Meltdown and revolt

The global capitalist financial system is grinding to a halt amid a meltdown of support for bailing out banks and political paralysis in the United States, the most indebted country of all. Without forms of finance/credit, the economy itself cannot function. It’s that serious.

When two-thirds of Bush’s own capitalist, right-wing Republican Party refused to endorse a $700 billion transfer of taxpayers’ money to financiers in return for worthless, toxic “assets”, they were looking nervously over their shoulders at a grassroots revolt. An overwhelming majority of their constituents are opposed to the hand-out while they suffer job losses, repossession and falling living standards. Many have taken to the streets in spontaneous protests on Wall Street and throughout America.

The fact that capitalist politicians baulked at rushing through a bill which was painted by president Bush as necessary to prevent a collapse of the financial system, is just one of many insoluble contradictions:

– In a world drowning in credit there isn’t enough money in the world to prevent the implosion of the global financial markets. Even if a deal were to be made on mortgage debt, much worse money mayhem is on its way.

– The relentless, profit-driven expansion of the global economy over the last 30 years led to and was eventually driven by the array of fantasy finance now unravelling before our very eyes.

– The cost to taxpayers of bailing out the banks is beyond their ability to pay. The credit crisis first erupted when people reached the limits of their ability to service the debts they’d accumulated, so attempts to pass them the [now valueless] buck only wakes a long-dormant opposition, stirring the rage of the working people. Jobs, homes and pensions are melting away as the price of food and energy skyrockets.

– With interest rates rising, attempts to blackmail us with the story that the pain of not stabilising the system will be greater than the cost of attempting to patch it up falls on ears deafened by the ever-louder demands of the debt collector.

– A new consciousness is appearing on the streets because hundreds of millions of people around the globe can’t see why we should have to pay for a crisis that we’ve been seduced into by failed promises of the good life continuing forever, when those who appear to be responsible are walking away with fortunes.

– Attempts which are anyway failing to resuscitate the hardly-regulated capitalist markets take the form of socialisation, (the work of “communists” according to Republicans). This sticks in the throat of those who claimed that “free markets” were the ultimate success of the capitalist system and its victory over socialism.

In the end, there are no capitalist-type “solutions” to this momentous crisis. They would have been discovered by now if there were any. Politicians and financiers are powerless to control and direct events because ultimately capitalism functions in an unplanned, uncontrolled and anarchic way and is prone to catastrophic crises like the one now unfolding.

Capitalist socialisation of the failing banks is a backhanded acknowledgement that private ownership for profit has failed. Now is the time to seize the initiative and finish what the capitalist politicians cannot. Millions mostly new to political action can coalesce into an organised movement to refuse to pay their existing debt. From there we must build a movement that aims to create a new democratic power.

This would take control of both financial institutions and the essential productive side of the economy. Then we could re-establish these resources on sane, rational lines and operate them on a not-for-profit basis for the benefit of the majority. These are without doubt revolutionary proposals that will take some achieving. Yet it would be dishonest to suggest that there are more palatable, less challenging ways forward in these dangerous times.

Gerry Gold
Economics editor

Another way is possible

The increasingly desperate attempts to bail-out the financial system in America and Europe have raised fundamental questions about economics and politics that were considered dead and buried not so long ago.

1. The “C” word is back. Nearly everyone (New Labour is an exception here) is talking about the fact that it is capitalism as a system that is in crisis, although remedies range from regulation to revolution.

2. Financial markets which were viewed as the source of endless wealth and easy money have lost their lustre and invincibility. They stand revealed as casinos and purveyors of fantasy finance.

3. The crisis has thrown into sharp relief the inability of capitalism to sustain itself without political support and intervention. So the markets by themselves cannot operate independently in some apparently weightless state.

4. The duty and role of the state is first and foremost to private banks and financial institutions to the detriment of taxpayers, workers and those threatened with repossession. This demonstrates unequivocaly that we are ruled by a capitalist state.

5. Democracy becomes an unaffordable luxury at times of capitalist crisis and the spectre of national government looms large, especially as all the major parties stand for the same thing.

These developments have undoubtedly produced a change in social consciousness, particularly in the United States . Opposition to the $700 billion buy-out of toxic debt with no known market value is vociferous and increasingly militant. The Bush plan is a massive transfer of wealth from the public sector in the shape of taxpayers to the private sector. The debt is being socialised and the profit privatised. Meanwhile, thousands of Americans lose their homes each day and join the dole queue.

Proving there is no real choice in capitalist politics, the Democrats are riding to the rescue of the beleaguered Bush administration. Obama, the Democratic candidate for the presidency, is lending his support to Bush while some Republicans cavil at the bail-out because their phones are ringing off the hook and they face re-election in November. In Britain, the Tories can hardly bring themselves to criticise New Labour because both parties are responsible for what is taking place.

For more than a decade, Blair and Brown governments followed their Tory predecessors in promoting the everyone-can-get-rich-quick spirit of globalised capitalism. House price inflation was seen as a good thing by governments because it seemed a way for everyone to get wealthy. When teachers and firefighters needed affordable homes, for example, they were encouraged to buy them with state financial support and the building for rent social housing programme was all but wiped out. So when Brown says that the “age of irresponsibility” is over, the hypocrisy meter registers off the dial, driven by the saving of Bradford & Bingley, the bank that funded speculative buy-to-let properties.

As for the bail-outs, hand-outs and pseudo-nationalisations – they won’t work. The global debt mountain has barely started to unravel and the economy is already in recession. What is taking place is unacceptable. Ordinary people are being informed that they have to stump for the bankers and for a crisis not of their making.

Another way is possible, however. Building an independent movement to challenge the capitalist state and its cosy relations with the banks and corporations offers a fresh perspective. This raises the revolutionary question of who should rule society: big business and finance or the people? Creating a new, democratic state to embody people’s power is, like other questions that were off the agenda for a long time, now not such a fanciful thing to consider.

Paul Feldman
Communications editor

Panic in Washington

The chaos in Washington last night, with members of Congress shouting at each other across the table, ignoring President Bush who was chairing the emergency cross-party summit, shows how the frenzy in the crumbling financial system is finding its mirror image in politics.

The meeting of 35 members of the two US parties in the US Senate called and led by the president around the cabinet table in the White House was meant as a show of political unity following Bush’s national TV warning of a panic in the markets if no agreement was reached. John McCain, Republican presidential candidate for the election due in under 40 days, suspended his campaign to attend the meeting and challenged Barack Obama, the Democrats’ candidate, to do the same. The two issued a joint appeal to the Congress to support the outline sketch of a plan hastily scratched together by the Treasury.

But there was no agreement. Members of Bush’s own party accused the president of socialism by bailing out the banks and refused to back the rescue package. Others wanted more direct help to millions of US householders struggling to meet their repayments as the deepening recession multiplies unemployment and drives more and more Americans from their homes.

Even while they were arguing, the crisis deepened on the home front. The mortgage lender Washington Mutual (WaMu) was closed by its regulator, making it the biggest US bank to fail. The Office of Thrift Supervision (OTS) stepped in to shut the mortgage lender before selling its assets to JPMorgan Chase for $1.9bn. The OTS said it was worried WaMu would run out of cash as $16.7bn of deposits had been withdrawn since 15 September.


The idea of the show of unity is/was to convince the markets that there could be an above-politics agreement on the proposed $700 billion dollar bail-out plan for the mortgage markets. The huge sum is larger than the vast US defence budget, and equal to about the value of half of US production. Yet it hardly touches the towering trillions in credit default swaps, the next hurricane about to barrel though the global economy.

The plan, if implemented, means that the US government would borrow this huge sum of money, largely from other governments, and use it to buy parcels of “toxic” mortgages, taking the pressure off the paralysed and nearly bankrupt peddlers of debt who could then return to business as usual. Responsibility for servicing the unpayable debt will then pass to the American people. Estimates put it at more than $2,000 each. All indications suggest that they aren’t happy.

Some commentators, sceptical about his true intentions, say that McCain’s suspension of his campaign – invoking instincts of the need for action in a crisis gained from his military career - is anything but. Instead they see it as another attempt to raise his profile, following his selection of ultra-right wing Sarah Palin as future Vice-President. But there’s another lesson here. Irrespective of the intentions of any of the individuals caught up as actors in it, the financial crisis engulfing politics is an objective process, itself the expression of a deeper crisis in the capitalist global economy.

What little remains of democratic niceties are subordinated to the survival of the system. As Gordon Brown emphatically stated at New Labour’s annual event (hardly a conference) last weekend, he’ll do “whatever it takes” to restore stability to the markets. And that includes following the US attempts at a national coalition, presiding over mass unemployment and homelessness, and cancelling democratic rights. Was it an accident that the new ID card was paraded on the day Brown flew to the US to support the lame-duck Bush? All the more reason to stand up for your rights at the forthcoming festival on October 18.

Gerry Gold
Economics editor

Drive the merchants from the temple

When the Archbishops of Canterbury and York weigh in against what they see as the excesses of market capitalism and financial speculators, something is definitely up. The most senior figures in the Church of England haven’t suddenly become revolutionaries, however, but reflect a growing sense in society that the economy is going to hell and that ordinary people are the principal victims.

The Archbishop of York, Dr John Sentamu, condemned the financial traders who made millions by driving down the share price of leading banks as "bank robbers and asset strippers". Speaking to City bankers on the effects of the credit crisis, he damned the "Alice in Wonderland" world of global finance where speculators profited by laying bets that shares in HBOS would fall in price.

Meanwhile the Archbishop of Canterbury, Dr Rowan Williams, warned that modern devotion to the free market is a form of idolatry and that Karl Marx was right in his analysis of the power of "unbridled capitalism". In an article for The Spectator magazine, Dr Williams said the current crisis had exposed the "basic unreality" of the long-standing global trade in debts, in which "almost unimaginable wealth has been generated by equally unimaginable levels of fiction, paper transactions with no concrete outcome beyond profit for traders".

Sentamu and Williams make some good points but like many others, fail to relate the financial crisis to the essential nature of the capitalist system. The inner drive for the continuing expansion of capital is the source of the fantasy finance world the archbishops describe. Their demands for regulation and reining in of the speculators will not only fall on deaf ears but are as far removed from reality as the financial system they denounce.

In the United States, for example, the Bush administration is taking desperate measures to try and keep the financial system going by spending $700 billion to buy up useless assets that the market is unwilling to put a price to. Bush is bludgeoning Congress into approving the deal, warning that failure would lead to “financial panic” and a “long and painful recession”. The Financial Times has doubts whether the package will make a difference, saying today: “The plan has some serious flaws. In particular, there is no reason why public sector buyers should be better at pricing these assets than private bidders. This could, potentially, lead to significant losses.”


The archbishops would like to return to a more benign form of capitalism of the 1960s, before the globalisation genie was let out of the bottle. Those of a mature age like myself would love to go back 40 years, which shows how the imagination can run riot. It is far easier to conceive of a future based on co-operation expressed through common ownership and democratic control of the resources of the global economy.

Of course, the Church of England cannot help in this respect. Since the Reformation, it has provided the theological justification for capitalism. Money-lending and the accumulation of individual wealth through land grabbing, slavery and colonial possessions were generally blessed and approved of by the church, which is an integral part of the British state. Rather than limiting ourselves to Sentamu’s and Williams’ criticisms, the action of Jesus in driving the merchants and money-lenders out of the temple would be a far better starting point!

Paul Feldman
Communications editor

Post-capitalist irony

Ironically, the best case for the abolition of private ownership of production and finance is now being made by capitalism itself. For example, banks which until just a few months ago were firmly in the private sector are now state owned or controlled. As yet, the world as we know it has not come to an end following this remarkable turnaround.

Of course, George Bush and Gordon Brown have not become revolutionary anti-capitalists. Their actions are desperate moves to prop up the failing international financial system and save it from total collapse. Every day there’s another frantic response. Yesterday, America’s Federal Reserve made $30bn available to central banks in Australia, Denmark, Sweden and Norway, to ease money markets. The American government is printing money like there is no tomorrow.

What the crash of 2008 is demonstrating, however, is that a) the market-driven capitalist economy and financial system has failed big time b) there is no iron law that says private ownership is necessary and c) there are alternative ownership models which can actually work.

So the crisis itself indicates the solution. Shareholder-owned and profit-driven corporations and banks have produced chaos and an impending catastrophe. Let them be commonly owned and run for the benefit of society as a whole. Of course, the capitalist state and proxy governments like New Labour are only interested in keeping the system going, if at all possible, whatever the social consequences in terms of unemployment, repossessions and lower living standards. They intend to either wind up or hand back to the private sector the enterprises they have nationalised.

Yet this assumes that the financial crash is now under control and manageable. Some superficial observers even believe that current events lead back to a much more conservative financial system, where credit/debt is much reduced and the regulatory framework is tightened up. This back-to-the-future fantasy scenario is championed by liberal commentators like the Guardian’s economics editor Larry Elliott and Will Hutton, chief executive of the Work Foundation.

Serious analysts know that the credit crunch is only just beginning, however. The unravelling of countless trillions of dollars of fictitious “assets” has a long way to go and will be reinforced by the impact of recession, falling house prices and lower consumer spending. All eyes are now turning to another mysterious area – credit default swaps (CDS).

These are insurance-like contracts that promise to cover losses on certain securities in the event of a default. They typically apply to municipal bonds, corporate debt and mortgage securities and are sold by banks, hedge funds and others. Contracts can be traded — or swapped — from investor to investor. The instruments can be bought and sold from both ends — the insured and the insurer.

The CDS market exploded over the past decade to more than $45 trillion by mid-2007, according to the International Swaps and Derivatives Association. This is roughly twice the size of the US stock market and far exceeds the $7.1 trillion mortgage market and $4.4 trillion U.S. treasuries market. The top 25 American banks hold more than $13 trillion in CDS instruments. As asset prices plummet and companies go bankrupt leaving nothing but bad debts behind, the CDS market is ready to implode.

Yet another powerful reason to refuse to pay for the bankers’ crisis and to mobilise for the Stand Up for Your Rights festival on 18 October.

Paul Feldman
Communications editor

A step forward in Manchester

The Convention of the Left meeting in Manchester near the New Labour conference yesterday adopted a “statement of intent” that is intended to sustain a framework of ongoing discussion on policies and actions over the next few months. A World to Win’s participants voted for the statement because it represents a step forward.

John McDonnell, one of the few MPs who have consistently resisted the New Labour government, was right to stress caution. An attempt to create a “left unity” or to launch a new electorally-oriented party would not only be premature but futile. The dilemmas facing the socialist movement require more than what would amount to cosmetic political window-dressing along these lines.

The challenges arise from the fact that the conventional routes to social and political progress are now more or less closed off. Labour being transformed into capitalist New Labour – in fact, it is the self-appointed bankers’ party – is only part of the story. Two other inter-related developments within the state raise even more problematic questions.

Firstly, in Britain the post-World War II so-called consensus, welfare state has been obliterated by successive Tory and New Labour governments. In turn, policies of governments express profound changes in the demands of the corporate-driven globalisation process. What we have now is an undemocratic, unashamedly business state under which parliamentary processes and political representation count for nothing.

The priorities of the business state are clear: save capitalism and its financial system at all costs, including mass unemployment, homelessness, reduced wages and social division, provoked by racist, anti-immigration statements and policies. The events of the last seven days, with the US government offering to buy up bad debts and New Labour facilitating the takeover of HBOS, is a graphic illustration of how this is working out.

The Convention’s statement of intent makes no mention of these questions. Nor does it refer to the crisis now spreading like a contagion from the financial sector to other areas of the economy. Most observers now acknowledge that the crash of 2008, which last week claimed banks in Britain and America (and yesterday saw the last two investment banks change their status to try and escape), is only just starting to unfold.

The statement’s strength lies in the admission that there are no simple answers, declaring: “We must find ways to develop and promote alternative positive policies and demands – of peace, social and environmental justice, public ownership, workers’ rights, civil liberties and equality. We must join together with all those seeking a better society, as an anti-capitalist left fighting for an alternative socialist society.” The Convention also wants to define ways of joint working and is calling for local Left Forums to continue the discussion.

This is a positive initiative. For our part, A World to Win will want to discuss how to take forward the struggle for democracy that in its time produced parliamentary representation, the Labour Party and major welfare reforms. The termination of that period of history is not a matter for regret but can be made into an opportunity to create a new democratic state as a platform for overturning an economic system that is plunging the world into a catastrophe.

Paul Feldman
Communications editor

'Managing' the crash

Every passing day sees more of the consequences of the global meltdown coming to light. Financial institutions implode and disappear and increasingly desperate measures are taken by private sector banks, central banks and governments.

Now the focus has changed from trying to avert the crash, to managing its descent, softening its landing as it falls to earth, ensuring that the capitalist financial system survives, at all costs.

This is the real meaning of Alistair Darling’s statement that "financial stability had to trump the competition concerns". This justifies changing the law to allow the new Lloyds TSB-HBOS conglomerate to dominate the British banking system. "We will take whatever action is appropriate to maintain stability in the banking system," he said. "The entire economy depends on that."

On the other side of the Atlantic, the US Treasury is proposing a plan to absorb all of the bad debt arising from the mortgage crisis. Unsurprisingly, since this would pass the whole cost directly to US taxpayers and the Chinese financiers of American government debt, the US stock market had its best day for years.

It can’t and won’t last. This is a truly insane open-ended proposal, given that, as a result of the decades of unregulated explosion of fantasy finance, nobody in the world has any idea of the true value of the outstanding credit and debt. Hey, but we could then get back to raking in the profits.

For Darling, Brown and Bush, survival of the system that has failed, is broken, will come even at the expense of millions, perhaps billions of people who will be its victims as the markets find their “solutions”. With a week of dramatic, unprecedented contraction and consolidation in the finance industry comes the first wave of unemployment. Estimates of 40,000 job losses from the New Labour-sponsored takeover of HBOS by Lloyds-TSB are hardly even the tip of the iceberg. Predictions for the impact on the US workforce put job losses as high as 500,000 per month.

In response to the news that Britain has seen the biggest climb in unemployment benefit claims in 16 years, Trades Union Congress general secretary Brendan Barber said the "figures show that unemployment is starting to accelerate and it now looks very likely that total unemployment will reach two million during 2009." So what stirring message has he for the six million plus trades union members as recession engulfs the economy?

“the TUC is concerned that unemployment has been sneaking up in the last few months and it's up to unions, employers and the government to halt and reverse this trend as soon as possible. With unemployment rising, people are looking to the government for a response and economic measures will be far more welcome than yet another round of welfare reforms.”

The TUC’s “expert” was just as hopeless as his boss. Head of economics and social affairs Adam Lent said: "Poor growth and falling consumer confidence are a far greater risk to the economy than inflation, which is still relatively low. The Bank of England can play a key role in helping to reinvigorate the economy by cutting interest rates this month." To the TUC bureaucracy, we say: Thank you and good night.

Even the Tory Daily Telegraph has acknowledged that the crisis may have something to do with the “internal contradictions of capitalism”. One aspect of this is that New Labour is the party using the levers of the capitalist state to shore up the system, whatever it takes. We are witnessing not just market failure on a grand scale but the utilisation of the machinery of state by bankers and corporations to save their skins. This road leads in one direction only, as history has demonstrated.

The Convention of the Left starts tomorrow. Those attending have an historic responsibility to shape and build a movement that answers the capitalist crisis by posing the revolutionary alternative – an economy based on co-ownership and self-management and a truly democratic politics based on people’s power in place of corporate power.

Gerry Gold
Economics editor

An 'orderly' failure

Manchester United have a new sponsor this morning – the federal government of the United States of America! Yesterday, the global insurance company AIG was in private hands. This morning, 80% of the shares are owned by the government following a hastily-arranged take-over to prevent the company’s total collapse and a systemic failure of the global financial system.

Such is the measure and speed of the unravelling of the credit crisis that significant financial institutions are passing into the hands of the US government. In a series of desperate moves, Washington has taken control of mortgage lenders Freddie Mac and Fannie Mae. Last night in an extraordinary step, AIG was loaned up to $85 billion in emergency funds in return for a government stake of 79.9%.

George Bush is not going into the insurance business, however, which is just as well for the rest of the planet. AIG will be kept afloat just long enough to sell off its assets and repay the loan. In other words, the objective is orderly liquidation (after which United will need new sponsors). In a statement, the Fed, America’s central bank, said it was acting to prevent “a disorderly failure of AIG” which would “add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance”.

The dramatic moves came after earlier plans for a private sector bail-out were dashed by a further 21% slump in AIG’s shares, reducing the market capitalisation of the biggest insurance company in the world to just over $7.5bn (£4.2bn). AIG’s crisis has nothing to do with ordinary insurance, however. The corporation, which is a pivotal part of the global financial system, has lost billions of dollars on derivatives and mortgage-backed securities and is bankrupt.

And so the great unravelling goes on, with the mountains of fantasy finance created over the last 30 years taking their toll on banks, insurance companies, mortgage lenders and investment houses. Today, Lloyds TSB is arranging a merger with HBOS – whose shares have been driven down on rumours of a crash.

State intervention on both sides of the Atlantic cannot halt, stabilise or reverse this process. The accumulated debts in the financial system – running into thousands of trillions of dollars – are so enormous that they cannot possibly be absorbed through central bank actions. Nor will the crisis unfold in an “orderly” way. It is like the collapse of a house of cards - it has a momentum of its own, which is already taking its toll of jobs, pensions and people’s homes. Official figures released this morning show a leap of 81,000 in UK unemployment in August alone. The subsequent loss of purchasing power will fuel the recession and the drive towards slump.

To sit back and wait for the dust to settle would not only be foolish but irresponsible. The ever-closer alliance between the state and corporate finance has sinister political implications, with its echoes of the 1930s in Germany and Italy. We have to take maximum advantage of the crisis to make the case for revolutionary political and economic changes as the way forward. Our Stand Up for Your Rights festival on October 18 emphasises the need to take control of our lives away from New Labour, the state and the corporations. Register for the festival today!

Paul Feldman
Communications editor

On a knife edge

The Financial Times puts it like this: “The world has not ended. The international economy has not yet collapsed. But one thing is now quite clear: the banking system as we know it has failed.” Note the “yet” because the financial earthquake that produced the collapse of Lehman Brothers and Merill Lynch will claim more victims and translate into economic slump.

The American International Group, a global insurance company that sits at the centre of the world’s financial system, is on a knife edge. Others in the sickbay include Goldman Sachs, Morgan Stanley and the HBOS bank in Britain. “The locusts may be running out of big names to attack, but there are still some big names in the market’s sites,” said Alan Ruskin at the RBS Greenwich Capital.

After a series of spectacular rescues, starting a year ago with Northern Rock, the world’s central banks have reached the already-stretched limits of possibility in their attempts to avert disaster. They can only stand and watch as the laws of the market take their toll on debt-laden financial institutions that are unable to keep their operations going.

On Friday, Lehman Brothers was an investment bank with $42 billion of liquid assets. By Monday it was bankrupt. Why? Lehman Brothers had invested 35 times the value of its capital in a variety of exotic instruments that few people understand. The bank depended, however, on constant refinancing. But with great holes appearing in the balance sheet, the loans dried up and Lehman Brothers was suddenly a financial king with no clothes.

Joseph Stiglitz, Nobel prize winner in economics, and former senior chief economist of the World Bank says: “The present financial crisis springs from a catastrophic collapse in confidence.” According to Stiglitz it is “the fruit of a pattern of dishonesty on the part of financial institutions, and incompetence on the part of policymakers”. He should know. It was the objective, law-governed pressure for the expansion of capital that transformed the role of the World Bank and created new institutions like the World Trade Organisation which obliged governments to reduce and eliminate regulation.

As we explained last year, in A House of Cards, the disintegration began in 2005 when the frantic period of credit-fuelled growth that had produced globalised corporations reached the limits of the markets. Consumers, who had been equipped with new ways to accumulate debt so as to buy the torrent of cheap commodities needed to fill their newly-acquired mortgage-funded properties found themselves at the limits of their ability to repay even the interest on their mountainous loans.

So came the collapse of the pyramid of exotic, toxic, derivative financial products which had been invented to provide a mirage of wealth. But, just like the highly-profile “extenders” used to cheapen and debase the food we eat, they too had no real value. Instead, just as we have been poisoned and weakened by “food” consisting of fats and sugars, these worthless financial products poisoned and weakened the real, productive economy.

What to do? The Financial Times says things have begun so bad “as to render a coherent regulatory riposte impossible”. We agree. The financial and economic and social system based around production for profit is broken. It is beyond repair and must be replaced. It means moving rapidly to a system based around social ownership, and the identification and satisfaction of need. Only then will we be able to begin to repair the damage done to the planet’s eco-systems by decades of wilful destruction by credit-crazed capitalist corporations.


Gerry Gold
Economics editor

A Sunday crash on Wall Street

It has come to something when the right-wing Daily Telegraph starts talking about the possibility that "capitalism is collapsing under the weight of its internal contradictions". But with Lehman Brothers, one of the world’s biggest investment banks going to the wall overnight, and another, Merrill Lynch, disappearing in a rescue takeover on the same day, you can understand the paper’s concerns.

Sunday’s Wall Street crash with its echoes of 1929, followed by a sea of red on the London stock market, is a qualitative turning point in the debt-driven financial crisis which surfaced in the summer of 2007. The US government took the ailing mortgage companies Freddie Mac and Fannie Mae – both created by Washington in the 1930s – under its a wing only a week ago. Seven days later, the Federal Reserve was not prepared or able to save Lehman Brothers or Merrill Lynch. Instead, America’s central bank is allowing securities firms to swap shares for short-term loans, which sounds like a recipe for further disaster.

With one of the world's biggest insurers, AIG, seeking a $40bn bridging loan after reeling from losses on its exposure to property and financial insurance deals, the global financial system has entered into the unknown. The crisis has developed a momentum all of its own, where state interventions are unable to deal with the outcome of those infernal “internal contradictions” referred to by the Telegraph (which doesn’t, however, acknowledge Karl Marx’s analysis of capitalism as its source).

The Telegraph is unable to explain what these contradictions are, preferring instead to lambast central bankers for keeping interest rates too low as the cause of the crisis. But as A House of Cards explained, the contradictions are more profound. They centre around capital’s need for constant expansion and the spawning of incalculable amounts of corporate, state and personal debt in the process. Converting debts like mortgages into credit seemed an easy way to make money – until the economy went into reverse.

In the end, the Telegraph cannot grapple with the contradiction of being a paper of the big business and the Tory party and insists that “the free market remains our best hope” for coming out of the crisis. This is not such an outrageous view as it first appears. In the absence of a non-capitalist alternative, global capitalism will eventually emerge from the crisis – at a price. This is the crucial lesson of the history of capitalism.

Previous slumps and crisis were “solved” – through the destruction of capital and jobs (25,000 worked for Lehman Brothers and 2,500 the XL holiday company), homelessness and poverty, authoritarian rule, fascism and world wars with their tens of millions of dead and injured. This is how the “free market” sorts out the internal contradictions of capitalism and is a price we cannot afford to pay. The growing political instability in Britain, with New Labour in permanent turmoil, the Lib Dems moving sharply to the right and the ugly face of state-sponsored racism coming to the surface, are intimately connected to the economic and financial crisis.

These are the issues that have to be addressed, for example, by this weekend’s Convention of the Left in Manchester. Building a movement that can mobilise to create not-for-profit, commonly-owned enterprises and banks as an alternative to the capitalist market economy is the priority. This is the focus of A World to Win’s Stand Up for Your Rights festival on October 18 which you are warmly invited to take part in.

Paul Feldman
Communications editor

An umbrella in a hurricane

The union leaders at the TUC week built up quite a head of theatrical steam over their demand – swiftly rejected - that New Labour politely asks the energy companies to pay a one-off, windfall tax to be used to hold down prices. It was a waste of everybody’s time – and energy.

Instead, the power companies are being invited to fund an insulation programme, the cost of which can be knocked off their tax bill or recouped through higher prices!

All in all, the government remains 100% in thrall to the corporations and especially the financial markets. You can learn much about the strength of their commitment by opening the rushed report Chancellor Alistair Darling commissioned from Sir James Crosby on how to improve the functioning of the mortgage market. Crosby is deputy chairman of the Financial Services Authority - the government’s “regulator” (do I hear cynical sniggers?), and former chief executive of the seriously ailing HBOS banking group.

As it happens Crosby left HBOS in 2006, having received a knighthood for services to the financial services industry. It’s what you get from New Labour for leading an organisation that now has an extremely high loan-to-deposit ratio. At 177 per cent, it is higher than any other British bank. In other words, the UK’s biggest mortgage lender lent out an awful lot more than they’ve got on deposit, and they’re not going to get much, if any of it, back. Ever. Does that make Crosby the man to sort out the mortgage mess? Apparently so.

And the report? It’s not as if Darling set Crosby an open-ended “what is to be done” kind of question. In his letter to Darling which fronts up the report Crosby writes: “In April of this year, you asked me to review what market-led initiatives might be necessary to improve the functioning of secondary and primary markets in UK mortgage-backed securities ... in the context of the recent and ongoing disruption in global financial markets.” (emphasis added in case any TUC leaders who may be reading, missed it).

Crosby and the government are wasting their time because their beloved markets have taken on a life of their own. A year ago this week, Northern Rock’s crisis became public. Taking the failed bank into temporary public ownership and pumping billions of our money down the plughole was a desperate, hopeless attempt to prevent the global market meltdown. A bit like an umbrella in a hurricane.

Which brings us to Fannie Mae and Freddie Mac, the US mortgage companies taken over by the American government earlier this week. Keyboards are rattling all over the world about the scale and significance of this, the biggest bail-out of a financial institution in history. Some say that it amounts to nationalisation – or the socialisation of debt, passing the risk of failure and the costs to the taxpayer. Some are arguing that the global crisis has got so bad that it has made the neo-liberals stand on their heads, cancelling shareholders’ rights, wiping them out.

Certainly it is bad. Very bad. Most of the big economies are either already in recession or will be by the end of the year. The collapse overnight of UK holiday firm XL is a sign of the times. Some analysts are beginning to say that there can’t be a recovery for eight to ten years. The giant global financial services company, Lehman Brothers, which borrowed billions of dollars from the US Federal Reserve earlier this year, is on the skids with no rescuer in sight.

But the US government hasn’t begun to adopt socialist measures, and the rescue won’t achieve US Treasury Secretary Henry Paulson’s aim “to protect the stability of the financial market, and to protect the taxpayer to the maximum extent possible”. Unless you understand “protection” as wiping out thousands of regional banks that are among the shareholders in Freddie and Fannie. In reality it is an unimaginably huge gamble, as jobs and incomes are blown away, to keep people with mortgages tied into repaying the debt they’ve been seduced into by the fantasy spun by global financiers and their friends in London and Washington. Some stability.

Gerry Gold
Economics editor

Embarassed but not deterred

The acquittal yesterday of the Kingsnorth 6, who climbed a 200-metre smokestack (from the inside) as part of the campaign to oppose the building of a new coal-fired station on the site in Kent, is one in the eye for the government’s refusal to tackle climate change in any serious way.

The jury evidently concluded that the damage done to the environment by a new plant burning coal — which would emit more greenhouse gases then the 30 least polluting countries in the world — was in a different league to the £30,000 cost of removing the paint daubed by intrepid Greenpeace activists. The jury found that the six had a “lawful excuse” for damaging the property because climate change was a clear and present danger.

Most observers concerned by the dismal record of this government over the last 10 years on the issues of global warming and climate change, not to mention those of civil liberties, will be delighted to raise a glass to the Kingsnorth 6. But the question is, will the jury’s decision change anything? When Greenpeace claim that the result of the court case could be the “tipping point for the climate change campaign”, and then (once again) call on Gordon Brown to step in and embrace a clean energy policy for Britain, they are (again) giving credence to something that is not possible.

The New Labour government will not turn about. Their direction is clear and it is not towards any action that might further de-stabilise the economy, endanger the status quo, or blow a raspberry at the global corporations. The simple fact that greenhouse gas emissions in Britain have actually increased over the last years, says it all.

The recent climate change camp, which took place at Kingsnorth, gave a more accurate picture of just what the state is preparing under this government. Around 1,400 police with batons from 26 forces were in attendance, as well as specialist units with dogs and horses. Kevin Smith, for the Climate Camp, said at the time: "Our legal team are going to be exhausting every possible channel for holding the police accountable for the draconian use of stop and search measures, for the things they confiscated, and for their violent incursions on to the camp. Every year police use the supposed existence of a hardcore minority as justification for their heavy-handedness and every year this hardcore minority fails to materialise."

In a recent article for the New Statesman, Stephen Armstrong, revealed the startling and sinister statistic that roughly 25% of all those attending these activist camps and protests, particularly those concerned with the environment, are corporate spooks. This estimate comes from the so-called “private espionage industry” itself. “From New York and London to Moscow and Beijing, any decent-sized corporation can now hire former agents from the CIA, FBI, MI5, MI6, and the KGB. The ex-spooks are selling their old skills and contacts to multinationals, hedge funds and oligarchs, digging up dirt on competitors, uncovering the secrets of boardroom rivals and exposing investment targets. They are also keeping tabs on journalists, protestors and even potential employees”, says Armstrong.

Embarrassed the government may be by the Kingsnorth 6, but not deterred, and certainly not contemplating any changes.

Peter Arkell

Nature hits back

Hundreds of people in Haiti and the Caribbean are dead, the whole of Cuba has been battered. Millions in the United States have been forced to flee the coastal areas of the Gulf of Mexico, with hundreds of thousands of homes destroyed.

These are the devastating effects of a series of hurricanes and tropical storms from Fay, to Gustav, Hanna and Ike. More and worse weather conditions are to be expected worldwide as the planet warms up. Floods in the Indian state of Bihar and, on a much smaller scale in Britain, are just two more examples of the power of nature disturbed by four decades of the rampant, wasteful and destructive growth of capitalist transnational corporations.

As Hurricane Ike was approaching Cuba, Dr Rajendra Pachauri, chair of the UN Intergovernmental Panel on Climate Change (IPCC), the consensus of the world’s scientists, which showed in 2007 that global warming was the consequence of industrialisation, was proposing a quick fix to reduce carbon emissions.

In common with other campaigners he is advising us to eat less meat. According to the Worldwatch Institute 'The human appetite for animal flesh is a driving force behind virtually every major category of environmental damage now threatening the human future: deforestation, erosion, fresh water scarcity, air and water pollution, climate change, biodiversity loss, social injustice, the destabilisation of communities and the spread of disease.'

But, in an ironic reciprocal action in which nature appears to be biting back at the real source of the problem, the hurricanes have again forced the closure of the Mexican Gulf platforms which produce a quarter of US domestic oil.

It was the rapid credit-induced corporate growth that saw energy consumption soar in the latter part of the 20th century. This same drive for economic growth fostered increased population, an orgy of over-consumption, and, for some, the income which began to transform dietary habits.

So why does Dr Pachauri, like Al Gore, his Nobel Prize co-winner, focus on putting the blame on consumers when we should be tackling the real source of the problem?Could it be anything to do with his previous jobs? Here are just three of them: he was on the Board of Directors of the Indian Oil Corporation (January 1999 to September 2003); Board of Directors of GAIL (India) Ltd (April 2003 to October 2004); National Thermal Power Corporation Ltd (August 2002 to August 2005).

Indian Oil Corporation is a public-sector petroleum company. It is India’s largest commercial enterprise, ranking 116th on the Fortune Global 500 listing (2008).

GAIL (India) Limited, is India's largest natural gas transportation company, integrating all aspects of the natural gas value chain. GAIL is listed by Forbes as one of the world's 2,000 largest public companies in 2007.

National Thermal Power Corporation is the largest power generation company in India. Forbes Global 2000 for 2008 ranked it 411th in the world. It is an Indian public sector company listed on the Bombay Stock Exchange. The Government of India holds 89.5% of its equity. The Company’s name has been changed to "NTPC Limited" with effect from October 28, 2005. The primary reason for this is the company's foray into hydro and nuclear based power generation – and coal mining.

He certainly knows about energy. He may or may not have shares in these companies, but putting Dr Pachauri in charge of the IPCC looks a bit like using a fox to guard the chickens. Gordon Brown has a similar idea - asking the highly profitable energy companies to help the old folk out with a bit of insulation. Crazy, but true.

Gerry Gold
Economics editor

No justice for unions

On the eve of the Trade Union Congress conference in Britain, transport union leader Bob Crow has warned of a massive erosion of workers’ rights resulting from the decisions of the European Court of Justice.

“Anti-trade union decisions by the unaccountable European Court of Justice have undermined workers' rights even further than the Thatcher anti-union laws,” Crow said. Recent rulings by the ECJ “add up to the most serious attack on union rights since the Taff Vale judgement more than a century ago. The ECJ is an unaccountable and politically driven body which aims to extend the ‘internal market’ - that's privatisation to you and me - and its rulings effectively render the right to strike meaningless”, the RMT leader said.

The union’s statement points to ECJ rulings which undermine trade union efforts to prevent employers using immigrant workers as cheap labour and split the workforce. “The ECJ has taken upon itself the right to judge the legitimacy and the proportionality of a dispute and the effect on the employer,” it says.

The RMT rightly points to the historic issues involved in the Taff Vale judgement of 1901. Its own predecessor, the Amalgamated Society of Railway Servants, was fined £23,000 when it was held liable for losses the Taff Vale railway company sustained in a strike of rail union members. The reversal of this decision was only made possible when the trade unions elected members to Parliament in 1906 and the Trades Dispute Act was passed, granting unions immunity from prosecution. Crow says that unless the European Court rulings are rolled back, trades unionists “will be left defenceless against the EU's drive to liberalise markets and institutionalise social dumping”. He calls for “stepping up the campaign for a Trade Union Freedom Act and ensuring that any new UK Bill of Rights includes all ILO conventions, and... working with unions across Europe to demand the reversal of the ECJ's anti-union rulings”.

While Crow concentrated his fire on the unaccountable ECJ, other trade union leaders have attacked New Labour. Derek Simpson, joint general secretary of Unite, has accused up-and-coming Foreign Secretary and leadership contender David Miliband, of being “smug” and “arrogant”. And the normally pro-government Dave Prentis, head of Unison, Britain’s biggest union, has accused New Labour of pandering to big business. TUC general secretary Brendan Barber has called for higher taxation of those earning over £100,000 saying that extreme wealth was "socially divisive and morally objectionable". His statement accompanies a new TUC study Do the super rich matter? which compares the fortunes of Britain's wealthiest people with the largest estates left in wills in each decade since the 1850s. The wealthiest few in the UK now own as much, if not more, than their equivalents did at the end of the nineteenth century. The TUC points to how “this surge in wealth at the top has overturned the advances made in a century that saw the gap between rich and poor narrow as a result of progressive taxation, the growth of trade unions and regulation”.

The TUC’s report says that the super-rich have acted like Robin Hood in reverse – taking an ever larger share of the cake. But its leaders never point to the fact that the very essence of New Labour has been its shamelss embrace of corporate interests . It has championed the the very same billionaires who are now riding high on the hog in the City of London. And now, paralysed by the economic crisis, it is on the brink of handing over power to Cameron’s Conservatives.

The stark fact is that no parliament in its present form can or will legislate sorely needed basic rights or a fundamental change in the economy to shift wealth away from corporate interests. To ensure basic rights for ordinary working people requires a different type of parliament altogether. To achieve this means deconstructing today’s empty “democracy” and preparing political and economic alternatives – the aim of Stand Up for Your Rights Festival on October 18.

Corinna Lotz
A World to Win secretary

Essex Travellers call for support

Being able to afford a home has become more difficult than ever for countless people as the credit crunch continues to bite. In a home-ownership obsessed country the dream has turned into a nightmare.

But quite apart from those struggling to pay their mortgages, there is another group of people who are suffering even greater insecurity. In addition to eviction, they are now in danger of being made scapegoats for countryside blight and local and national government failure.

Up to 1,000 travellers at Dale Farm, Essex, the UK’s largest Gypsy village could be faced with eviction if Basildon District Council wins its appeal against a High Court Ruling preventing demolition of the site at a hearing on December 5.

Richard Sheridan, president of the Gypsy Council, who is speaker for the site, says that travellers at Dale Farm are suffering a gross miscarriage of justice: “The Conservative government took away the rights to remain on public land in 1994 when it repealed the 1968 Caravan Sites Act, so Travellers purchased their own. Now we are faced with eviction from land that we have purchased ourselves,” he said in a statement to A World to Win.

“The Council has breached the Data Protection Act by putting personal and medical details of 86 Dale Farm families on a public website. They are prepared to spend £3m to evict us, including nearly a million in estimated legal costs, on top of £1.9m to throw us off our site. It could cost the taxpayer up to £30 million to comply with the law if they keep us on the road – a huge waste of money.”

Sheridan will be attending an EU-sponsored Roma summit in Brussels on September 16 where he will put the case for Dale Farm’s continued existence. The gathering has been called as the Italian government criminalised its own Roma citzens. The Berlusconi government authorised dawn raids, evictions and dismantling of camps, including 40 caravans and tents near Rome.

Under Conservative leader Malcolm Buckley, Basildon council has set aside £3 million to bulldoze the 132 homes and evict travellers from their site at Crays Hill. It failed to carry out its plans in May this year, when High Court Judge Andrew Collins ordered a stay of execution for 40 families. One Labour councillor has described the threatened eviction as “an outrageous amount of money to set aside, to enforce planning laws at a former scrapyard in an anonymous country lane."

But a Basildon council development control meeting this month is likely to vote through measures which could include demolition of a small wooden school, chapel and meeting place called St Christopher’s. Martina McCarthy, who is the wife of site spokesman Richard Sheridan, has been served an enforcement notice, despite the fact that the building was built with an Essex County Council arranged grant.

The far-right British National Party is gearing up for a vicious racist campaign to out-do the Conservatives who at present control Basildon council in a hotly-contested by-election on September 18. The long-running dispute over Dale Farm is being made into a rallying cry by the BNP which is contesting all 14 local government seats.

The far right is using immigration and urban development issues to stoke up support in an area which has seen industrial development come and go, with the decline Ford’s tractor plant (now owned by Case New Holland) and the Standard Telephone Company. Since Basildon is considered a barometer of public opinion in General Elections, the issues there are more than local.

A World to Win salutes Dale Farm organisers, Gipsy Council leaders, Richard Sheridan, Joseph G Jones and Grattan Puxon in their campaign for basic rights, to life, land, health, education and data privacy. They are calling on supporters to attend a rally on September 16 and for human rights monitors in the event of an eviction attempt after the December High Court Hearing.

Corinna Lotz
Secretary, A World to Win

How history speaks

Seventy years ago today, thirty people from eleven countries came together secretly in the home of a French anti-war revolutionary Alfred Rosmer in Périgny, near Paris. In addition to those who had travelled from the United States, France, Great Britain, Germany, the Soviet Union, Italy, Latin America, Poland, Belgium, Holland and Greece, organisations in many other countries pledged their support for the risky venture being undertaken. Their mission? To found a new organisation that would work internationally for revolutionary socialism. It was to be called the Fourth International.

The meeting was held on the eve of World War II, six months after Germany annexed Austria, and just 27 days before Britain’s Prime Minister Neville Chamberlain signed the infamous ‘peace in our time’ agreement with Hitler. As the American Trotskyist, Max Shachtman, wrote: “The Fourth International is proud of the fact that during the dramatic Munich week, when Europe seemed to be hurtling headlong towards a new imperialist slaughter, when the traditional parties of the proletariat were rallying to the flag of the bourgeoisie and the centrists were paralysed by their internal contradictions—our world conference, meeting at the same time, issued the only clear cut, flaming call to the proletariat to unite on resolute internationalist struggle against imperialists, its war and its lackeys.”

Within a few years of the Wall Street Crash of 1929, unemployment had risen dramatically. Right wing and fascist politicians – amongst them Adolf Hitler - who a few years earlier had been seen as cranks and demagogues, suddenly rose into prominence. But their coming to power was not inevitable. In the last analysis, it was the outcome of the degeneration of the Third Communist International under Stalin. Hitler’s rise to power, as Trotsky analysed so acutely, was facilitated by the disastrous political leadership on the part of working class organisations – the German Communist and Socialist Parties in particular, which allowed the powerful workers movement against Hitler to be split.

The creation of the a new International was the culmination of a campaign launched led by Leon Trotsky, co-leader with Lenin of the 1917 Russian Revolution, along with others who opposed the rise of Stalinism from a revolutionary standpoint - the Left Opposition. They issued a declaration in 1933, after Hitler’s establishment of a Nazi dictatorship in Germany, a confirmation of the warning Trotsky had issued a year earlier. He noted that the Communist International could not survive the victory of Fascism in Germany.

Trotsky’s analysis of the disastrous impact of Stalinism which led to the collapse of the German Communist Party had led him to conclude that the Third International- the Comintern - founded largely by himself and Lenin in 1919 – had ceased to be a revolutionary organisation. He concluded that a new organisation, a Fourth International, had to be built. There were many people who came into conflict with Stalinism, but only Trotsky and his supporters were able to develop a revolutionary alternative. As Leopold Trepper, leader of the secret anti-Nazi intelligence organisation, the Red Orchestra was to note many years later “Let them not forget, however, that they [the Trotskyists] had the enormous advantage over us of having a coherent political system capable of replacing Stalinism. They had something to cling to in the midst of their profound distress at seeing the revolution betrayed,” he wrote in his book The Great Game.

Today, as the credit crunch turns into fully-fledged recession, threatening to eclipse earlier slumps in the 20th century, the political effects will take new and different forms from those of earlier times. Conditions are maturing for social and political upheavals which will again pose issues of leadership. It is imperative to understand both the dangers and the great opportunities which this offers new generations today.

Political regimes like that of Bush and Brown continue in power largely due to inertia and the lack of attractive political alternatives. Protests, strikes, social movements and campaigns for rights of every kind already exist which challenge the capitalist economic system and its antidemocratic and authoritarian states. For success under these new conditions, it is vital to connect with historic movements – and use that knowledge to forge new solutions and alternatives. This is why A World to Win is hosting the Stand Up For Your Rights Festival on October 18.

Gerry Gold and Corinna Lotz

Escape from Neverland

New Labour’s crisis deepened over the weekend, with the Chancellor Alistair Darling’s open admission about the seriousness of the credit crunch. He said today’s economic times are “arguably the worst they’ve been in 60 years”, causing the pound to fall against the Euro and the dollar.

As the government’s popularity – and with it Brown’s status - sinks ever lower, Darling decided it was best to go for broke and admit the truth that everyone else had already known, and in doing so, steal a march on the Prime Minister.

After a year of denial, the Chancellor pricked the bubble of New Labour’s fantasies, to shock all around. Like his namesake Wendy Darling in the fairytale world of Peter Pan, he preferred telling stories and fantasising to the mundane everyday world of real life the rest of us have to deal with, but at last he has been forced to admit that there’s a big problem. “I think it's going to be more profound and long-lasting than people thought", he told a Guardian journalist.

He claimed that when he first became Chancellor, “we knew that the economy was going to slow down”, but he did not have “any idea” that there would be a major financial crisis: “No, no one did. No one had any idea,” he claimed. But to any serious observer of the global economy, it was already clear back then that a huge financial crisis was starting to blow as the US mortgage market went into tail-spin.

A World to Win warned about its effect on the British economy well over a year ago:

‘The contagion is certain to spread as there are very many over-borrowed, over-stretched corporations - not just financial institutions - as well as the millions upon millions of individuals who find themselves in trouble in every country. The British economy is particularly vulnerable... Some observers are comparing the situation to 1929, when the Wall Street crash led to a world-wide slump...’

Now, as house prices have fallen by over 10% in a year, widening the gap between the mortgage debt millstone millions of people are struggling to repay and the value of the property they are trying to buy. More than 30% of all UK borrowers – around 3 million households - are expected to be caught in the negative equity trap if prices drop by a further 30%, as many are predicting.

Even the remaining mutual Building Societies, like the small but successful Swansea, which has continued to lend only against the money its savers have deposited, are caught up in the vastly overblown finance fantasy.

Whilst banks and financial institutions are free to simply write down the declining value of the assets they have accumulated, no such freedom exists for those who are stuck with impossible levels of mortgage payments. In the US, around 1 in 5 of the population are already in negative equity, and many who are unable to sell their houses in an already oversupplied market are simply walking away.

Our solution? Rather than passing the buck to local councils to take over a portion of the debt – effectively using even more taxpayers’ money to shore up the private usurers - investors and borrowers should take control of the mortgage lenders without compensation to shareholders and, following the banks’ example, write down the value of the property as prices fall, and recalculate outstanding loans based on the now much lower value. Simple. But not something New Labour can countenance whoever the leader might be.

Gerry Gold
Economics Editor