Back to main newsPolitical Report - The crisis of Britain’s productive economy and the General Election
Sat 30 Jan 2010
Author: John Foster1931 saw what was called the Bankers Ramp destroying the Ramsay MacDonald government. We see it in full cry today across whole of EU. In Ireland, Spain and Greece the EU Commission is intervening directly in domestic policy. Greek government officials described EU intervention in early January, which required ‘reforms’ in labour contracts and pensions, as a gross infringement of sovereignty. Everywhere the EU Commission has laid down targets by which deficits must be cut. Their motivation is the traditional monopoly capital response to crisis: solve it by reducing working class incomes and the social wage. For Britain the target is a cumulative 10 per cent cut in public spending over four years. The people of Iceland are subject to similar blackmail without even being members of the EU and we should offer them all support to their rejection of these demands in their referendum next month.
In face of all this clamour it is important to stress:
• Britain’s national debt is historically low. It was 180 per cent when the Labour Government decided to fund the welfare state in 1946-7. It was over 100 per cent through the 1960s – a period of fast economic growth. Today, even after the banking crisis, it is less than 80 per cent. Japan’s is 187 per cent.
• The increase in the deficit is the direct result of the banking crisis. It has nothing to do with spending on services. It was only 2.7 per cent before the crisis in 2006 when more money was spent on services. The projected 12 per cent deficit is solely a result of the economic crisis triggered by the banks (rise in unemployment and benefit payments and the fall in tax income) and the money paid to the banks themselves.
• If cuts of this magnitude are imposed across EU, they will kill the recovery stone dead and precipitated a further banking crisis
So the call for drastic cuts in public expenditure ahead of the general election is not just, as Andrew Murray rightly calls it, a gigantic fraud. It is an incredibly dangerous one, one which the trade union and labour movement must resist.
Every day sees fresh closures involving key strategic elements of British industry, Corus in the North East, Bosch in South Wales. Unlike the US, Germany and France no steps have been taken to sustain productive industry. No limits whatsoever have been imposed on banking speculation which continues to suck in capital that should be productively invested.
Why ? Because of the degree to which British finance capital is now interpenetrated with, and dominated by, external investment banking. Britain is the world venue for unregulated, tax free speculation. Foreign banks and hedge funds don’t want this changed. British banks depend on them and together they have largely co-opted the government to do their bidding.
At same time it is important to notice the unease within the financial civil service: the Bank of England, the Financial Services Authority and even the Treasury. They know the risks being run by not controlling speculative investment. Increasingly sharp warnings are being given about scale of the new speculative bubble.
It is also important to note emerging divisions within government between the hedge fund wing under Mandelson and the financial establishment led by Brown. We should not exaggerate. But we should take it into account. It is notable that it was Brown who was pushing the Tobin tax and opposing drastic deflationary cuts. Mandelson has been leading the hedge fund lobby against French and German attempts at regulating investment banking.
The Treasury paper outlining the case for the Tobin Tax, which would exact a charge for every financial transaction, was published on the same day as the Pre Budget Report. It could be dismissed as electoral window dressing – as meaningless to British politics because it is based on world-wide adoption. But it is important nonetheless. It demonstrates that capital can be controlled by state power and states are not powerless in face of ‘global capital’. It shows that every transaction can be tracked. That it is why it should be taken up by the Labour Movement. If transactions can be taxed, so also can capital be directed into productive industry.
It was this conflict within the government that provided the context for the botched Miliband-Hewitt coup two weeks ago. Though it failed, it succeeded in what was probably its real objective: to reinforce Mandelson’s grip on the Prime Minister and Labour policy ahead of the election. The establishment press coverage is clearly deeply worried that the Labour Party could slip to the Left and pose major problems for enforcing the kind of cuts envisaged under a Tory government.
It is this that should provide the context for our intervention in the General election.
We should today welcome and endorse the Communist and Unity for Peace and Socialism contests now agreed. It will be critically important to have an effective Communist intervention. This will not be in terms of the scale of contests but in terms of the quality and effectiveness of our intervention both through contests themselves and by taking our policies into the trade union movement. Maximum pressure has to be exerted to expose and isolate Mandelson and the Blairites, to widen the policy gap and to demand alternative policies.
We must make clear our support for a Labour victory. But we must also stress will only be a victory for working people if it is in the context of the development of a mass movement for alternative policies, a movement with the trade union movement at its heart and which uses its power to change Labour Party policy. Otherwise Labour victory will turn out to another defeat that will breed further cynicism and despair.
This brings us back to People’s Charter – something much broader than our party and which must of course be kept separate from any electoral position.
It is not yet a mass movement or anything like it. There are one or two small signs it could become one. But it will depend on how far it is linked to struggle against the cuts and closures and how far individual trade unions become engaged locally and go beyond sectional activity. Real cuts are only just starting. Most won’t seen in practice before March. This is what we must prepare for over the next eight weeks.
Our success as a party will measured by the scale of broad activity created by left activists and the Morning Star. We need to win this understanding in our own ranks and especially among new recruits. The Communist Party is not and never has been primarily an electoral party. Elections are part of a wider role. Our primary task is to organise working class struggle, to build wider alliances and to develop class understanding. Today this is more crucial than ever before.
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