Britain’s economic position
14) The hopes of a revival in the fortunes of the ConDem government – which is already under siege from opposition to the cuts – will be dissipated. There is no outlet for Britain internally or externally in greater growth or significantly increased penetration of export markets by British capitalism.
Indeed, the economic figures in December underline just how far British capitalism has gone back. City economists were cutting forecasts for growth in the final three months of 2010 particularly as the economy had been severely affected by the bad weather.
There was a slowdown in the last quarter of 2010, yet it had been predicted that the economy was likely to grow by 0.8% in the third quarter – itself a miserly rate.
This in turn was lower than the 1.2% recorded in the spring quarter of 2010. Growth is now expected to be a mere 0.5%.
At the same time, the VAT rate increase from 17.5% to 20% will kick in, as well as the effects of job losses, all adding to a contraction in ‘demand’.
The pre-Christmas surge in retail spending – at one stage hampered by the bad weather – itself was a one-off rush to buy goods – particularly white goods such as fridges, etc. prior to the VAT rises.
15) The bourgeois employ anodyne language to disguise the scale of this collapse. They use meteorological language which seeks to cover up underlying class realities.
For instance, the Economist speaks about “economic headwinds” as if this was something out of the control of human beings and not itself a product of the crisis of capitalism.
Unemployment is described as “a headcount”, and the deliberate cutting of living standards as “cutting costs”. Massive attacks on welfare are also described as “cutting costs” and “paring down debt”.
16) The ‘intemperate’ weather also revealed the shameful collapse of the infrastructure of British capitalism, its short-termism and incapacity to provide a minimum safety net for crises of this kind.
Philip Stephens, the political commentator of the Financial Times, wrote on the debacle at Heathrow: “To fly from Istanbul to London is to travel from the first to the third world.
“Ataturk international airport sparkles with steel and glass modernity – a monument to Turkey’s status as a rising power. Heathrow’s Terminal 3, scarred by broken travellators, exposed ceiling voids and filthy carpeting has become an emblem of national decline.
“No one should have been surprised by the latest snow-induced standstill at one of the world’s busiest airports. Heathrow is not quite so dreadful as it was three or four years ago.
“It is still a disgrace – a two-fingered jeer at any notion that London’s future is as a global economic hub.” He sums up the undisguised rage of millions of travellers who saw their whole holiday plans ruined with the complete failure of BAA to provide the necessary “investment in basic infrastructure in favour of quick profits”.
Indeed, the only real expenditure at Heathrow has been the retail concessions given by BAA to the lucrative store chains that infest modern airports. Expressing the despair of even the defenders of the system in what this leads to, he states: “I am tempted to say that Heathrow should be nationalised – or at the very least handed over to Boris Johnson, the London mayor [!?].
“No one could do a worse job than BAA.” Johnson would!
17) Imagine what the situation will be if the proposed draconian government cuts go through! Even the employers’ organisation, the CBI, has now taken to predicting that the next year will see “high prices, low growth and rising rates”.
Cameron himself has warned of a “difficult year” ahead. Stalled growth is bad enough but adding to the misery of millions will be a significant rise in prices on top of the already increased rate of inflation, which is 4.7% at the time of writing.
There is no possibility, at least in the short term, of restricting inflation to the government target of 2%. It was 3.3% in November as the effects of world price increases – particularly food and raw materials such as oil, etc. feed through into the British economy. The huge devaluation of sterling at a certain stage automatically leads to an increase in prices.
Food prices will be up, as will formerly cheap clothing at stores such as Primark – which will particularly impact on the poor. Petrol rose to 122p per litre in December 2010 which will take nearly £3 billion out of the economy.
Moreover, the rise in inflation could prompt the Bank of England to push for an increase in base rates, already 0.5%, which could rise by another 0.5%, which in turn could help to choke off any prospect of a further stimulus to growth.
18) The much vaunted claim that Britain, in particular its manufacturing exports boosted by a cheaper pound, will be able to storm world markets is a chimera.
Britain’s trade deficit with other countries ‘unexpectedly’ worsened in October. Apart from anything else, there is no export outlet in countries such as Spain, Italy and Portugal suffering a ‘financial storm’.
There are also restricted ‘export opportunities’ in China, Brazil and Russia, not least because of the weakness of manufacturing industry in Britain. These countries are not as important as Ireland for the British economy.
Hence Osborne’s panicky £7 billion ‘gift’ to the Irish government. This itself is an indication of the weakness of British capitalism.
The British capitalists have not used the drop in sterling to increase competitiveness by maintaining or lowering prices but have used this to boost profitability.
Hence the stagnation of manufacturing industry which, according to Cameron and Osborne, is supposed to do the ‘heavy lifting’ in reviving the British economy.
Anger at the banks
19) We have heard this all before. In the decade to 1997, British industry fell from being the world’s fourth largest exporter of manufactured goods to eighth at one stage.
It presently stands at sixth in terms of output in the world. In the following decade to 2007, it had a growth rate lower than all the UK’s major competitors and half the rate of Germany.
Employment in the manufacturing sector fell below 2.5 million workers for the first time since records began in September 2010. At the same time it is widely recognised even by the capitalists that service industries – in the ‘noughties’ perceived as the lifeline for the British economy and accounting for 75% of national income – are no longer capable, in the wake of the financial meltdown, of sustaining or improving the economy, if it ever was.
20) The consequences of the disastrous reliance on the finance sector are obvious. The banking sector is still crippled, propped up by huge injections of state aid.
And we are not at the end of this process of sustaining the banks. The government stipulation that the banks hold more cash in reserve may mean an extra state injection will be necessary to prop up the ‘nationalised’ Royal Bank of Scotland and Lloyds-TSB bank group.
This is on top of the £65 billion already spent on buying their shares. The government actually underestimated how much it cost to bail out these banks.
This sum would go a long way to paying for the £81 billion of government cuts the government alleges is necessary to ‘save’ the economy by eliminating the deficit.
At the height of the banking crisis, the government had spent or guaranteed £955 billion!
21) The same applies to ‘tax evasion’ which the TUC and unions such as the PCS have pointed out amounts to a colossal £120 billion a year which is the equivalent of the total budget deficit and greater than the proposed four-year cuts programme.
In one fell swoop, the deficit could be eradicated. However this would be impossible to effectively implement and ‘police’ on a capitalist basis unless there was state control, complete nationalisation of the banking and finance industry.
This one measure could then lead to the control and checking of the import and export of capital into Britain. It would help to stop the rich from taking ‘their’ loot abroad.
But even this would be ineffective unless it was accompanied by strict workers’ control and management of these nationalised industries. The capitalists, left to themselves, will find a thousand and one ways to escape measures to control them.
Hence the need for the Socialist Party programme of nationalisation of the banks and financial sector under workers’ control and management, with consumer and small businesspeople participation.
22) The parlous state of the finance sector in Britain could be further aggravated by a European-wide meltdown of the banks, which would have continent-wide consequences.
Yet while the banking crisis remains unresolved and threatens to worsen, the bankers are once more rewarding themselves with billions of pounds in bonuses.
This is adding to the growth of a deep anti-banker, anti-rich feeling from the depths of British society. The capitalist press and pro-market apostles like Will Hutton in the Observer fume at the bankers.
Hutton demands “the whole edifice [of the banking industry] be dismantled,” because it will “inflame public opinion and lead to a new banking crisis”.
He bemoans the fact that the bankers have got away ‘scot free’ from their responsibility for the 2008 financial holocaust. He admits that in the event of a new banking crisis they will be bailed out again, with the working masses paying for this once more.
Even Obama, he says, has caved in to the big bankers. Hutton wants severe limitations to be placed on the banks.
His solution is a “bonus tax”! This would be an example of “good capitalism”. Yet even his minimal measures will not be accepted, as Bob Diamond of Barclays made clear to a House of Commons committee.
Logically – from the standpoint of the industrial capitalists – the parasitic bankers should be brought to heel through nationalisation. But this they will not do because it would pose point blank the nationalisation of other failing industries.
23) Even Cameron and Osborne have been forced to take account of this. They have hypocritically ‘attacked’ bankers over their bonuses.
The effect of this is to further stoke the rage of the population, particularly when they consider the ‘sacrifices’ which they are expected to make to solve the current crisis.
Cameron has threatened stringent attacks on the bankers. He was compelled to drop a plea to them for ‘restraint’ and even warned of the need to impose ‘controls’.
While ultimately defending the capitalist ruling class, governments of the possessing classes have not been averse on occasion to striking blows – ‘soft’ punches – at different sectors of their own class, the better to ensure the overall ‘safety’ of the class they represent.
Bankers, Cameron said, should accept no more than 20% of their bonuses, with the rest being ‘deferred’ as company shares. Workers, of course, will not receive later any wage cuts imposed today! Moreover, the bankers are already preparing to compensate for deferred bonuses by doubling and trebling their already inflated salaries! We must point out that any measures that Cameron and Osborne contemplate would merely mean cutting the fingernails of the bankers.
It would in no way mollify the overwhelming majority of people on this issue.
Divisions amongst the capitalists
24) At the same time, this government, like the last New Labour one, demonstrates a breathtaking complacency towards the further weakening of ‘national’ control of the British economy.
Already, ‘Britain plc’ is in hock to foreign capital. Large parts of the economy are controlled by them.
In a symbolic discarding of its ‘national’ interests, this government is now actually considering the selling off to a French company of the British firm which presently prints the British currency! This has provoked opposition in some capitalist quarters, inflaming the divisions over how best to confront the economic crisis and particularly how to deal with the working class.
25) This is reflected in the public exchanges of some of the major ‘institutions’ underpinning the system. Mervyn King, the Governor of the Bank of England, was widely perceived – in advance of the election – as being in favour of a rapid cuts programme.
He openly opposed the Labour government in its last period of office because it was not prepared to be ruthless enough in swiftly imposing cuts. This earned the ire of David Blanchflower – amongst others – a former member of the Monetary Policy Committee of the Bank, and now in ‘exile’ in America.
King undoubtedly collaborated behind the scenes with Cameron and Osborne, in the last days of Gordon Brown’s government. Ironically, this was ‘payback’ for Brown himself who sanctified as his first act as Chancellor in 1997 the so-called ‘independence’ of the Bank of England.
We pointed out at the time that this ‘independence’ was nothing of the sort. In a crunch, it would reflect the demands of the capitalists, meaning if necessary the Governor would go over the head of the elected government.
He now turns out to have been a firm pillar for the agreed capitalist policy of unloading the responsibility of the crisis on the shoulders of the working class.
Blanchflower, in his pursuit of a ‘softer’ more staged policy of cuts, expressed opposition to King in a scathing fashion: “I think [King]’s stepped over the line.
“The first thing that King ever said to us was that we don’t comment on fiscal policy. The rule is that you have to be neutral, but it looks to me like he essentially co-authored the Coalition’s deficit reduction plan” (Daily Telegraph).
As Karl Marx pointed out, “Revolution always starts from the top.” We are not quite at this point in Britain yet. But these splits do denote that we are on the eve of huge social upheavals, which can, even at an early stage, divide the ruling class into different camps.
26) This was a general theme explored at the recent World Congress of the CWI. The view of some comrades was to see the ruling class internationally as united in a policy of ‘austerity’ as opposed towards a more Keynesian or quasi-Keynesian approach.
Undoubtedly, this harder, deficit slashing trend constitutes the main camp of those gathered at the G20 summit recently. This indicated a reversal of the previous policy of this body which, at the beginning of the crisis, was firmly aligned with Gordon Brown and his stimulus proposals.
But the divisions have not been eliminated. They are not only still there but will, indeed, widen as the opposition to the cuts programme develops.
There is a significant layer within the ranks of the ruling class – Paul Krugman in the US, even Samuel Brittan a former Thatcherite ‘monetarist’ in Britain – who are in favour of further measures of quantative easing (QE), a state-backed stimulation programme, to ward off the worst effects of the crisis.
Brittan has echoed the words of the ancient Greek writer Euripides: “Those whom the gods wish to destroy they first make mad” in describing the coalition government.
He is opposed to any measures that would cut demand ‘significantly’ at this stage of the economic cycle. Undoubtedly from a capitalist point of view, this section of the ruling class is more ‘correct’ then the Camerons and Osbornes.
However, their programme is not capable of a long-term solution to the problems of the world economy or that of Britain. Keynes was confronted with the argument that state intervention in the economy would, “in the long term”, not solve the problems.
His riposte was in the “long-term we are all dead”; in the meantime let’s see what ‘we’ can do in warding off the crisis. Actually, the policies of Keynesianism and its opposite, austerity programmes, are head and tail of the same capitalist coin.
While Keynesian policies can mean increased state expenditure, at the same time they could be accompanied by a continuation and even a deepening of neo-liberal policies.
Neither road offers a long-term solution. But the ‘slash and burn’ school of Osborne and Cameron represents the worst option for the bourgeois at this stage.
Attacks on living standards
27) Under the cover of this crisis even the most ‘liberal’ section of the ruling class agrees that the working and middle classes must pay the major cost of this crisis.
And there’s already been a significant worsening in living standards. What is striking about the present conjuncture is the clear perception, even of capitalist commentators, that while the ‘poor’ will be most significantly affected they will not be alone in this.
More and more reports have appeared from ‘think tanks’ – modern monasteries composed of a handful of self-appointed experts – producing some significant figures and examples about the effects of the forthcoming cuts.
For instance, the independent ‘Resolution Foundation’ – whatever that means – has looked at 11 million households who have income between £12,000 and £30,000 a year.
Incredibly, they refer to this section of society as the “squeezed lower-middle-class families”. £12,000 puts most people in the position of poorly-paid workers – particularly in high living cost areas such as London and the South-East.
Even £30,000 a year in the London area would not generally qualify you – particularly with a family – as being part of the middle class.
28) But what this survey inadvertently indicates is the increased proletarianisation of formerly cushioned, even privileged, sections of the population under the blows of the crisis of capitalism.
Now ‘squeezed’ Britain is not just the poor and working class in general but those who formerly were or saw themselves as part of the middle class, perhaps the lower middle class.
Research has predicted that families in this bracket will see their wages fall in real terms on average by a minimum of 4% over the next year as the major cuts overlap with the fragile jobs market.
The effects of this on the aspirations of this section of the population, particularly in jobs and housing, of ‘owning your own home’ are dramatic. “Even if these families put aside 5% of their disposable income each year, the foundation finds it would take 45 years to accumulate the average first-time buyer deposit in 2009” (The Guardian, 25 November, 2010).
This represents, as we have commented elsewhere, the complete smashing of Thatcher’s idea of a ‘property-owning democracy’. Its social and political effects, taken together with other factors, cannot be overestimated.
More than 21% of those on ‘low-to-middle’ incomes are now part-time workers, compared with a 15% national average. The share in national wealth of this section of society has dropped dramatically since 1977.
29) In fact, the process of proletarianisation in Britain has been taken to a new level. In workplaces like libraries or hospitals now, particularly in major urban centres, sometimes a brutal class war – not even a veiled one – is unfolding as a dishonest, anti-militant policy is pursued by highly-paid local government ‘consultants’.
The aim is to drive out the more conscious leaders out of the workplace, to effectively behead the working class industrially. All of this, of course, is prior to the savaging of libraries and other social services on the altar of the government’s programme.
The average ‘middle-class person’ will lose £720 thanks to government cuts, rising inflation and stagnating pay – in fact many will have their wages cut.
Political alternative necessary
30) If there was a mass party of the working class – even one along the lines of the bourgeois workers parties that existed prior to 1989, in Britain, the Labour Party, for instance – giving a lead, in this situation it would lead to mass uprisings.
It would have also resulted in the emergence of a more conscious layer amongst whom the ideas of socialism, centrism and Marxism would be hot topics of conversation within the workplace and in communities, etc.
Even now, a small but significant layer of young people and workers are beginning to draw socialist conclusions, many of them travelling into our ranks.
Somewhat delayed, this process will develop further in Britain. The whole situation, and indeed the whole logic of this document on British Perspectives, is the crying necessity for the creation of a new mass party of the working class.
At first, this could be a small mass party, which is now in prospect in Ireland through the efforts of our party there. The same is demanded in the current situation in Britain.
31) The battle against the cuts is a top priority for the working class and us, but it must be linked to the need to argue for an electoral alternative.
The Trade Unionist and Socialist Coalition (TUSC) actually assumes even greater importance in this battle for us and it should strongly feature in all the anti-cuts battles.
Without a serious electoral challenge, there is a danger that councillors carrying out cuts can remain impervious to the suffering that their callous approach can cause.
Industrial action is vital, of course, but it must be buttressed by pressure for candidates – trade unionists in the first instance – to challenge them in elections.
Ideological factor in the offensive
32) The scale of the savagery to come has been spelt out in all its brutal detail in the Observer on 16 January. Nicholas Ridley, the late Tory strategist and former cabinet minister, as is well known, prepared with Thatcher to defeat the miners after being forced back in 1981.
This led to the epic struggle of the miners in 1984-85. The Tories only succeeded because of the pusillanimity of the right-wing TUC leaders at the time.
What is less well known is that, in a pamphlet published in 1988, Ridley also wanted to completely dismantle – effectively destroy – local government, seen then as a “bastion of the left”.
It certainly was, as was shown in the magnificent struggle of Liverpool City Council between 1983 and 1987 alongside Lambeth. Ridley and Thatcher wanted to hand over everything from education to refuse collection to their rich friends in the private sector – a policy of mass privatisation.
They were thwarted in the main by the resistance of the likes of Liverpool. 33) Now Cameron wants to complete the job which Thatcher could not: “City analysts and government experts expect big private contractors such as Capita, Serco and Sodexho to benefit” from council privatisations.
It is expected that if they get away with it, “third-party suppliers will make up 44% of total public sector spend by 2014/15” and unions fear that this could rise to 50%! The GMB union has “established that a total of 113,765 posts are under threat”.
Vacancies will not be filled and services will collapse. Even in Germany, “the private sector now provides more hospitals than the public sector”.
34) One of the ways in which the government is trying to present this is the concept of the ‘Big Society’. Cameron described the Big Society as devolution of power beyond local authorities to individuals and community groups, providing choice and control to local people.
In part, the Big Society is propaganda aimed at countering the growing alienation in society. But in reality, the cuts that come with the Tories’ Big Society will massively increase alienation.
The Big Society will mean volunteers providing services through charities, religious groups and private companies, which should be the responsibility of the public sector.
With job centres now advertising voluntary opportunities it will mean more people, predominately young people, being forced to work for free while the original jobs are being slashed.
In addition, the cuts to charity funding will question whether they will be able to continue to function and provide these services. 35) Even without real leadership the objective situation in Britain is a guarantee of struggle.
The programme of cuts is not a subjective wish on the part of Cameron and Co. There is undoubtedly an ‘ideological’ element to their approach.
They want to use the crisis to inflict lasting defeats on the working class, in a sense to go further than the situation demands. But in general the attacks arise from the concrete position that capitalism finds itself in at the present time.
Even Vince Cable accused his Tory ‘partners’ of being ‘Maoists’ intent on ceaseless ‘revolution’, in reality counter-revolution. One Tory minister boasted that they wanted to create “chaos”.
Nicholas Edwards, acting Chief Executive of the NHS Confederation, in reference to the counter-reforms in the health service, said: “There will have to be an element of Joseph Schumpeter’s ‘creative destruction’.” (Schumpeter was an economist of the first half of the twentieth century.)
