economy is now officially in recession. No great surprise, as most people feel they have been suffering recession-like conditions for six months already.

The latest blow is the announcement by Corus steel that it is cutting 2,500 jobs in the UK; 2,500 skilled industrial workers who will mostly not find equivalent work. Many, plus others in the industry's supply companies, will join a dole queue that is nearing two million and predicted to rise to over three million over the next year.

Corus steel was once the publicly owned British Steel, that employed 268,000 workers when it came into being as a nationalised company in 1967. Privatisation in 1988 threw the fate of Britain's steel workers back into the hands of private profiteers, with the end result that the 24,000 steel workers left in Britain today are at the mercy of Indian big business conglomerate Tata Steel.

Gordon Brown's improvement in the opinion polls -mainly due to the blunders of Tory leader David Cameron - quickly evaporated as realisation set in that the recession will be both deep and prolonged. The economist Nouriel Roubini, now renowned for foreseeing the recession, was considered delusional and labelled Dr Doom in 2006 when he warned of the crisis to come. Now, the severity of the crisis has hit home to even the most upbeat capitalist politicians and economists, some of whom are succumbing to fear and demoralisation.

They are having difficulty in seeing light at the end of the tunnel, as the economy is going to get even worse before it gets better. Roubini made this clear in a Guardian interview last weekend when he said: "We might as well write off 2009 completely ... The losses now are mostly in mortgages; wait until it hits commercial real estate, the credit card companies, the auto loans, the student loans, the corporate bonds. There's a whole pile of stuff. The financial system is insolvent ... technically bankrupt".

But no-one, including Roubini, and certainly not the government, knows the extent of this bankruptcy - the amount of toxic debt held by the banks. So Gordon Brown and chancellor Alistair Darling are floundering in their attempts to tackle it, with fewer and fewer people believing that they can avoid worse catastrophe.

Hundreds of billions of pounds of public money spent on bailing out banks, cutting VAT and other measures, together with lower than ever interest rates, are not having enough effect.

Neither are there signs of economic recovery abroad. The pound has slumped to a 23-year low against the dollar, but this is an indication of the weakness of the UK economy rather than any strength of the US economy. US president Barack Obama wants to push a new $800 billion (£486 billion) stimulus package through the US congress to create four million jobs. But over 2.5 million jobs have already been lost and five million more are predicted to go, so unemployment will still rise. New York Times columnist Paul Krugman argues that a US package of double the present magnitude is necessary to avoid a severe slump.

So, in Britain, with most economic indicators diving to their worst level for 30 years, Darling decided to authorise the Bank of England to release more emergency money into the economy this week and he realises he must prepare a third emergency package in time for the spring budget. Help for the car industry, and green technology and infrastructure projects are among the measures being discussed.

As well as these desperate attempts to boost the economy, there is speculation that the spring budget will include plans for future tax increases and expenditure cuts to reduce the public deficit, now standing at £697.5 billion and rising fast. Such future cuts will be on top of slash and burn measures that are ongoing or presently being stepped up in parts of the public sector, despite the recession, for instance by councils like Wirral, and in sections of the civil service.

So working and middle class people will be assaulted on all fronts, through lack of jobs, no financial security and worse public services. British capitalism has never been so exposed in its failure to deliver reasonable living standards to the majority of the population. An anaemic economic recovery will at some stage set in, but an era of illusions in capitalism has ended and a new one is opening up, delivered by this present abrupt and shocking economic downturn.

Defenders of capitalism try to blame excesses and a lack of 'moral compass' for the crisis, suggesting solutions such as Will Hutton's call for "a different kind of capitalism, less dependent on reckless bankers and property bubbles" (Observer 25.1.09). The Socialist on the other hand explains that yes, there are reckless bankers and property bubbles, but these are byproducts of a system that is essentially rotten to the core, and that must be removed.

It is still the case - incredibly, given the situation workers face - that no leading left or trade union individual is championing the building of a new mass workers' party. But The Socialist will ceaselessly call for one, and argue that it will need a socialist programme, to demand nationalisation in the interests of workers as opposed to nationalisation in the interests of the bosses; the sharing out of all the work that is available with no loss of pay; a massive building programme of good quality council houses; an end to the war in Afghanistan; and many other demands that would quickly attract tens of thousands of people to join the new party.

The Socialist Party shares none of the demoralisation of the capitalist commentators. Party activists are meeting more and more workers and young people who are interested in supporting a socialist alternative. Not only does the basis exist for the future development of a new mass workers' party that can aid mass struggles and seriously challenge the parties serving the rich, but the Socialist Party is increasing in size and influence to help speed forward the development of the labour movement and of Marxist ideas within it. Join us.