Introduction
The whole of the planet was affected by the 11 September attack on the Twin Towers and the Pentagon and the political fallout that resulted from this.
Britain was not an exception. In fact, with Tony Blair as the twin ‘star’ in the ‘war against terrorism’ in Afghanistan, Britain was affected more than most countries. A strong element of an unofficial ‘national government’ was in place. The Tories slavishly supported the government in “mutual bondage” [Hugo Young, The Guardian], while Charles Kennedy’s Liberal Democrats, with the usual ritualistic wringing of hands, also lined up behind the Blair government.
Now that the war in Afghanistan is in the ‘endgame’ – the “first phase”, according to US defence secretary Donald Rumsfeld – the political contours of the future have become clearer. It is true that the ‘war without end’, promised by US vice-president, Dick Cheney, could rumble on in the background. It could also come back into the foreground if a serious military attack was to be undertaken against Iraq, for instance. Therefore, processes which were muted or pushed into the background during the conflict will re-emerge with redoubled force in the next twelve months.
The Blair government will not reap a huge long-term ‘war dividend’. ‘Victorious’ governments rarely do, as the fate of Winston Churchill in 1945, George Bush senior following the Gulf War, and Blair’s own position following the Balkans conflict shows. (Thatcher’s victory in the Falklands/Malvinas War was an exception for special reasons, which we have explained before.) Nevertheless, in the first period after the war, the standing of Blair and the government in the polls will probably be maintained, partly because of the relief that the war ‘did not go too badly’ compared to what seemed likely in the immediate aftermath of 11 September, and partly due to the continued unpopularity of the main opposition party, the Tories.
The aftershocks of 11 September and the war in Afghanistan will still be felt for some time. But events, particularly in the economy, both in Britain and worldwide, will act to re-shape the situation. This will be the most decisive factor in determining the consciousness of the working class.
In the recent past, chancellor Gordon Brown boasted that his ‘prudence’ in economic management had banished the capitalist ‘boom-and-bust’ economic cycle, if not from the whole of the world then certainly from Britain’s shores. He was like King Canute, except the waves were lapping around his midriff rather than his ankles. This compelled him to switch his position and declare, at October’s New Labour conference: “No country can insulate itself from the global economy.” This has not stopped the National Institute for Economic and Social Research picking up Brown’s discarded mantra to claim: “The chancellor has achieved his aim of abolishing boom and bust and that Britain is likely to emerge almost unscathed from the global economic showdown.”
This is in the teeth of all the evidence to the contrary both in Britain and worldwide. Britain cannot insulate itself, as Brown and his apologists maintain, from what is shaping up to be the most devastating, simultaneous world economic crisis for at least 25 years and possibly the most serious since the slump of 1929-33. We have given an abundance of facts, figures and quotes in the theoretical journal, in our weekly paper and in detailed statements from the Committee for a Workers’ International, which do not need to be repeated here but which comrades in Britain, particularly the newer generation, should acquaint themselves with. It is necessary, however, to give here some of the main features of the world and British economic situation.
It is quite clear that the US and Japan are already mired in recession and Europe is moving rapidly to join them. Growth predictions for the ‘triad’ (the US, Europe and Japan), the dominant economic powerhouses of the world economy, have been severely scaled down. Some, like the International Monetary Fund (IMF), put forward the ‘optimistic’ scenario of a growth of the world economy by more than 2% while others put it much lower. Significantly, however, the International Herald Tribune declared: “Most economists consider a global reading of less than 2.5% to be a recession because the economy needs to grow at least that much to keep up with rising population.”
Moreover, each set of predictions for future growth is a scaling down of those given previously by bourgeois economists and institutions. Horst Kohler, the IMF managing director, expressed the complete bemusement of most bourgeois economists at what was taking place in the world economy: “There is no real precedent for this situation, which makes forecasting based on previous experience look something like trying to read the tealeaves” [International Herald Tribune, 16 November].
This underlines the arguments of Marxism on two counts: 1) Capitalism is an unplanned, blind system with processes in the economy taking place behind the backs of society. 2) Most bourgeois economists’ predictions are normally, in any case, the equivalent of ‘reading the tealeaves’.
The US economy is the powerhouse of the world economy and is the key. It is commonly accepted that it is now in recession, with a plunge in output, a drop in capacity utilisation (in other words, factories are increasingly lying idle), and a big decline in profits. Japan, the world’s second-largest economy, faces moving from an economic depression to a slump with industrial output falling by an annualised rate of 12.7%, the largest drop since 1975. A similar situation faces Germany and the eurozone with the best-case scenario being a virtual stagnation in production.
Europe’s economic woes could be compounded by the introduction of the euro. Through the ‘growth and stability pact’, with its tight control of budget deficits, Europe, in theory, will not be able to take the same route of Japan in the 1990s, of accumulated debts and, recently, devaluation of its currency, in Japan’s case the yen, as a means of trying to extricate itself from its difficulties. Even with Japan this has now resulted in a probable ‘day of reckoning’ in the next period. The unsustainable 130% state debt cannot go on and will mean that Japanese capitalism will be forced to ruthlessly attack the living standards of the working class. Different policies can be resorted to by governments but for capitalism, ultimately, it is a choice of different roads to ruin.
That does not mean to say that the capitalists when facing a serious crisis will not seek to take any measures – sometimes to gamble – in order to overcome the problems of their system. As the British economist, John Maynard Keynes, was fond of saying: “In the long run we’re all dead.” But in the short term… “When the situation changes, I change. What do you do?”
The bourgeoisie in the US, in particular, under the impact of the first stages of this crisis compounded by 11 September, dropped the Thatcher/Reagan monetarist policies like a hot brick. Paradoxically these were first introduced by the social democrats in Britain in the 1970s (Denis Healey and James Callaghan) but were ruthlessly applied in the 1980s and 1990s. These doctrines informed the policies of the bourgeoisie worldwide until today. But we now have the about-face of Bush, who was cast in the mould of his father and Thatcher before he came to power, sanctifying the pumping in of significant amounts of money, liquidity, into the US economy. This has been accompanied by the slashing of interest rates – eleven reductions in 2001 – in a desperate attempt to boost the economy.
Can it work? If the markets at the end of 2001 are to be believed then the ‘worst is over’. Shares on the Wall Street stock exchange in the US, including technology shares, at one stage took the Dow Jones Index back over the magical 10,000-mark. However, such temporary revivals are not uncommon under capitalism while the economic curve is stagnant or declining. Similar short rises like this were witnessed in the 1929-33 slump but were mere episodes in the relentless drop of the US economy.
Some industries could experience short-term ‘growth’. For instance, American companies have been engaged in a big inventory clear-out in recent months, spearheaded by the car industry. Therefore, output could increase for a few months but this would just bring it back to the level of stocks which existed previously. Lower interest rates, it is hoped by Greenspan and the Fed, will encourage ‘consumers’ to buy all this increased output, which will lead to higher growth, higher corporate earnings, higher profits and higher share prices. However, the more serious bourgeois economists are decidedly more downbeat than this and are expecting a more prolonged ‘period of economic adjustment’, read recession or slump, because of the ‘excesses’ of the 1990s.
Overcapacity
The massive accumulation of capacity, which can only now be partially used, together with the tendency for the rate of profit to decline, combined with a collapse in ‘demand’ – temporarily cut across by Christmas shopping – will not encourage the capitalists to massively invest.
The speculators in finance capital can gamble on the stock exchange in the hope of short-term gains. With interest rates plunging, to keep their deposits in the banks is not the most attractive option. Why not therefore take a risk in the hope that it will pay off? Many of them, therefore, will burn their fingers seriously as the stock exchange in this period cannot get out of line too much with the developments in the real economy which is in recession or slump. It is not just ‘over-bought’ and ‘over-hyped’ dotcom companies which have seen their earnings plunge. Merck, which, in the words of The Guardian economic journalist Larry Elliot, is a well-established old company in a pharmaceutical sector seeing strong demand growth for drugs, is predicting zero growth for earnings for 2002.
The growth of the national, corporate and household debt, which accumulated in the 1990s and extended the life of the boom, is now recoiling on the US. The injection of what Marx called ‘fictitious capital’ can create demand which extends a boom beyond its ‘natural life’. The further this process goes, the more ferocious the recoil, like an elastic band being stretched to breaking point. For instance, we warned that the extensive use of ‘derivatives’, in the US in particular, was storing up huge problems for the future. These financial devices are a form of ‘traded options’. Simply put, it involves betting by the capitalists and financiers on the future price of commodities, currencies, loans etc. This has come massively unstuck in the case of Enron, the world’s largest energy trader and benefactor of the Bush family in past elections in the US. It has spectacularly gone bust and could be the first of many collapses amongst the economic titans of the US.
There is now open speculation even amongst bourgeois economists about different ‘worst-case’ scenarios for the US economy. There are those like Stephen King, managing director of HSBC, who, like the Socialist Party, has drawn a parallel with what happened in Japan in the 1980s which ended with the decade-long depression of the 1990s. King says this can be repeated in the US. He posits a second scenario of a quick but short-lived bounce in the economy, helped by the measures which the Fed and other central banks are taking in cutting interests and pumping in liquidity into the economy. However, any recovery can only be sustained, not through weakened companies and industry, but by the government through higher government expenditure and a real growth in wages. But this, as Elliot points out, will lead to a “squeeze on corporate profits… the rebound is choked off either by higher interest rates or savage corporate downsizing – or perhaps by both”. He also says it is possible that there will be a repeat of the recession of the 1990s with the Fed doing just enough to prevent a Japanese-style deflation but with much reduced growth rates.
Slowdown, recession or slump?
It is impossible to work out in advance the exact severity or length of this recession or slump. But all the present indications show that it is going to be severe and could be more prolonged than any recession since 1945.
Moreover, any future ‘growth’ will be anaemic, with rates lower than in previous cycles and much lower than the 1990s. This will mean that capitalism, even when it inches ahead, will be unable to fully re-absorb the unemployed and solve the problems which existed during the crisis. A sudden collapse of the economy, a slump, is not the most favourable for the working class or for us. Workers could be stunned and with a weakened position in the factories feel that they are powerless against the employers’ offensive. A slowing down of the economy, lower growth – a small recession – will aggravate the position of capitalism, anger the working class without seriously denting its power and means they will be more receptive to socialist and Marxist ideas. A slump or a serious recession is still possible. Larry Elliot quite brutally summed up the situation of capitalism when he wrote: “The financial system is out of control… Globalisation is acting as an agent of price destruction and… modern capitalism is inherently unstable and prone to ever more serious crises” [The Guardian, 17 December].
The present crisis seems to be a classic crisis, described by Marx as an ‘over-accumulation of capital’, with huge excess capacity and a glut of unsaleable products. Superimposed on this could come a financial crisis which could complicate, deepen and extend its effects. Argentina is the most obvious example of what could become, in the neo-colonial world, a repetition of the 1930s, with a series of defaults which could trigger off a world financial crisis and heavily impact on the real economy, on manufacturing and the jobs of the working class.
Moreover, Argentina is a mirror of what can happen to the working and middle classes, not just in the rest of Latin America, but in the industrialised world as well. Here is a country which was the major economic power of Latin America in the 1930s, the seventh-richest country in the world, which has been reduced to absolute destitution under the stewardship of rotted Argentinean capitalism, combined with the plunder of its assets and wealth by imperialism. It presents the most visible expression of how ‘modern’ capitalism can turn back the wheel of history for the masses in a very real sense. In the 19th century, Spanish, Italian and other workers fled an impoverished Europe for the new vistas of Argentina and a new life. Now their great great grandchildren queue up outside the Italian and Spanish embassies in a desperate attempt to escape the nightmare of Argentina for the ‘old country’. Only a few can take to this lifeboat for ‘salvation’.
In a situation which has features of 1923 in Germany, with the impoverishment of the middle class, and the slump in the US of 1929-34, Argentina appears to be locked into an increased spiral of decline. University professors, architects, in scenes that could be taken from Moscow or St Petersburg in Russia in the most impoverished period of the 1990s, are forced to hawk their heirlooms on the streets of Buenos Aires for a pittance. Many are driven from previously comfortable houses and flats in middle-class areas to seek refuge in the poorest quarters of the capital, there to be met by huge signs, “Welcome, middle class”, erected by the usual inhabitants of these areas.
The situation is crying out for a mass revolutionary party and leadership capable of mobilising the mighty Argentinean working class to change society, thereby acting as a socialist beacon to the whole of Latin America. The anger and desperation of the masses has compelled trade union leaders, largely Peronist controlled, to organise a series of general strikes with the purpose, however, mainly of ventilating the anger of the masses. The political leadership of Peronism merely sees this as an attempt to rock the parliamentary cradle from the side of the ‘populist’ De La Rua (not so popular now) to their side. However, the despair of the masses at any viable political alternative at present, is reflected in the massive abstentions and also the vote for the different left tickets in Buenos Aires. The vote for the latter, mostly remnants of the Trotskyist Moreno organisation which had an important influence in Latin America in the 1980s, is despite their inadequate programme and not because of it.
It is not just in Latin America or in the neo-colonial world as a whole where workers are moving into opposition to the bosses. In France a wave of protests, ironically involving for the first time mass demonstrations of police, as well as teachers and health workers, have forced concessions from Lionel Jospin’s government. With a sure instinct the French workers have seized the opportunity of the upcoming presidential elections in which Jacques Chirac and Jospin are competing for support, to extract concessions.
The same could happen in Germany with the metalworkers lining up for action if the bosses do not grant considerable wage increases. There is a growing anger in Germany – and this could become a general feature of the European workers’ movement in the next stage – that ‘we were told by the bosses and the government’ to ‘tighten our belts’ in the 1990s, which would ensure a rosy future for us and our families. Instead we are reaping a bitter harvest of job losses and cuts in the social wage. The present younger generation in Germany, facing massive job losses and a curtailing of rights and conditions in the factories, the holding down of wages, etc, will be probably the first since the immediate 1945 period to face lower living standards than their parents. This is bound to produce a mood of fury and opposition within the German working class within the next period.
The mighty 100,000-strong demonstration in Brussels in December is also an indication of the temper of the working class in Europe. Coming as it did so soon after 11 September, and in the ‘end game’ of the Afghan war, the numbers who turned out and the mood on the demonstration, particularly of the French workers, is a harbinger of what is to come. It is true that the trade union leaders once more demonstrated in Brussels that they are bereft of any alternative to capitalism or have a strategy or tactics capable of defeating the bosses. This magnificent demonstration for them was just a parade under the slogan of a ‘social Europe’. At the end of the demonstration they offered vacuous, empty platitudes and accompanying music, instead of a fighting programme for action to save the working class from the onslaught of the bosses.
It is the young people, in particular, who will bear the main burden of this crisis, with previous opportunities for advance in education and employment choked off. They are bound to fight back, already there have been mass demonstrations and strikes in Spain against the privatisation of education, probably the biggest in the whole of Spanish history. These have engulfed the right-wing Aznar government and forced it onto the back foot. Similar strikes and demonstrations have taken place in Italy against attacks on state education.
International Socialist Resistance together with the CWI made a big impression on the demonstration on 14 December as well as its international conference. ISR will continue to play an important and energetic role in the anti-capitalist movement, which has been one of the most important developments of recent years. It can also play a key role in reaching young people and giving them hope through a fighting campaign to defeat the programme of education privatisation which is now taking place on a European and, indeed, worldwide level. There is no reason whatsoever why the examples of the successful anti-poll tax struggle in Britain and the anti-water charges campaign in Dublin could not be repeated on this issue in at least some of the countries of Europe. Such a battle, taking place against the backdrop of a serious economic crisis and growing discontent amongst the heavy battalions of the working class and could therefore lead to a deeper radicalisation than in the past. We can marry together this movement with important struggles, both on the trade union and political levels, of the European and worldwide working class.
