Editorial

Socialist nationalisation - the only way to save manufacturing jobs and end the bank bonus scandal

Corus workers protest on the Unite jobs demo in Birmingham this summer, photo Paul Mattsson

The year 2009 is ending as it began. Thousands of workers are losing their jobs in factory closures while bankers rescued by government intervention and money from working class taxpayers continue to rake it in.

1,700 steelworkers in Teesside are being thrown onto the scrapheap before Christmas at the same time that failed investment bankers working for RBS (bailed-out and owned by the government) queue up for million pound bonuses.

5,000 bankers in the City of London stand to gain £6 billion between them in bonuses effectively paid for by the state. While Gordon Brown promises to recover £500 million from benefit fraud by the poorest in society, half of it accidental, the government is largely impotent in dealing with what amounts to a £6 billion bankers' benefit fraud.

Such has been the public outrage at the sheer cheek of the bankers' demands and the scale of their bonuses that the Chancellor of the Exchequer, Alistair Darling, and even the Tories with closer links to the City, have been forced to make noises against the "bonus culture" that infests the top levels of the finance sector. As we go to press, Darling's Pre-Budget Report is likely to propose minor curbs to bankers' bonuses and the Tories have also indicated some measures to curb the excesses.

Bankers' billions

Darling is reported to be preparing some kind of tax to recoup some of the billions to be lavished on the bankers this Christmas. The Tories will probably not oppose it and have claimed that they might tax undistributed bank profits.

But for both parties the measures aimed at the banks are mainly for public consumption. Having boosted bank profits with one hand Darling is unlikely to tax them with the other for fear of stalling the commercial banks' recovery. The tax on bonuses is likely to be a short-term pre-election measure. All three main parties accept that finance capital has to be "free" to pay billions to its executives and traders.

Whatever tax measures capitalist governments take against the bonuses the banks' accountants will find a way around them. Banks currently pay little or no Corporation Tax. The US bank Merrill Lynch is not expected to pay tax in Britain for several decades using past losses in the US to offset taxes. "The problem is we are dealing with people who are usually one step ahead of us," a Treasury official told the Financial Times.

The investment wing of Barclays, Barclays Capital, for example, has simply doubled the salaries of its top traders to replace some of the bonuses. Goldman Sachs, bailed out by the US government last year, is reported to be paying its bonuses in the form of shares to cut across the accusation of short-termism (even though the now defunct Lehman Brothers paid its bonuses in shares).

If Darling attempts to tax bankers' bonuses by introducing a tax on the income of those who receive a large proportion of their income in one month the bankers will merely receive their bonuses over a number of months.

The dust has hardly settled on the banking crash and banks across the world are already awash with profits.

They are benefiting from the liquidity pumped in by governments and low rates of interest, "hidden gifts from government" according to financier George Soros. Globally they have taken about $18 trillion in bail outs and made billions, not from investing in industry, but by using increased liquidity from governments and central banks to speculate in short-term profits in shares, bonds, commodities, currencies etc.

In doing so they are creating new financial bubbles that threaten to burst and cause as much damage as the financial collapse last year.

Whichever party is in power in Britain they are incapable of preventing this psychopathic behaviour. All the main parties defend the private ownership of finance and accept that if profits and bonuses are curbed in London then the most profitable traders will move abroad and that capital will flow away with them.

If a government significantly cuts banking profits then they will trade elsewhere. Boris Johnston, the Tory mayor of London, wails that the finance industry in London would be crippled if bankers' pay is held back.

On a capitalist basis there is no way to control the financial industry. Co-ordinated action by governments in the leading capitalist countries is unlikely to succeed in curbing even the worst excesses of the bankers.

Gordon Brown has tried to placate outrage at the bankers' bonuses by raising the possibility of imposing a type of Tobin Tax on global financial transactions but concerted international action to close the net on all international transactions would be extremely difficult to co-ordinate without public ownership of the finance industry.

The weight of finance capital has become a burden on world capitalism but nowhere more than in Britain. The banking sector has been able to hold the rest of the economy hostage, requiring £850 billion in state assistance while manufacturing goes to the wall even faster as the recession bites and credit dries up.

New Labour and sections of the financial press are belatedly waking up to the dangers of the British economy being dominated by finance capital. Bank assets are now worth more than five times the value of the annual output of the economy.

Andrew Haldane, executive director of the Bank of England, has expressed concerns that the British economy could not afford to bail out another financial collapse.

Because of the weight of the financial sector, the financial crisis has led to Britain's economy falling from the fourth biggest in the world to the seventh behind France and Italy and it is projected to fall to eleventh by 2015 according to the Centre for Economics and Business Research.

The Business Secretary and New Labour ideologue, Lord Mandelson has mouthed phrases about boosting the manufacturing sector but his lack of action over the closure of the Corus plant at Redcar indicates that New Labour's slavish devotion to the operation of the free market has not changed.

More manufacturing disappeared in the twelve years of this Labour government than even in the 18 years under the manufacturing-phobic Tories. Whole swathes of manufacturing have been wiped out as New Labour adopted a Thatcherite let-it-go attitude with manufacturing's share of the economy nearly halving from more than 20% to 11% of output.

With plant closures, skills have disappeared as well. Unbelievably there are fourteen times as many publicly-funded apprenticeships in hairdressing as in manufacturing. Meanwhile bank assets have grown more than twice as fast as the whole economy since 1997.

Socialist programme

Workers in Teesside have supported the demand raised by Socialist Party members for re-nationalisation of Corus to save jobs, but Mandelson and New Labour would rather the plant closes than countenance the idea of public ownership of factories faced with closure.

It falls to the Socialist Party, working with others in the trade union movement, to raise the idea of a socialist programme to save jobs. This includes supporting any action that workers in factories threatened with closure take to defend jobs and also fight for the safeguarding of factories allowed to fail by their old owners and New Labour by nationalising them under workers' control and management.

And that programme also includes the taking into public ownership of the banks and large finance houses together with their assets. This should be coupled with public control of foreign trade to ensure there is no flight of capital from Britain.

Then we could recoup the public money used to bail out the banks to invest in factories like Corus at Redcar and in a publicly-owned manufacturing industry.

Why not click here to join the Socialist Party, or click here to donate to the Socialist Party.

In The Socialist 9 December 2009:

Corus steel closure: 'Bail out our jobs, not greedy bankers'