The Socialist 13 October 2009 |
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The economy: Green shoots or scorched earth?
"WE ARE in the midst of the worst recession most people alive have ever experienced, or will probably ever experience. It is already worse than the 1980s and it isn't over yet."
This statement by David Blanchflower, (The Guardian 9 October, 2009) until recently a member of the Bank of England's monetary policy committee, is unfortunately accurate. A year ago - when the world's finance sector was in meltdown and Britain's ATMs were within 24 hours of stopping paying out - capitalism faced a crisis even worse than the 1930s Great Depression.
This was prevented - at least in the short term - by huge state bailouts of the banking and finance sectors combined with stimulus packages. A brutal recession, however, has not been avoided.
The majority of the capitalist media spends its time desperately searching for 'green shoots' of recovery, whether it is a slight increase in house prices or an increase in the number of people buying 'finest' products from Tesco.
In reality, any recovery is extremely patchy, existing only in certain parts of the service sector and manufacturing. The car industry, for example, has had limited growth based on the short term effects of the 'cash for bangers' scheme, combined with the effects of the running down of inventories in the previous months.
However, overall British manufacturing contracted again in August, following a few months of stuttering, anaemic growth. According to the OECD, Britain's economy will not show overall growth in a single quarter of 2009.
Worldwide it is perhaps most likely that the economy will suffer a 'double-dip' recession. With a shrinking industrial base and dominated by the City, Britain's economy is in a particularly weak position, and may not even experience growth before the 'second dip' begins.
What is more, the recovery, when it comes, will not be a return to 'normality'. For the working class, this will be a jobless, joyless recovery. There will be no return to easy credit. On the contrary Britain's population is still burdened with an unprecedented 'debt overhang' from the boom years.
Youth unemployment will pass the one million mark this month or next. Overall, unemployment will pass three million and could reach four or beyond. As Mervyn King, Governor of the Bank of England, declared it is not a question of growth but "of the levels, stupid". The government figures show that an estimated 5% of production has been destroyed; as Will Hutton put it "lost forever".
It is not the bankers, but working- and middle-class people, who are expected to pay the price for this economic destruction. This is both in terms of job losses and cuts in hours, and in the devastating attacks that are planned on public services.
The bailout of the banks and finance sector in Britain has been underwritten by an estimated £1.2 trillion of taxpayers' money, more than five times the annual wage bill of the entire public sector, yet, in a massive con-trick, it is public sector workers who are being held responsible for the growth in the budget deficit.
The proposed cuts announced by Osborne at the Tory party conference offer, as Tory grandee Ken Clarke put it, "only a sample" of the devastating cuts in public spending promised by the Tories. David Blanchflower declared that: "The Tories economic proposals have the potential to push the British economy into a death spiral of decline that would be almost impossible to reverse for a generation."
The fear of Blanchflower, along with other serious economic commentators, is that the stimulus packages are reversed too early. This happened with the stalling of the New Deal during the Great Depression in the US in 1936/37 resulting in a sharp deepening of the economic crisis.
Blanchflower is right to point out that the Tories' policies, which if implemented would put 700,000 public sector workers on the dole, could lead to a severe deepening of the crisis. However, any government which accepts the logic of the capitalist market also accepts that it is necessary to cut the size of the public deficit at some point. The debate between the capitalists is not about if, but when and how the working class pays for the crisis.
We do not accept that workers should have to pay. It seems that the majority of Britain's short-sighted ruling class have come behind the Tory party and its policies of massive cuts and privatisation.
New Labour, in the meantime, is taking fundamentally the same approach. Alistair Darling's response to George Osborne's proposal to freeze the pay of 80% of public sector workers was to propose his own version of the pay freeze. The vast majority of the Tories' proposed cuts are also put forward by New Labour, albeit sometimes in a slightly different form.
Gordon Brown's latest stunt to try and cut the size of the public deficit is another indication of New Labour's pro-big business, privatising policies. A whole swathe of public assets is to be put up for sale, including large amounts of council property, uranium enrichment and student loans.
If they can find a buyer for the student loan book, for example, these proposals will inevitably mean greater pressure on hard-pressed graduates to repay their enormous debts more quickly than they can afford.
Even the Financial Times dismissed these proposals as a "car boot sale" and, in contrast to their normal ultra-free market approach, declared that "it is madness to assume that private ownership is always best."
The working class needs to prepare to oppose the onslaught it will face from the next government, as the representatives of capitalism present the working class with the bill for their system's crisis. Philip Hammond, Tory shadow chief secretary to the Treasury, has suggested that there will not be a "winter of discontent" after a Tory government is elected. He bases this on the "cordial relations" he feels he has established with union leaders behind the scenes.
As the trade union movement discovered under Thatcher, and has also been true under New Labour, "cordial relations" at the top will not stop a single attack on trade unionists' rights and conditions.
However, the Tories are making a big mistake if they mistake the 'reasonable' approach of the majority of trade union leaders for the burning anger of the rank and file. What will be needed is determined, militant action of the kind that CWU members have voted overwhelmingly for - and will be disappointed in their leadership if they do not deliver.
Alongside this a political alternative will need to be built that puts forward a clear, socialist alternative.