Afterword: Fighting back

The crisis threatens to impose huge burdens upon the working class. It is inevitable that there will be a fight back. To be effective the labour movement needs a correct analysis of the situation it faces and, flowing from that, a correct programme. This book is offered as a contribution to rearming the movement.

What have we learned so far? The first lesson is regarding the nature of capitalist crisis. Capitalism has gone through world economic cycles regularly since 1825. Crisis is therefore an inevitable outcome of the laws of motion of capitalist development. But each crisis is not a simple repetition of the previous crisis. Each crisis has features in common with the others. It is also a unique historical event. No wonder capitalism is hard to figure out. The economy is anarchic. The system is a stew of conflicting interests, and as a result outcomes are unpredictable.

Causation is complex but the widespread view that the Great Recession was just a financial crisis, a historic accident, is wrong. It was a classic crisis of capitalism. Every crisis has its unique form of appearance and trigger that sets it off. The role of the rate of profit is central to the functioning of the capitalist system, but it is only ever an underlying cause of crisis. Apparently accidental factors can profoundly affect the actual course of events.

The capitalist system is irrational as well as anarchic. Individual capitalists chase after their own interests. There is no common interest of the system they can work towards. Capitalists navigate by instinct, not according to a plan. Their instincts brought the world economy to the brink of meltdown (a situation where they too could be ruined). They may well do so again unless they are stopped.

The second lesson from the recent past is that capitalism is a system out of control. The state is a capitalist state. Politicians do not bend the system to their will; they are bent to the will of capitalism. They do not dictate to the financiers. The financiers, the bosses and the markets dictate to the politicians.

This is very clear in Britain in 2011. The Tory-led coalition is doing the bidding of the bosses. In this they are pursuing the common policy of the international capitalist class to deal with the effects of the crisis. They are attacking the workers on every front, with the intention of loading the burden of the crisis on to them. We hope that readers of this book will have learned something from it that will help them to speak up and fight more effectively for the working class.

The third lesson is that cuts in wages and public services, unemployment and short time working do not solve a crisis of capitalism. At best a revival prepares conditions for another economic downturn further down the road. Here are some practical arguments for activists arising from the previous discussion of the role of the state under capitalism.

Government imposed austerity

All the major capitalist powers have identified excess government spending as the central problem that their economy faces in the wake of the crisis. All the major capitalist countries are deep in debt. All are running deficits on government spending. The G20 (meeting of 20 important countries) in summer 2010 decided that rectifying these deficits and debts was the most urgent task for recovery of the world economy. This is quite a turnaround. Only a year ago the bankers were widely seen as villains. Now nurses and teachers are to blame for our economic woes! The capitalist press has worked relentlessly to put this message across.

We shall use the right wing coalition government (often called the ConDems), elected in Britain in May 2010, as an illustration of the austerity drive. Bleak as the situation is in Britain the summer of 2011, the assault on public services and public sector workers has only just begun. The Conservative and Liberal Democrat government published a Fundamental Spending Review in October 2010 proposing to cut government spending by 1.6% of GDP a year every year for four years. They say they have ring-fenced the National Health Service, education and overseas aid, though experts and professionals doubt this is possible in the general economic austerity and gloom.

But all other public services are to be hacked back by 25%. This means the loss of half a million jobs in the public sector over four years. Since the public and private sectors are interdependent, it is also likely to cause the leaching away of half a million jobs in the private sector as well. Cutting a million jobs! How will that speed economic recovery?

Other serious commentators see this as foolhardy. For a start the cuts are savage and bound to mean the massive destruction of basic social services provision. Martin Wolf, instance, comments in the Financial Times (29.10.10), “The overall prospective cuts in real spending are the most severe since the second world war”. The coalition proposes to come down harder on the working class than Thatcher. This is a provocation which could well blow up in the government’s face.

Secondly the cuts could actually choke off the recovery. They even provoked fears of a double dip recession. Wolf’s article, cited earlier, is headlined Britain has gone climbing without a rope. Recovery has been under way for more than a year in Britain now, but it is hesitant and partial. A return to boom conditions is a long way off. In those circumstances to cut into the markets of those capitalists who are able to scrape a living and have shown the ability to pick themselves up off the floor and survive the crash is to tempt fate.

Crowding out?

The coalition government in Britain argues that they need to trim back state expenditure in order to give the private sector room to grow. This argument is called ‘crowding out.’ While it is completely incorrect in the case of Britain, the burden of state debt incurred to bail out capitalism in its crisis has dropped a dead weight on the recovery prospects of peripheral countries such as Greece and Ireland (see Part 1: What happened in the Great Recession).

At the time of writing (the summer of 2011), it is a grotesque misrepresentation  in Britain to present a picture of a vigorous private sector trying to thrust its way forward, but held back by the thickets of ‘bureaucracy’ and ‘waste’ represented by government spending.

In fact firms are awash with cash. Profits have recovered but profitable investment opportunities remain few and far between. Private sector growth is anaemic in Britain and all the other major capitalist countries after the blows delivered to it by the recession. There are plenty of idle resources out there that could be used for expansion. But the impulse for the capitalist sector to grow fast enough to gobble up unemployment just does not exist anywhere in the advanced capitalist world at present, and there is no sign of it materialising any time soon.

In the presence of idle workers confronting idle machines, the contention that the different components of national income (investment and government spending) have to compete against one another for resources just to stand still is ridiculous. This is to turn a national accounting identity into a causal connection. There is room for all sectors to grow in principle. What stands in the way is the capitalist system. When the Tories and Liberal Democrats say, there is no alternative to cuts in the public sector they’re talking rubbish.

In any case the relation between the components of national income is complementary, not competitive. To take one example from the UK: the decision by the coalition government to cancel Labour’s programme of schools renovation in 2010 was not just a blow to the public sector. It also hit the construction industry hard.

More broadly, an expansion of investment will have a positive effect on consumption as more workers are taken on to produce capital goods, and an increase in consumption will likewise stimulate new investment. The other components of national income are complementary to one another in the same way. The resources available to society are not limited, like a stagnant pool of water in a desert, every drop of which has to be fought over. They will grow with the growth of the economy.

The capitalist economy is hardly ever working at 100% of capacity and full employment – it certainly isn’t in the wake of the Great Recession. Idle resources are omnipresent. So there are alternatives to austerity, to be gained by tapping the idle resources that exist and putting them to work. Understanding that is at the root of arguing the case for defending public spending against the cuts the Tory-led government intends to impose.

Advocates of austerity

Another illusion that is played on by the representatives of the ruling class in their determination to ram through cuts in public expenditure is to compare the national economy to a household and then claim there is no alternative to cuts. To start with, ruling class priorities for the national ‘household’ budget may strike the rest of us as very odd. Spending money on Trident while cutting back on health and education is like buying a machine gun in preference to food and paying the rent.

There are basic differences between the economic situation of a household and a government in any case. A household has a quite limited potential to vary its income. If a major breadwinner loses their job when there is mass unemployment, then cuts in living standards may have to be accepted by the family for the time being. There is often no alternative under capitalism.

But households do borrow under capitalism, and it is often in their interests to do so. Borrowing to buy a house or to pay for university education can improve the prospects of household members. Why should the government not do the same? In any case the government has more power to change things than an individual household. Few households have the ability to pay their bills by printing money for instance, as the government can.

The present government in Britain pretends that there is no alternative to their policies of austerity. They do so in order to foist the priorities of the ruling class they represent upon the British working class. The bosses pass off their own interests as the way things must be, the way of the world. In reality it is a system that squanders human and material resources and skews production towards profit, not human need.

Another deception carried out by the coalition’s representatives is the way they lump all government expenditure together as ‘waste’. This is false. Though public investment doesn’t directly generate surplus value for individual capitalists, it can create an environment where the economy grows and capitalists make money. So the outlook of the ruling class is shortsighted. They regard every penny of government spending as a penny that can’t be used to accumulate capital. It is a penny wasted. Hence their hostility to public expenditure and the government deficit.

Is the debt insupportable?

The government is using the ballooning deficit to argue for cuts in the social wage that the capitalist class believe are necessary. The ConDems wail that Britain is bust. The debt and the deficit are all Gordon Brown’s fault, says the coalition government.  This is poppycock. Brown wasn’t Prime Minister of Iceland. Greece or Ireland, all of which are in a worse mess than Britain is. The crisis is not the fault of the public sector. The public deficit and the growing state debt are the products of the world crisis of capitalism. Why should we be made to pay for their crisis?

In any case the cuts may well be counterproductive. Martin Wolf is very concerned at the effect the coalition’s policies in Britain may have in throttling off the recovery. He also notes (Financial Times 21.10.10), “The chancellor presents the hypothesis of looming national ‘bankruptcy.’ If so the UK must have been bankrupt for much of the past two centuries.” And he presents a chart on national debt to GDP ratios to show what nonsense this argument is. For instance, from 1688 to 2010 the national debt was on average 112% of national income. (Financial Times 21.10.10) Now it has gone up to a projected 75% and the Tories are shrieking that the end of the world is nigh.

Critics of the right wing UK government rightly raise the fact that the post-War Labour government set up the welfare state while national debt was more than double GDP and national income per head was between about a quarter of what it is today. Now the country is so much richer, and so much less burdened by debt, the government tries to persuade us the situation is so desperate we have to scrap the welfare state! This is really just the rhetoric of class war. The Tories see the crisis as an opportunity to tip the balance of class forces back in favour of the ruling class by hacking away at the welfare state.

Fighting the cuts

For the working class government spending has an entirely different significance. Of course the state is a capitalist state, but government spending is an arena of class struggle. We have fought on the industrial and political fronts for centuries to preserve and improve our living standards. The proportion of government expenditure that is spent on welfare benefits is a vital protection against the insecurity that is a permanent feature of life under capitalism. Inadequate as they are, they are a shield against poverty incurred while bringing up a family, unemployed or in old age. Likewise the National Health Service provided free comprehensive medical provision to the mass of people for the first time. In the years after the Second World War we saw working class students who were able in some numbers to take advantage of a system of grants and the free provision of education to go to university for the first time. That has already been severely trimmed back and is being whittled away further as we write.

All this is part of a social wage. It is as precious to working class people as the wages they earn in the workplace. It has to be defended. And of course, this is the part of government spending that is particularly under threat now. The class struggle is not just waged at work, on the shop floor. It also has a political aspect. The working class has fought historically for the social wage. The fight against cuts is part of the struggle to defend working class living standards against the offensive triggered by the capitalist crisis.

We can beat the cuts. But to do so we must be clear that we are taking on the entire might and the interests of the ruling class. This book was written by a socialist and Marxist. It is evident, now more than ever, that the only real solution to the problems of working people is to transform society in the direction of socialism. Let us dedicate ourselves to that task.



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