37. 2001: economic storm clouds


2001 was an election year when the record of all parties, particularly the governing party, would be examined and tested. As was usual, The Socialist opened it with a perspectives article for Britain and the world.

We wrote: “Eighteen months ago, George W Bush was told by an economic adviser that the US was heading for a ‘painful adjustment’ (read recession or slump). Bush’s reaction was: ‘If you’re right, I’m not sure I want this job [the US presidency!]’.”

In the event, Bush did stand for office – and stole it from Al Gore, the inept Democratic Party candidate, through blatant electoral fraud worthy of a banana republic and a legal coup d’état by the Supreme Court.

The only issue in doubt in relation to the US economy was whether it would collapse in a ‘hard’ or ‘soft’ landing. We summed up the choices he faced “Like the Duke of Wellington after the Battle of Waterloo, Bush may well ruminate that ‘nothing except a battle lost can be half so melancholy as a battle won’.”1

We expected that the effects of the US meltdown would wreak havoc on the world and particularly the exposed British economy. Already, significant groups faced redundancy, including workers at General Motors (GM) in Luton, and Corus steelworkers in the North-East and South Wales. The working class seethed with anger at the capitalists who were shutting factories as easily as matchboxes. Economic worries combined with horrendous floods seemed to conjure up the biblical spectacle of the Four Horsemen of the Apocalypse. At one stage, an area the size of the county of Lancashire was under water. The natural disasters were compounded by the capitalist disaster of a severe lack of infrastructure investment.

As the election approached, New Labour remained in the driving seat although it was the memory of the greater devastation when the Tories were in office which boosted its prospects. Moreover, New Labour was fortunate in that it had not faced a serious economic crisis in its first period in office. Gordon Brown put this down to his economic ‘prudence’. However, the British economy had benefited from the upswing of capitalism in the previous eight years. At the same time, Tony Blair admitted that by continuing with Tory restrictions on state spending he had starved the NHS   of funds. The journal of the British Medical Association said that doctors were “clinically depressed” at the state of the NHS. Britain’s Housebuilding Federation declared: “Britain has had the lowest level of housing investment as a percentage of gross domestic product of any developed country for decades.”

Accumulated anger was breaking out and not just in Britain. In Spain there had been a massive strike of 2.2 million public sector workers – the first there since 1996. A similar general strike took place in Greece and a huge industrial wave in Southern Ireland. On matters big or small, New Labour was a mouthpiece for big business. The government had known about proposed redundancies of car workers in Luton, but never informed the trade unions or the workforce. Blair even promised the bosses the previous November that the minimal rights for those unfairly sacked would be weakened. Employment tribunals, he promised, would be given new powers to strike out “ill-founded claims” that allegedly “had no real chance of success”. These are the very proposals which the ConDem coalition government later implemented.

An avalanche of proposed job losses was announced in the New Year. “Britain is working again,” boasted Education and Employment Secretary David Blunkett. Yet this was against the background of 2,000 Vauxhall workers in Luton, 2,600 Ford workers in Dagenham, 2,000 at British Aerospace (BAE) and a massive 30,000 Corus steel workers facing the dole queue. Even the TUC claimed that 10,000 manufacturing jobs per month would be lost in the next year. Drunk on his own hype, Blunkett said that New Labour was likely to achieve full employment. We wrote: “What tosh! The dot.coms of the ‘New Economy’ have turned into dot.bombs as the speculative stock market shares bubble has burst.”2 The betrayal of New Labour was matched by the acquiescence of the right-wing trade union leadership to the pro-big business agenda. This was best summed up by Roger Lyons, the discredited General Secretary of the MSF finance workers’ union. He had led officials and some NEC members, complete with a priest and candles, outside the Bank of England to plea for a reduction in interest rates to “help manufacturing industry”. The only policy these trade union leaders had was literally a hope and a prayer!

Luton car workers showed that the mood was now changing, however. The new generation were not prepared to allow themselves to be driven back into poverty and deprivation. This new mood had already been reflected within the civil service union PCS with the victory of Mark Serwotka, the left-wing candidate for General Secretary, who was supported by Socialist Party members in Left Unity. We ended our perspectives article by pointing to the reality which lay behind the myth of capitalist triumphalism: “The claims made for this system as the bearer of culture, of new technology for all, of rising living standards, and a future of undreamed of plenty for the mass of the peoples of the world will be further undermined in the next year.”3

Car workers at GM in Luton showed this in a magnificent 10,000 strong march. This clearly reflected the anger of people against the multinational companies which were threatening to close down whole towns at the first nervous twitch of their shareholders. However, there was no real strategy to effectively resist them on the part of union leaders. They had promised a European-wide day of action in late January and, even though there was an expectation that something would happen in Luton and perhaps Ellesmere Port, very little was proposed from the platform of the march. The Socialist reported: “It was left to a local radio dJ who was chairing the rally to say everyone should go sick on the day! Tony Woodley, the chief transport union negotiator for the car industry, talked about the traumatic year for the industry with the closure plans for Dagenham, the threats still hanging over Longbridge and now Vauxhall. He complained how the Luton closure demonstrated the role of a multinational like GM”.

The strategy seemed to consist solely of holding out for mass pressure to change GM’s collective mind. The Socialist demanded “a call to arms, including strike action, if the pressure is to have any effect… [Trade unions and the workers] should be campaigning for the nationalisation of all GM plants under threat of closure, whether in Britain or any European country.” The union leaders merely challenged GM over figures for overcapacity with Ken Jackson of the AEEU pleading for the protection of the manufacturing base of the KK economy. John Monks, TUC General Secretary, suggested a national campaign for proper corporate standards of behaviour!4

While these workers were fighting for their jobs, the lives of New Labour luminaries faced upheavals. The resignation of Peter Mandelson once more revealed the rottenness arising from their pro-big business policies and the patronage that went along with it. Mandelson’s fall from grace was generally greeted with enthusiasm in labour movement circles because he personified New Labour’s arrogance and subservience to the bosses. He was seen as the archBlairite and a big business stooge. He was also a lightning conductor for all the anger building up against the government. When his resignation was announced, his erstwhile colleagues in the Parliamentary Labour Party greeted it with cheers!

There were desperate attempts to shore up New Labour but the backbiting could not be contained. Clare Short briefed that “Mandelson went… because he’s got problems with telling the truth.” His ally’s departure left Blair vulnerable, not on his character judgements alone but also on wider political issues. A major reason why the Murdoch papers went for Mandelson and Keith Vaz with such abandon was because of their advocacy of the EU and joining the euro. The Socialist made the point: “The main factor in the [Millennium] Dome, [Formula One and Hinduja brothers] fiascos is that when you ask big business for donations they expect bigger favours in return.”5 Vaz’s financial dealings were subsequently raised in the exposé run in the media in 2016. So desperate were they to appease big business, they had stepped in where even the Tories feared to tread and gave passports against government agency advice to big business pals.

The rottenness was exposed in Servants of the People, a book by Andrew Rawnsley, political editor of the Observer. He showed that from the beginning Blair and Brown had set up two camps like a ‘dual monarchy’. Rawnsley described the way Mandelson had “swanked around the salons of the wealthy, the powerful and the right wing”. Rawnsley also revealed what the Socialist had maintained all along: that Blair and Brown were conscious of the kind of policies that were necessary for capitalism: “Brown told Harman that, to remain within her budget limits, she would have to choose between two Tory cuts, both of which Labour had bitterly attacked when in Opposition”. He pointed out that ‘cabinet government’ was a myth because “the people who make the decisions and effectively run the show [are] Blair himself, Brown the Chancellor, Alistair Campbell (Blair’s press secretary) and, until [he was removed], Peter Mandelson.”6

Meanwhile, pressure was mounting on the government for action to stop the haemorrhaging of jobs. Most of the unions, such as the ISTC steel union, had no strategy other than proposing that different groups of capitalists should buy out the owners of bankrupted firms – in the case of steel, the whole industry. We commented: “This will not provide a solution, but Corus rejected this from the outset saying it would hardly allow its most productive plant to be set up in competition with its remaining plants.” There was widespread support for the renationalisation of steel – of course, with no compensation. The shareholders had received a £750 million pay out when the company was formed in 1998 and their share values had jumped by 10%, but there was not a whisper of a real solution by New Labour. Blair went out of his way to introduce ‘state capitalist’ measures of which Thatcher would have been proud. He stated: “The purpose of this government has been not to turn the clock back on the enterprise agenda; but to deepen it and then to correct the instability and under-investment.”

The problem for Blair and New Labour was that this pro-capitalist ideology was not working anywhere. Moreover, there had been a shift in public opinion towards public ownership. We remarked: “Compare the crisis-ridden privatised utilities in Britain with their state-owned counterparts in Europe, where for example train travel is cheaper, faster and safer because of massive public investment.” The Socialist argued for “socialist nationalisation with workers’ control and management and a proper plan of production based on need not profit. This would guarantee sufficient investment to protect jobs and ensure modern working conditions. That is the only way working class people can end the ‘instability and under-investment’ of the capitalist market.”7 Yet the steel unions refused to even countenance this, the only measure that could save jobs. What mattered to the shareholders was not the need to retain this vital industry but the maintenance of their share price.

The foot and mouth disease epidemic that broke out illustrated how a minor crisis turned into a disaster for the government. A virtual state of emergency was called over a relatively mild animal disease, although one which produced big concerns largely for the profits of the farming industry, public health and animal welfare. The farming industry was and is dominated by finance capital, agribusiness and big landowners. Each year £30 billion was handed out in subsidies by the EU’s Common Agricultural Policy (CAP), 80% of which went to the richest 20% of EU farmers. The Economist estimated that the foot and mouth disease fiasco cost £9 billion. We asked: “Who’ll pay the price for this chaos? Not government ministers or big business. It will be workers in agriculture, tourism and small farmers.”8 One million animals were slaughtered in the UK when only 5% had the disease. Nevertheless, this crisis illustrated the deficiencies of food production in Britain on a capitalist basis.

In March Brown’s budget was tailored towards a forthcoming general election. Labour was so far ahead in the polls that Hugo Young commented: “This was not a budget to win an election, but a budget for an election that is already won. Its handouts were slight, its promises distant, its perspectives closer to five years than five weeks.”9 The budget did little for ordinary people, although Brown made some attempt to buy off lorry drivers hit by the fuel crisis. From the Treasury’s huge surplus, he chose to repay £34 billion of the national debt. Kevin Parslow pointed out in the Socialist: “It was reported that, last year, five million people were living in conditions of absolute poverty in Britain.”10

The Financial Times commented: “An economist from Mars examining the public finances under Tony Blair’s Labour government might conclude that it came to power early in 1999. His first glance at the figures would suggest that in 1997 and 1998 Britain’s public finances were being managed by someone who out-Thatchered Margaret Thatcher for restraint.”11 Even Polly Toynbee, the usually steadfast friend of New Labour, wrote: “This has been a deeply conservative government, dogmatically attached to private finance and privatisation.”12

New Labour’s plans for a second term were outlined with a focus primarily on education. These were so outrageously right wing that the Tories’ then education spokesperson, Theresa May, said indignantly that Labour had adopted Tory education rhetoric! Labour promised to introduce selection in schools, more religious-based schools and a massive expansion of private provision in primary, secondary and higher education. All of this amounted to a massive boost for privileged education for a small elite. Moreover, New Labour was still under pressure from vice-chancellors of the elite universities to introduce top-up fees. We promised to organise resistance to New Labour’s education attacks, through mass union-led campaigns of teachers, parents and students.