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Home   |   The Socialist 8 January 2005   |   Join the Socialist Party

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Fighting a failing system

"CAPITALISM IS the only system that works," pronounced Polly Toynbee, a columnist in The Guardian, as 2004 drew to a close. Yet, a torrent of reports, factual comment and information in her own newspaper and the rest of the capitalist media indicate that the system she supports is working badly and potentially is on the verge of a catastrophic breakdown. An 'economic tsunami' on a world scale could follow the disaster in Asia.

Peter Taaffe, Socialist Party general secretary

A banner headline in The Independent in mid-December read: "Poverty and despair of Britain's lost generation". Across Britain, almost 20 per cent of children are in families receiving means-tested help because they are not working. A recent arrival from Bangladesh, an engineer, commented: "I was shocked, I thought I was coming to a leading world country."

Around eight million people are living on less than 10,400 a year and cannot afford essentials such as furniture. Two million cannot afford to heat their homes properly, which results in 50,000 deaths a year, while thousands have to choose between prescriptions for medicine or food.

On the other hand, the wealth of the super-rich has doubled since Blair came to power. Polly Toynbee's system is indeed working for some as inequality rose in Britain by 40% between 1979 and 2001. The number of dollar millionaires in Britain rose by 28,000 to a staggering 383,000 in 2003.

Worldwide, the ranks of "high networking individuals" - those with more than $1 million (547,000) in assets - increased by 500,000 to a total of 7.7 million. Their combined wealth rose by 8 per cent to $28.8 trillion. Bolstered by a colossal increase in profits - the surplus extracted from the labour of the working class in Britain and worldwide - the super-rich are creating "100-year plans" to hold on to their wealth.

This at a time when half the world's 2.8 billion workers who actually have jobs are struggling to survive on less than $2 a day, while 550 million live on less than $1 a day. This is the grim reality of Polly Toynbee's "best system" as we enter 2005, a year that promises the turning of the tide against what is seen as an increasingly discredited system.


ANY ECONOMIC and social system is ultimately judged on the basis of whether it can develop, maintain and increase the productive forces - science, technique and the organisation of labour, and with it the living standards of the majority. In the 1990s, given the collapse of the regimes of Eastern Europe and the Soviet Union, capitalism worldwide claimed that it was fulfilling this task through the 1990s boom.

The underlying reality, however, was a colossal polarisation between rich and poor, between the capitalists and the working class, as the former ruthlessly applied neo-liberal policies which, in turn, generated an incipient revolt amongst young people and growing numbers of working-class people.

This could assume mass proportions if the present highly unstable economic situation tips over into what the Financial Times warns could be a severe "economic depression".

The US economy, which is the Atlas of world capitalism, holding up the whole system, was mainly sustained after the economic shock of 1997 by huge inward investment by foreign capitalists, particularly from Asia, with the governments of Japan and China in particular also plugging the US federal deficit by buying Treasury Bonds.

They have done this because of their dependence on exports to the US market, without which they would plunge into an even worse crisis than in 1997.

The consequence has been a huge US balance of payments deficit of almost 6 per cent, almost double what it was in the 1980s, which in turn has now resulted in a big drop of about 30 per cent since 2002 in the exchange rate of the dollar against other major currencies.

While proclaiming support for a "strong dollar" the US government of Bush has colluded in the devaluation of the dollar, which in turn cheapens US exports against the major competitors of Europe and Asia. In effect, the US has put the European capitalists on reduced 'rations', driving up the euro to around $1.33 and the pound almost to the level of $2, which will savagely undermine even further the stagnant eurozone and could result in a spiralling of factory closures and unemployment.

At the same time the holders of US dollars abroad, having seen it plunging and their holdings further devalued, can divest themselves of this currency for others, setting in train what US economist Stephen Roche has told his clients may be an "economic Armageddon".

However, not just the US but also the Asian capitalists and governments are terrified of jumping off this speeding economic merry-go-round for fear of collapsing the whole financial house of cards. A former US Treasury secretary has described this as a "balance of financial terror". When and just how the system could implode is unpredictable but as the British economist Wynne Godley comments: "The crunch may be at hand."

US trade deficit

THE INEXORABLE rise of the US deficit means that the Bush regime will have to savagely take the axe to public spending in the US and, at the same time, through a cheap dollar, seek to recapture markets from its European and Asian competitors. If this is successful, it will enormously aggravate the 10% unemployment in France, for instance, with almost that figure existing in Germany.

Moreover, there is no salvation to be found even in the growing market of China. Half of Britain's exports go to Europe whereas only one per cent goes to China. True, the British capitalists are behind their US and European counterparts in exploiting this market but even US companies are currently earning greater profits in Australia, a market of 19 million people than in the potentially 1.2 billion market of China.

At the same time, China is churning out huge amounts of manufactured exports that are pouring onto the world market, which is becoming saturated. The result could be massive 'overheating' in China and an economic crisis on the scale of Asia in 1997.

But, given poverty-stricken wages, China and, to a lesser extent India, still remain threats to the jobs of millions of British workers from "outsourcing", particularly in manufacturing. Outsourcing is predicted to increase massively in the next period.

Despite this, Gordon Brown gives the impression that he is on economic cruise control, with promises that Britain under his stewardship will remain unaffected by the world economic storm clouds that are gathering. Nothing could be further from the truth. In many ways, the economic position of Britain is a replica, albeit on a smaller scale, of the chronically diseased US capitalist economy.

Its trade deficit in manufacturing is the worst for three centuries. Its first deficit was in 1983, a signal of British capitalism's long-term decline but this has now burgeoned to almost 39 billion in 2003 and was almost that figure in the first ten months of 2004. It therefore has a similar "balance of payments crisis" to that of the US.

Unlike the US, however, Britain still has a surplus from the capitalists' investments abroad and in 'services', which plugs, for the time being, this growing black hole.

But the scale of the collapse is indicated by the fact that British capitalism, in the first ten months of 2004, had a 2.4 billion trade deficit with Belgium and Luxembourg, a 4.7 billion deficit with the Netherlands, a deficit over 10 billion with Germany, and a more than 3 billion gap even with Berlusconi's ailing Italy!

This situation is destined to worsen as the price of the pound reaches towards $2. It was last at this level just before "Black Wednesday" in 1992. Whether it results in a crisis on that scale for the New Labour government is doubtful but the exports of British capitalism will suffer severely, factories will close and workers will be thrown out of jobs as a result of this.

'Golden rule' breached

AT THE same time Brown, despite his claim of further 'record' growth, faces a slowing down of the British economy this year and with it the shipwreck of his "golden rule" of only borrowing to finance investment over an entire economic cycle. There is already a growing gap between income and expenditure in the government accounts.

Either Brown will be compelled to increase taxes, a virtual certainty which he hopes to delay until after the next election or savagely cut public spending or combine both.

Up to now, the British economy and, thereby, even the paltry spending on public services of the government, has been buoyed up by the growth in consumption which has been a big factor in sustaining growth. The housing bubble has been a crucial element in this, allowing increased spending, second mortgages, etc. This, however, has led to a colossal household debt of 140% of annual income, which is now clearly unsustainable.

Some capitalist economic experts hope that this will not mean a repetition of the housing market collapse of the early 1990s, with a drop in prices that resulted in repossessions and homelessness. Interest rates are lower now and they argue that householders may just hang on to property and wait for "better times".

But this discounts the likelihood of a serious world economic crisis, which will severely impact on Britain as well as the underlying economic weakness of British capitalism.

The privatisation of education, particularly in the universities, is calculated by Brown and Blair to be one replacement for industry as a "foreign earner". It is true that Britain is second only to the US in its attraction of foreign students but this currently brings in less than 2 billion a year, hardly an economic lifeline.

Moreover, the surplus from oil at 2 billion is now half of what it was a year ago. The consequences of all this are felt in the harrowing poverty in Britain's major cities, with Glasgow, Liverpool and London accounting for half of the poor children in Britain, as well as the steady erosion and attacks on the past gains of the working class.

The assault on pensions, particularly the raising of the retirement age from 60 to 65, is a major attack on the remnants of Britain's once-famed welfare state.

The scandal of MRSA in hospitals, with 100,000 people catching infections and a horrifying 5,000 dying every year, is in itself an indictment of the capitalist system and, particularly, its neo-liberal phase of deregulation and privatisation.

This killer bug has been allowed to take root because the NHS now employs half the cleaners it did 15 years ago, resulting in fewer than half of hospitals having a "good or excellent cleanliness rating", according to the government's own health minister.

Privatisation is utterly discredited for the con which it is. The collapse of Jarvis, which is quitting four PFI deals, leaving half-built student accommodation at Lancaster University and elsewhere indicates this. Despite this, Blair will press on regardless because he is organically linked to diseased British capitalism.

Blair has even allied himself with the ultra-right neo-conservatives in the Bush administration. He told The Times: "The [US] neo-conservatives are not a world away from the progressive left"! Not just in politics but in lifestyle and outlook he is a million miles removed, as is his Cabinet and now his party, from the mass of working people in Britain.

He recently acquired a 3.6 million house bought against projected future income of 20 million after he leaves 10 Downing Street! It is time to prepare a new mass alternative to break the grip of parties rooted in the failed system.

The Tories still bear the mark of Cain, of Thatcher, and are largely a rural and suburban rump. Its main political message is that Blair is "always stealing its clothes", which is true.

The Liberal Democrats, on the other hand, who give the impression of being different, are also located firmly within discredited capitalism. They are recent enthusiastic converts to privatisation and the neo-liberal agenda in general. The future does not lie with these parties and the profit system they represent.

Elected dictatorship

ONE OF Polly Toynbee's colleagues at The Guardian, Martin Kettle, sought to reinforce her message by proclaiming last year: "Socialism is dead. Long live liberalism and social justice." Yet the past year has shown that his claim is false.

Capitalism, even "liberal" capitalism, and "social justice" are not twins but polar opposites. What is "liberal" or democratic about Blair's capitalist Britain? Lord Butler has revealed that Blair and a handful of cronies take all the decisions, with little or no reference to the rest of the government. The Cabinet meets for the same length of time as the TV programme Ready, Steady, Cook!

In other words, a veiled personal "elected dictatorship" by Blair exists which has taken Britain into bloody, devastating wars and relentlessly attacks the working class here and internationally.

Where progress has been made, even on a limited scale, it has been precisely by those who adopt a socialist outlook and oppose the capitalist system. Roger Bannister, for instance, the left candidate for Unison general secretary, and not the national leadership of UNISON, successfully mobilised the workers in his authority (Knowsley on Merseyside) and established a 35-hour week.

The attempt in education to impose city academies on an unwilling population was halted when Waltham Forest NUT, with socialists in its leadership, teachers and parents forced Jasper Conran to withdraw from his attempt to introduce the "benefits" of his "enterprise culture" to the grateful poor of that borough.

It is also the socialists in the PCS and other unions who are leading the battle for action to defeat the attack on the pension rights of the British working class through a one-day public sector general strike.

These are small examples, it is true, but events and the testing out of the official leadership of the trade unions, as well as the discrediting of New Labour, are preparing the ground for these ideas to be embraced by millions of British workers.

In projecting "liberalism" as the alternative, Martin Kettle imagines he is also "modern". So-called liberal capitalism and the Liberal Party which espoused these ideas predated the rise of the labour movement and of socialism. It was their failure in the nineteenth century and since that convinced working people to create mass organisations to challenge capitalism and change society in a socialist direction.

Discredited system

WORLDWIDE, A certain rebirth is under way. Two major international trade union federations are about to create a single body which, theoretically, will encompass 174 million members worldwide.

These organisations, unfortunately, are presently under the control of right-wing officials but the potential for radical change, especially under socialist and Marxist leadership is indicated by the numbers who could be mobilised for workers' rights and for a change in society. And such a fighting force is crucial given the worsening of the conditions of the working class and the poor internationally.

The attempt, therefore, of those like Polly Toynbee to reconcile us to this, "the only alternative", is doomed to failure. The rich might have a 100-years plan to hold on to their wealth but the capitalist system is inherently unplanned, riddled with contradictions and incapable of satisfying human wants or interests.

One capitalist commentator expressed this succinctly, in relation to who really takes economic decisions in the US, when he wrote that the politicians are "servants of the economic cycle and second to the Federal Reserve. [They] might have some impact on jobs in the margins but Greenspan [chairman of the Federal Reserve] is more important than the President and the economic cycle is more important than Greenspan." (The Observer)

Precisely! Capitalism is a society of chaos; it is a blind system, with the working out of economic processes taking place behind the backs of society.

We stand for a socialist, democratically planned economy, which can replace the barbarity of capitalism with a society of human solidarity. 2005 will see an advance in the forces of socialism in Britain and worldwide which have this as their vision of what is possible.

No amount of capitalist journalistic balm, extolling this discredited system, will deflect us and the working class from achieving this goal.


Home   |   The Socialist 8 January 2005  |   Join the Socialist Party

Subscribe   |   Donate   |   Bookshop

In this issue

They didn't have to die

Scale of tragedy was avoidable

India: A disaster made worse by poverty

Sri Lanka appeal

It was no 'Act of God'

Aceh: Indonesian military hampers aid operation

Strike against low pay

Fighting a failing system

Reports expose inequality scandal

How to resist New Labour's attacks

Elections in Iraq - but no peace or democracy

Fatah leaders 'unite' behind Abbas


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