An economic crisis like the one we are now in has a ruthless, market-driven logic all of its own. As it takes its toll of jobs, homes and living standards, the results of the collapse of credit-fuelled growth also exposes fundamental limitations of the capitalist state system and advance the case for revolutionary change.
New Labour is confused and close to paralysis, like rabbits caught in the headlights of an oncoming car, as the economy spins out of control. This week alone business confidence is reported at a 16 year low; mortgage approvals are down 60% in a year and house prices are heading south in a big way; builders like Wimpey are laying off workers; Marks and Spencers have reported a dramatic fall in food sales and lorry drivers are in London today in a protest against rising fuel prices.
Oh, and shares plunged yesterday, taking the FTSE 100 more than a 1,000 points lower since May when there was talk of the credit crunch being at its highest peak. Now the financial sector is bracing for more bad news as decades of fantasy finance deals continue to implode. Both to governments and ordinary people, it seems as if external forces from the outer limits of the solar system have taken over. But this is not an episode of Dr Who with the Daleks taking over Earth.
The facts are that capitalism is a system based on creating economic forces and processes that are then subordinated to the unseen hand of markets for sale at a profit. Commodities are produced that may or may not sell, that use up resources at a rapid rate, within a credit-driven production and purchasing system. While workers co-operate across the globe in producing commodities and services, their products are placed on the market in a haphazard and chaotic way.
This anarchic side of capitalism lies behind past and present crises. Today’s disruption to the economy has aspects which are unique and which contribute to the impotence of states to make any impact. The corporate-driven globalisation process has created economic and financial activities that transcend state borders and national controls in their scope. This makes governments fearful of intervening lest they drive capital away to other parts of the globe.
But even before the recent globalisation period, capitalist states and governments hardly exhibited the capacity to overcome recessions and slumps. This is no mystery, although it is often presented as one. The present-day state system evolved out of the need for capitalists to find a political expression which could facilitate their activities in the broadest sense. Their requirement, for example, of an educated, fit workforce is formally delivered by a state (although corporations are increasingly “partners” in this process).
Restrictions on the right to strike are implemented through laws and courts, for example. While the democratic side of the state has allowed people a vote in who governs them, it cannot alter this essential characteristic of the political system as a mechanism for maintaining and developing capitalism itself.
Therein lies the weakness of the state when economic crisis becomes the dominant issue in society, as it is doing in Britain today. The forces at work are largely outside of its control in the shape of privately-owned corporations and financial systems. These capitalist forces themselves are equally unable to buck the market, as Marks and Spencers has found out. In this situation, adjusting interest rates or bailing out a bank or two has negligible impact or can even make matters worse. People rapidly lose confidence in existing politics and governments as a way of solving problems, as New Labour found out last week when it finished fifth in the Henley by-election behind the far-right BNP.
This is not merely an issue about New Labour but about the state system as a whole. The state has demonstrated on countless occasions that it is a creature/prisoner of the very forces that when they spin out of control, devastate millions of lives and threaten global conflict. Bringing economic forces under some kind of social, democratic control, therefore, is absolutely necessary if we are to begin the task of getting to grips with the crisis. The key to this is building support for the project of replacing the failed capitalist state with a democratic, alternative model based on people’s power.