Leon Trotsky declared in the 1930s that the crisis of humanity could be reduced to the crisis of leadership.
Today, however, the problem for the working class is not just the crisis of leadership but of organisation, particularly of trade union and political representation, in the battles that will come.
It is not preordained that the working class, in this recession/slump, in all instances will successfully resist the onslaught of the bosses, particularly against the shedding of labour. The greatest contradiction in industry is between the growing oppositional mood of the working class and the quiescent and outright betrayal by the trade union leadership. Even the best of them have more the outlook of ‘social workers’, who ‘help’ the working class rather than helping to forge a combative fighting spirit, a militant rank and file leadership and an organisation to defeat the bosses.
But one important result of this situation will be a greater politicisation in the broad sense of the term. The desperation of the working class in the teeth of this capitalist offensive and the complete ineffectiveness of the official trade union leadership and organisation, is symbolised by the French Moulinex workers. When they faced redundancies, seeing no other alternative they threatened to blow up the factory. In Argentina this desperation was expressed by an unemployed worker shooting himself live on television in protest at the Argentinean catastrophe and its effects on him and his family.
Such terroristic or semi-terroristic moods underline the gravity of the present economic situation and its effects on the working class. However, such moods are episodic, temporary, and will not be the route that is chosen by the mass of the working class. A new layer of young fighters is beginning to emerge in the factories who are destined to play a key role in the struggle against capitalism.
In Europe, particularly in Germany, France and Italy the working class remains undefeated, particularly in the factories and in industry. Greek workers scored a victory last year when it forced the government to retreat on its pensions ‘reform’. The mood was shown on the Brussels demonstration in December, as also in the tremendous movement of the Italian workers, both in Genoa and also in the movements against the war. These were on a higher scale amongst the working class in Italy than any other country in Europe and also in the actions against Silvio Berlusconi’s attacks on the labour law and other issues. This movement is assuming general strike proportions.
Britain and the British workers will not be immune from similar processes, despite the arguments to the contrary, by various bourgeois pundits. The big anti-war demonstrations in Britain (the last one in 2001 was of at least 50,000) are a symptom of the general mood. The anti-war movement in Britain developed at a more rapid pace than in previous wars. The events of the Afghanistan war will leave a lasting impression on significant layers of young people who will continue to actively oppose the policies and actions of US imperialism.
End of recession-proof Britain
Britain is slightly behind the rest of Europe in fully entering an economic recession. The crisis is more pronounced in the North, Scotland and Wales, as well as the Midlands than it is in the South-East or the South.
In London, for instance, there was still in 2001 a shortage of unskilled labour in retail, pubs, etc, while a scarcity of job opportunities has begun to develop elsewhere.
The deputy governor of the Bank of England puts Britain’s chances of ‘going through a recession’ as one in ten, and even the most ‘pessimistic’ economists have speculated that the odds are no more than one in four. In this fool’s paradise, in which sections of British capitalism live, Britain is seen as an island not just geographically but also economically. Britain has benefited in the 1990s by outward investment, particularly to the US, and from inward investment of foreign capital. Therefore, the contraction in the US economy and the slowing down in the eurozone will have a big effect, not just in manufacturing which is already on its knees, but in financial services and the economy as a whole.
Gordon Brown’s sunny optimism that Britain will substantially escape the worst effects of a recession has been punctured even by the Treasury’s top officials. One of these, Gus O’Donnell, declared in December that 11 September had created “a big increase in the range of uncertainty” about next year. He said that economic forecasts prepared by the Treasury for Gordon Brown now had a ‘wider error band around them than usual’. This is Treasury-speak for, ‘delete everything we and Gordon Brown have said up to now; the British economy like others could be heading for the rocks.’
Napoleon believed that his generals should be ‘lucky’. Blair’s ‘general’ Brown has certainly been lucky, having inherited the chancellorship during the 1990s boom. But this is about to go pear-shaped as the waves of economic recession and slump from the world economy not just lap at our shores but engulf Britain in the next year or so. Growth may stumble on for the last quarter of 2001, fuelled by climbing household debt and a slower than previous decline in manufacturing industries. But manufacturing is in a deep crisis and is expected to contract to about 16% of the economy during the coming crisis. The engineering industry is in the worst recession for two decades with warnings of more than 300,000 job losses, largely in manufacturing, in the next two years alone. Manufacturing exports, as indicated by a recent CBI survey, are expected to be at a 21-year low reflecting the collapse of the former workshop of the world. Britain now is not even a ‘nation of shopkeepers’ as the street corner shop and small businesses go to the wall under the dual pressure of economic contraction and the dominance of the superstore monopolies. The twin pillars of past British society, industry and the sturdy shopkeeper, have now been replaced by what the Financial Times patronisingly declares is a “nation of shop-seekers”.
Paradoxically, it is the very weakness of British capitalism which meant that there has been a delay in the recession compared even to the countries of Europe. Manufacturing, and particularly manufacturing exports, is still crucial for a modern economy, as the experience of Germany and even the US has demonstrated. Knowledge-based services account for only a fraction of total export earnings: less than a third of receipts for manufacturing exports and only a quarter of domestic expenditure and manufactured imports in the year 2000. The skewing of government economic policy, dating from Thatcher, towards finance capital at the expense of the development of a strong industrial base, in the long term, we and others argued, would be disastrous for British capitalism. However, its full effects were masked first of all by the huge receipts of North Sea oil in the 1980s and then by the development of the financial expertise of the City of London. This was given a considerable boost by the dismantling of financial controls by national governments and a globalised finance sector during the 1990s.
However, the limits of this, with fatal consequences for the British economy, could be revealed in the next period. Bob Rowthorne, a professor of economics at Cambridge University, has provided a devastating picture of the full implications of what Britain’s industrial collapse has meant, even during a boom let alone what will happen once an economic contraction takes place. He has pointed out that productivity in Britain’s service sector is below the American average, but the gap closed as Britain became a more efficient producer and developed high value added, knowledge-based services. In the 1990s, the UK had a trade surplus of £7 billion in insurance, finance, computing and other knowledge-based services. By 2000 it had risen to £28 billion.
However, the picture is entirely different as far as manufacturing industry is concerned. After appearing to catch up, Britain fell back. Between 1995 and 2000 output per hour in US manufacturing increased by 27%, compared with 11% in Britain. Because of a huge advantage of increased investment in industry, American manufacturing workers produce twice as much as their British counterparts. Britain, severely weakened by the 1974 crisis, triggered by the oil shock of 1973, was given a death blow in the 1981-83 crisis when 14% of British industry was allowed to collapse by the Thatcher government. Since then industrial output has increased but only by 14% in Britain compared to 114% in the US.
Productivity has grown rapidly in British manufacturing since 1973 but output has been almost stationary. American firms now produce more than twice as much with the same number of workers as they did in 1973, whereas British firms produce almost the same as before with only half as many workers. Rowthorne comments: “Productivity growth in Britain has been almost entirely of the labour-shedding variety” [The Guardian, 5 November]. In other words, increased exploitation, including greater sweated labour through a worsening of conditions in the factories, rather than greater output through a greater horsepower at the elbow of the average British worker has been the norm.
The high value of the pound has also contributed to the crippling of manufacturing industry. Even members of the Bank of England’s monetary policy committee have suggested a 10% devaluation of the pound if Britain is to compete on a ‘level playing field’, particularly in the European market. However, in a contracting market, Britain’s rival capitalists and ‘the market’ are not likely to acquiesce to this easily. We will therefore see a further attrition, both relatively and absolutely, in the position of British capitalism.
Not just manufacturing but now the service sector is beginning to be severely affected by the downturn. The CBI has warned that job losses in the financial services industry will rapidly accelerate. The consequence is that ‘high-flying’ graduates, who were promised jobs a few months ago, have now seen these offers withdrawn. According to The Independent: “An air of deep, almost clinical depression hangs over business leaders and their staff” in the Square Mile. In what was construed as an ‘optimistic’ speech, the director of the Confederation of British Industry in November compared businesses in this country to a “boxer going into round three of a 15 round flight. It has been knocked about a bit already, he implied. but the real punishment may only just be beginning” [Financial Times, 5 November]. This is a masterly understatement from the leader of the ‘captains of industry’. Moreover, there is no guarantee that its competitors will not severely damage or knock out British capitalism. One thing is certain: any ‘punishment’ will be meted out first to the working class and the poor.
An important prop of the British economy, particularly in the 1990s, has been the inward investment of foreign capitalists. But this has begun to dry up as the world economic climate for investment, particularly abroad, has begun to change. It has been domestic demand, the propensity of consumers to ‘shop till you drop’, at least before the beginning of 2002, which has sustained the British economy. This inevitably goes hand-in-hand with the colossal increase of debt. Retail sales were rising at an annual rate of 6% last December while household debt has gone up by 10% a year. It is at a historically all-time high. It is now the equivalent of 70% of national income compared with only 50% in 1988. The savings ratio, the proportion of income saved by households, is about 5% which is well below what it was in the last recession of 1990, and in the 1979-81 recession. In contrast to this, the competitive position of British capitalism and, therefore, its earnings from abroad have collapsed. The trade deficit for the UK is forecast to balloon to £30 billion by 2004, compared with £20 billion now, as imports continue to exceed exports. It is difficult to see how British capitalism can sustain such a deficit without a collapse in sterling.
An additional factor in sustaining the British economy has been an increase in public expenditure sanctioned by Brown and the New Labour government. This does not mean, as Blair and Brown have suggested, that this will lead to the creation of ‘modern’ public services in Britain along the lines of what many of the advanced countries in Europe enjoy.
Spending plans hit the buffers
On the contrary, the world economic situation and the fundamental weaknesses of the British economy will severely restrict the room for manoeuvre of the Blair cabinet.
It will have a devastating effect on the spending plans in key fields which, in turn, will produce political convulsions. The small increases in public spending agreed by New Labour, but which have yet to come on stream, have to be set against the savage reductions in public expenditure overall which have taken place since they came to power in 1997. In fact, up to now the level of public expenditure under New Labour has been lower, as a percentage of GDP, than it was under the reign of the last Tory prime minister, John Major, and in fact lower than any government since 1945. Last year Blair frantically urged ministers to spend the £6.8 billion allocated to different government departments but not spent. These departments in 2000 underspent by more than 3% of the collective budgets with shamefully the biggest shortfalls in areas such as schools, hospitals and transport. The department of education “underspent by £5 billion, enough to pay for an extra 50,000 teachers while the department of health underspent by £500 million” [The Independent].
The cuts have gone so far that it was estimated that there would have to be a 10% rise in spending in public services this coming year for all the money already allocated to be used. What are the reasons for this? It is the ‘cuts culture’ in Whitehall. This in turn is the product of Brown and Blair’s fanaticism until now to out-Tory the Tories in cuts. One report described the situation whereby “civil servants… [are] unused to having such large sums at their disposal”.
This revelation will fuel the anger of nursery workers and parents, hospital patients, teachers and kids in overcrowded classrooms, and those who need special needs facilities but see them being closed by local authorities. This, they are now informed, is due to civil servants being organically incapable of actually spending money, not their money but the public’s.
Moreover, the idea that the government is going to bestow largesse on local councils is a mirage. Indeed the opposite will be the case as further cuts will be carried through. It is true that Brown did amass a cash mountain of around £19 billion – 2% of GDP – in the financial year to March 2001, due to his ‘prudence’ (read savage cuts in public services and jobs). During the boom, government revenue was boosted by tax receipts through increased employment but that will now be reversed. Indeed in Labour’s first period of office, revenue consistently exceeded budget forecasts. The opposite will be the case in the next period. Spending is now due to increase. But the government’s contingency reserve of £2.8 billion has already been raided to pay for foot-and-mouth compensation. On top of this have come the costs already of the war in Afghanistan and the commitment for Britain to head a ‘peacekeeping force’ in the area. This, together with the slowing down of the economy, means that a government surplus could swing abruptly into an estimated £7.7 billion deficit in the financial year 2002-03.
Wave of redundancies
This deficit could be lived with if the present economic downturn was temporary and significant growth was expected in the future. But even Eddie George, governor of the Bank of England, is now warning of a prolonged, three-year downturn.
The government, therefore, faces a ballooning budget deficit which could be resolved by increased taxes, which Brown flagged up in his Labour Party conference speech. It could be financed by further borrowing but this seems unlikely from this most ‘prudent’ of prudent chancellors. The government could resolve the deficit through further restrictions on public spending. In reality, a mixture of these measures is likely to be employed by Brown.
The result of this in the past year has been a trickle of redundancies which could now be followed by a flood. In fact, the biggest wave of job losses since the early 1990s is in prospect in the winter and into 2002. The Financial Times reported at the end of October that “employment lawyers… have reported a sharp rise in demand from companies wanting advice on cutting jobs”. All sectors are affected, manufacturing the most, but telecommunications and financial services are throwing people out of the factories. Even people who were recruited, promoted and given big cash handouts in August found by the end of October they were on their way, press reports have indicated.
It is not just smaller and medium sized firms but former ‘giants’ of British capitalism who are first in the queue to empty workers out of the factories. BAe, Waterford-Wedgwood, GKN and many others have thrown tens of thousands of workers out on the stones. The price that will be paid by the British workers is indicated by a report in The Independent at the end of October 2001: “A massive chemicals plant in the North of England will shut in a move that could cost 133,000 jobs unless the government agrees to hand out £300 million in state aid.”
The real unemployment figures in Britain have been massaged by different governments now for two decades. We therefore have the anomaly that the headline jobless measure fell in October. Yet the Labour Force Survey – which counts those considering themselves unemployed regardless of whether or not they claim benefits – actually rose by 53,000 to more than 1.5 million. Despite the fiddling of the figures, government statisticians will not be able to disguise the inexorable growth of unemployment in the next period. And while it will be the North, Wales and Scotland that will bear the brunt of the contraction due to the preponderance of manufacturing industry in these areas, the scale of the crisis could ensure that it is much more generalised even than the 1990-91 recession.
Recession or slump does not automatically equal a rising industrial militancy or heightened political consciousness. Moreover, it is necessary to take into account the national peculiarities, conditioned by its previous history, of each country. The movement of the European working class will exercise a big impact on the consciousness of the British workers. But the confidence and combativity at this stage of the working class, in Germany for instance, is potentially greater than in Britain because it has not experienced – apart from the East inherited from the former Stalinist East Germany – the setbacks and defeats of the British working class. Big sections of workers have been dislodged from the factories in Britain, which is still not the case in Germany, for instance.
The past, tradition, is the dead weight of previous generations, as Marx put it, which like an alp (mountains) can lie on the brain of the living. The defeat of the miners’ strike in the 1980s, the most powerful section of the industrial working class at the time, had a profound effect and, to some extent, still does in the consciousness of the British working class. The victory in the anti-poll tax struggle, which was a continuation and an echo of the miners’ strike in a different form, brought down the Thatcher government. Yet even this did not fully dim the effects of the miners’ defeat. Thatcher, to paraphrase the Roman historian, Tacitus, “created the desolation and called it peace”. The pit villages of Yorkshire, South Wales and Scotland, with the guts torn out of them, plagued by unemployment, drug addiction and social disintegration, are still monuments to the defeat of the strike. This flowed not so much from the strength of the Thatcher government but the perfidious character of the right-wing trade union leaders who refused to actively come to the miners’ aid.
The deindustrialisation of Britain which flowed from this was a conscious, or at least half-conscious, policy to nullify and weaken the British working class. “Never again,” reasoned the bourgeois leaders, would they experience the humiliation they felt at the hands of the miners in 1972 and in the 1974 strike. The latter led to a general election and brought down the Heath government. The whip hand which the capitalists appeared to have was reinforced by the collapse of Stalinism and the ideological offensive they conducted. One of the consequences was the bourgeoisification of the Labour Party and, with it, the jettisoning of any adherence to ‘socialism’, even in words, by the summits not just of the Labour Party but of the trade unions as well.
Some, even ex-members of Militant (the forerunner of the Socialist Party), have drawn utterly pessimistic conclusions from these developments in Britain and worldwide. They have reasoned that the ideas of socialism and Marxism, the broad socialist consciousness of the working class, are weaker now then for 150 years, weaker even than in 1848 when Karl Marx and Friedrich Engels wrote the Communist Manifesto. It is inevitable that isolated individuals, even some who played an important role in the past, can fall into a pit of despair unless they were armed with the analysis of the CWI of the 1990s. We recognised that the collapse of Stalinism was a big setback, – with particularly catastrophic consequences for workers in Eastern Europe – but not a crushing historic defeat ending in the smashing of the workers’ organisations as in the inter-war period in Italy, Germany and Spain. The ideological offensive of the bourgeoisie went deep, even into the workers’ movement and affected the consciousness of the working class, but it did not blot out completely an elemental socialist consciousness and certainly a stubborn working class opposition, even during the boom, to globalised capitalism.
The testimony to the correctness of our analysis is shown by the layer of youth who, quite independently of us and other organisations in Britain and on a European scale, in their opposition to the system gravitated towards the ideas of socialism and of Marx. At the beginning of the 1990s it was predicted that liberal capitalist democracy was the finished product, a political paradigm for humankind which would signify the ‘end of history’. Capitalism, albeit in its democratic form, was the quintessence of human achievement which could ‘painlessly’ usher in a humane and peaceful society. That perspective was shattered with the collapse of the Twin Towers on 11 September and its bloody aftermath in Afghanistan and elsewhere. The turbulence, the economic, social and political convulsions which will result from the growing economic storms, will deliver a deathblow to this perspective. Already in the 1990s a new generation was being formed ready to challenge capitalism and seeking an alternative.
The events in Argentina involving an elemental mass movement, which forced the de la Rua government not only to resign but also de la Rua and his family to personally flee the country is relevant not just to that country but to Britain and the whole of the world. This was followed by unprecedented events, even for Argentina. The country had five presidents in the space of a fortnight! This has come after a slump over three and a half years, which has plunged the working and middle classes into the most desperate abyss of poverty. Indeed, even before the latest tumultuous events, Argentina was in a pre-pre-revolutionary situation. Objectively, all the features of a revolutionary situation existed – a complete split within the ruling class on how to handle the situation, mass discontent of the middle class, and a working class whose consciousness was and is, ‘we can no longer live like this’. The vital factors missing were a mass socialist consciousness, a revolutionary party and leadership which would be capable of showing a way out in the direction of socialist revolution in Argentina. This would have immediately detonated revolutions throughout South and Central America and dramatically altered class relations on a world scale.
The small revolutionary, but ultra-left/opportunist Trotskyist organisations, have been able to partially fill the vacuum, particularly in areas such as Buenos Aires and Cordoba. But this has not been because of the clarity and correctness of their programme but despite it. Therefore, by default, if elections are held the working and middle classes in despair will probably vote back into power a wing of the Peronists. However, Peronism has failed completely in the past and will do so in even more glaring fashion in the next period.
But we should be on guard against expecting a simple repetition of a right-wing Peronist government, even of the kind that Menem presided over in the past. In desperate situations, desperate measures can be taken, even by bourgeois governments under the pressure of the masses. Argentina is one of those examples about which Trotsky warned. An unexpected onrush of the masses, without organisation or leadership, has completely shattered the expectations of the Argentinian and, for that matter, the world bourgeoisie. Payment of interest on the debt has been suspended. But it is entirely possible that a Peronist government, espousing ‘populist’, left and radical policies, could even repudiate the debt of Argentina completely, which could be followed by a chain reaction of debt cancellations, both in Latin America and in other besieged countries in the neo-colonial world. This in turn could have a devastating effect on the world financial situation and act as a trigger for a financial crisis superimposed on an industrial crisis, which could aggravate and prolong the world economic downturn and push it into a slump. If the Argentinian government moves in this direction, and this is not all certain, the world’s financiers will be compelled to accept, through gritted teeth, these emergency measures. They will be in effect compelled to write off this debt. Such a scenario followed the 1929-33 slump. Ultimately of course, Peronism, working within the framework of decaying capitalism, will not be able to solve the problems of the Argentinian working class.
