The Bank of England’s inflation report makes grim reading. Bland assurances about the strength of economic fundamentals as the credit crisis erupted in the autumn have been replaced, superseded with expectations of soaring inflation – “above 3% for several quarters”, and recession, with governor Mervyn King declaring: “The central projection is for growth to slow sharply in the near term, reflecting the squeeze on real incomes.”
All of this is explained by the anodyne “rebalancing of the economy”, as if things were under control. Nothing could be further from the truth. In reality, the UK, which under Gordon Brown’s 10 years as Chancellor had become entwined in and dependent on global financial markets is, like all other countries, being sucked into unprecedented economic storms.
Brown’s promise that New Labour will show that it can “manage” the economy to avoid recession is fantasy talk. For example, the £50 billion thrown at the banking system in a bid to unlock the credit freeze has made no impact whatsoever. According to the European Central Bank, the banks are using liquidity schemes like this simply to offload risky assets, while the Financial Times reports that the banks are looking at sums closer to £90 billion from the Bank of England. It’s a case of pick a number, then double, treble it or simply add loads of noughts!
The credit crisis, which deepens by the day in its impact on jobs, repossessions and consumer spending, marked the end of four decades of free floating currencies which began 40 years ago, on March 15, 1968. Then, the dollar was in crisis as the Tet offensive by the National Liberation Front and North Vietnamese Army turned the tide against the US. On that day in March, the American mint stopped the buying and selling of gold and ended the fixed dollar-gold exchange rate which had been at the foundation of the Bretton Woods post-Second World War arrangements set up in 1944. Three more years of running the printing presses later, on August 15, 1971, US President Nixon severed the dollar-gold link altogether, releasing a period of inflation that saw oil prices rising to historic levels to compensate for the declining value of the dollar.
For those familiar with the philosopher Hegel’s dialectic, the dollar-gold separation was the first negation of the post-war boom. It heralded the start of the period of globalisation – credit-led growth personified in world-straddling multi, then transnational and global corporations. Their vastly expanded, ecologically-destructive production of cheap-labour commodities could only be absorbed by consumers supplied with seemingly limitless debt funded by the promise of property prices rising without end.
Inevitably, as in all processes, finite limits were reached and opposite tendencies began to take over. By 2004, US consumers in particular were “all shopped out”. Consumption peaked. The second negation – the negation of the negation - marked by the sudden paralysis in credit markets last August, brought the ballooning of fictitious capital to a halt and ushered in a new period of unprecedented economic, social and political upheaval.
The contradictions inherent within capitalism, which were left unresolved by the incomplete process of 1968, have matured and deepened in the 40 years since. Food riots in more than 30 countries, and mass demonstrations by farmers against agribusiness corporations in India coincide with a growing movement against debt, foreclosure and repossession and strikes in as homes are lost, jobs are destroyed and incomes and pensions are hit by the deepening crisis.
These actions are coalescing into a new revolutionary possibility which demands the building of an independent revolutionary movement that can inspire and lead the challenge for power. The objective must be to replace a failed economic and social system based on profit with a new socialised system designed to satisfy needs identified through a greatly expanded democratic process.