Banks get quids but there's no quo

It is not long since Prime Minister Brown announced a £400 billion bail-out package including a £37 billion gift to the banks, but the big lie has already been exposed. The story a month ago was that the government and the Bank of England were going to do whatever it takes “to maintain the stability of our system and to make sure that there is stability for families and for businesses right across our country”.

In reality, capitalist governments in the UK and in the rest of the world are unable to anything effective to stop or even offset the impact of the global slump. Sales by leading retailer John Lewis dropped 9.8% on the year. Shares in Asia and Europe fell on Friday, heading for their worst month ever, anticipating a deep and long lasting downturn. In a renewed desperate attempt to stave off the worst effects, Japan cut interest rates for the first time in seven years on Friday, expecting severe stress in the global economy to persist, while banking giant Barclays said it was raising £7.3 billion in capital.

The failure of the package of taxpayer-funded public sector debt to deliver the credit needed by small companies and individuals reveals the governments’ total subservience to the privately-owned finance sector. In keeping with their requirement to make profits, as economic conditions deteriorate lenders are tightening terms, making borrowing less available and more expensive.

Despite the shouts of glee from the supporters of state intervention and delight from some over what they dubbed “nationalisation” of the failing banks, including Northern Rock, Royal Bank of Scotland, Lloyds TSB and HBOS, there were no constraints or requirements of any kind placed on how the money should be spent.

Even Vince Cable, the Liberal Democrat Treasury spokesman, has been able to denounce the government’s “utterly pathetic” position, saying: “The whole point about this deal with the lenders was that there was supposed to be a tough quid pro quo. It’s perfectly obvious now that the banks got the quids and there’s no quo.”

As events unfold, Brown and Chancellor Darling are reduced to begging at the rich men’s table. On Thursday, Darling admitted that the government’s requirement that the banks make lending available at 2007 levels simply means “the pool of money is there”. Decisions on whether to lend that money, and at what cost, remained with the banks. “In any banking operation, whether it is lending to individuals or to businesses, there must be discretion,” he said. And Brown added “I urge banks not to change the terms and charges for existing lending to small and medium-sized enterprises.”

In operating the real, brutal laws of the busted capitalist market, the bankers have a far better grasp of what is required than Brown or Darling. “We don’t sense any purpose in providing small businesses with loans that they cannot afford to repay,” said Eric Leenders, executive director retail, at the British Bankers’ Association.

What better reason than this could there be to end the operation of a system of fantasy finance that exists solely to extract value produced by workers in the real, productive economy in order to distribute it as profits to shareholders and dreamland bonuses to City traders? The profit-serving banks should be turned into mutually-owned, democratically controlled not-for-profit institutions. Then decisions can be taken and implemented on how to best provide the essential financial services needed to build an equitable and environmentally sustainable economy.

Gerry Gold
Economics editor

Beyond peak oil

Obscene profits announced this week by two oil giants underline two important messages. One, governments can neither regulate nor influence the activities of the global corporations. And two, if we leave our energy future to companies operating within the capitalist profit-driven framework, we might as well abandon hope now.

Royal Dutch Shell announced a 71% increase in profits, up £6.6bn for the third quarter of this year and BP posted a rise of 148%. Shell’s chief executive, Jeroen van der Veer, called the results "satisfactory" (no, really?) because Shell is "robust across a wide range of oil prices".

In other words, Shell pumped crude oil and sold it at inflated market prices – up to $150 dollars a barrel at one point. Then, as a refiner and retailer it passed these same inflated prices on to the consumer. They give a whole new meaning to the term “double-entry bookkeeping”!

On hearing the news Alistair Darling, henceforth to be known as the Jelly Chancellor, whined: "I want to see that reduction passed on to the pumps as quickly as possible, because people are entitled to see the benefit of the falling [oil] price reflected in what they actually pay when they fill up the car." He had no suggestions as to how this is to be achieved.

Trade unions and some Labour MPs renewed their call for a windfall tax on the oil companies – which Brown/Darling has already rejected and in any case entirely misses the point. The real question is, why are the oil companies allowed to keep their grip on world energy supplies? Why, when peak oil is around the corner, are we told there is no alternative to the drive to extract the last ounce of profit from the last drop of oil?

More and more people are asking this question. Many are attracted to the growing Transition Town movement which aims to find local answers to energy problems. The fact that Transition Towns are self-motivating and self-organising is their strength. But their “ideology” of handing over politics to others leaves them stranded with unrealisable utopian dreams.

This anti-political approach is challenged in a new pamphlet by Paul Chatterton and Alice Cutler, from the Trapeze Collective, entitled The Rocky Road to a Real Transition. The authors insist:

“Being against climate change does not have to be a political position. But the analysis of how we got into this mess and the best way to move on, does bring us back to politics. It involves taking on power and those who hold wealth and influence....Responding to climate change could mean new niche markets for capitalism, greater social inequality, closing borders and strengthening state power. An agreement ‘not to rock the boat’ will not help Transition Town’s long-term viability, as it would mean not really changing anything.”

The question of state power, and who controls the corporations, cannot be evaded if the energy crisis is to be averted. As the Charter launched at A World to Win’s Stand Up For Your Rights festival states: “The existing system of government fails to represent the interests of the vast majority of people and is democratic in name only. Instead, the state’s primary purpose is to promote business interests at the expense of ordinary working people.”

We would encourage Transition Town members to support the Charter, and join the debate about climate change in its wider socio-economic context. That has to include the project of building alternative democratic forms of government that can remove the power of the corporations to determine our energy fate.

Penny Cole
Environment editor

Keeping people in their homes

As repossessions soar – they are up 71% on last year – and millions of homeowners see the market value of their properties fall well below what they owe to the banks, the New Labour government washes its hands of the growing housing crisis.

In fact, the state-owned Northern Rock is leading the way in throwing people out of their homes, repossessing 50% more properties than the industry average. By the end of September, the state-owned lender had seized 4,201 homes, up from 2,215 at the end of last year.

Yesterday, Dai Davies, the independent MP for Blaenau Gwent, asked ministers to take possession of Northern Rock and Bradford & Bingley homes where borrowers have defaulted. The response was brutal and to the point. He was told: "Northern Rock and Bradford & Bingley are run at arm's length from the Government, on commercial principles."

The treatment meted out to former chef Karl Clark, who suffers from severe arthritis, tells you all you want to know about Northern Rock. Housebound and unable to work, he said: "I've done everything I could to keep up with my repayments, sometimes I did without medication so I could pay for my mortgage. I've tried everything to reason with them. I've been upfront from the start and told them I had money troubles because I could no longer work. I've sent copies of doctors' notes to prove I can't work."

He used his savings to pay the mortgage, but they soon ran out. Karl told his local paper: "My wife works part-time, but the money just isn't enough. I used to call Northern Rock and arrange payment deals, but then just a couple of weeks later they were seemingly forgotten about and I'd have to go through the same process again. I've got a wife and daughter and they shouldn't have to go through this. It seems that Northern Rock have been eager to kick me out of the house. Everything seems to have been fast-tracked. I got a letter from them saying they were going to take me to court. Usually this takes a few weeks, but in my case it was a few days."

As unemployment rises relentlessly in the recession, the number of people who won’t be able to pay their mortgages is sure to soar. Many have also borrowed against what was increased equity in their property. Now, as house prices fall, if they lose their homes, they will still almost certainly owe more than the current market price of the property (if it can be sold, that is). They will be homeless and in huge debt to the banks at the same time. This is simply unacceptable.

New Labour’s indifference is all the more brutal because the state has shown that it possesses enormous powers (if not the answers) when comes to the financial crash. Commitments totalling £500 billion have been made to the banks’ bail-out. Local authorities or housing associations could, for example, be given the powers and resources to buy up homes under repossession orders and rent them back to the occupants. Of course, the Brown government has no intention of doing this.

Instead, the government is pressing on with more state-funded home-ownership schemes, even though banks have stopped lending to anyone who doesn’t have a substantial deposit. Developers have stopped building and housing associations who work in partnership with private companies cannot possibly meet their targets; associations will also face increasing financial difficulties as a result of unsold properties and unused land.

Dai Davies asks: “What is the benefit to taxpayers of keeping these banks alive, if they cannot be directed to helping people in dire housing difficulty?” Quite so. The mortgage crisis is soluble. Existing mortgage debt could be cancelled and future payments determined by a formula based on the cost of new building and ability to pay, to be agreed through the democratic process. Empty homes could be requisitioned to house the homeless. Ridding ourselves of New Labour and the business state it presides over will enable us to carry these policies into practice.

Paul Feldman
AWTW communications editor

'Walking blind into a minefield'

The impending collapse of so-called “emerging” economies from Ukraine to Turkey illustrates dramatically the domino-effect of the global financial crash, with the weakest countries going to the wall first. Rising political tensions at national and regional level are also dangerous signals that the crisis is destabilising international relations.

Countries like Ukraine have relied on external funding to develop their economies; now the same banks are themselves in deep trouble and are pulling their money out where they can in a desperate bid to reduce their massive exposure. Ukraine has seen its currency crash by 20% and its stock market reduced by 80%. The $20 billion it is seeking from the International Monetary Fund will soon be swallowed up; Iceland is already asking for more from the IMF.

The conflict between Ukraine’s prime minister and president ahead of scheduled elections is mirrored in Turkey, where the military and the courts are undermining the elected Islamic-based government. In Russia, stock markets have crashed by over two-thirds since May and the fall in the price of oil is reducing state revenues sharply. Russia’s already soured relations with the United States and Britain are certain to worsen.

Meanwhile, as even the Bank of England belatedly acknowledges, the financial crisis has a lot further to run, with insurers and hedge funds next in line in the meltdown. Some estimates suggest that up to 30% of the world’s 8,000 hedge funds could disappear shortly.

At a conference in London last week, Professor Nouriel Roubini, a former US Treasury and presidential adviser known for his accurate prediction of financial crises, said he would not be surprised if the US and other countries soon had to close their stock markets for more than a week to halt descent into "sheer panic".

He added that turmoil over world trade, currency markets and debt is likely to cause tensions between the Western world and emerging superpowers such as Russia, China and "a bunch of unstable oil states". Roubini warned: "It's the beginning of the decline of the US financial empire. The Great Depression ended in a massive war. I hope that's not going to happen but it's pretty ugly now."

Roubini, who does not mince his words, summed up the predicament facing capitalist governments and states. "The bail-outs have not worked because the markets are no longer rallying, and the policy-makers have run out of options. It's like we're walking blind in a minefield. Every situation has become risky and no one can trust each other. The banks are too big to be allowed to fail, but they're also too big to be saved."

Roubini’s remarks are no exaggeration of the dangers we face as a result of the crisis. History has demonstrated how economic recession and slump fuels militarism, nationalism, protectionism and, ultimately, war. Prime minister Brown’s plan to bring forward a few public-private infrastructure projects are meaningless in this situation (his suggestion came on the day that the government launched its draconian attack on people with disabilities, trying to force them to take non-existent jobs).

Nothing less than a root-and-branch reorganisation of the economy and financial system will suffice. As our Charter for Democracy says, we need to “eliminate speculation and profit as the basis for society, ensuring that both ecological care and basic human needs shape production, consumption and lifestyles”. We urge readers to back the Charter and work to establish local and national Conventions for Democracy to build support for the transfer of political and economic power to the majority. It’s time to plan to put capitalism out of its misery before it can inflict unimaginable pain on the working people of the world.

Paul Feldman
AWTW communications editor

The 'Big Ear' hears everything...and nothing

While conspiracy theorists insist against all the evidence that the third tower at the World Trade Centre was deliberately destroyed by the American government, the real behaviour of the secret state is being exposed by a courageous group of US journalists and whistleblowers from within the military and intelligence agencies.

Investigative journalist James Bamford has researched extensively and interviewed operatives to build up an chilling panorama of mass surveillance by the US National Security Agency (NSA), which he describes as “the Big Ear”. It is a story in which the real terrorists go scot free while vast numbers of innocent people are spied upon and sometimes even killed.

Bamford’s new book, The Shadow Factory: The Ultra-Secret NSA from 9/11 to the Eavesdropping on America, follows two earlier books. His 1982 The Puzzle Palace, nearly landed him in court, when the NSA sought to silence him. In an interview with Democracy Now TV/Radio host Amy Goodman, he provides a detailed picture of the NSA which is many times larger than the CIA and more secret.

“The NSA”, he explains, “specialises in SIGINT, which is signals intelligence… It gets most of its intelligence from eavesdropping on communications, whether it’s telephone calls or email or faxes, computer transfers of information between computers….It intercepts it. So NSA is the big ear.” Bamford catalogues the incredible ineptitude and bungling by the NSA – described as “humiliating blunders” by Time magazine

Although the NSA had the names of two of the 9/11 conspirators as early as December 1999, and was monitoring their calls, “they never bothered to check,” Bamford says, "so they both got in without any problem into the United States. They went down and lived in San Diego.” Khalid al-Middhar and Nawaf al-Hazmi’s conversations were being picked up and relayed to the CIA, but the NSA did not tell anyone that they were in the United States! The ultimate irony was that the crew that was about to attack the Pentagon set up their base of operations in Laurel, Maryland, on the other side of the road where the NSA headquarters is located.

Bamford interviewed two FBI agents, Mark Rossini and Doug Miller, who were assigned to a special “Counterterrorism Center” within the CIA. But the officers in charge of the CIA unit would not allow them to send a message warning that “these guys are probably headed towards the United States” to the FBI. “Rossini was very angry that he was never allowed to send that message,” Bamford says. Not too surprisingly, the FBI has just denied Rossini and Miller permission to appear in a television documentary on pre 9/11 rivalries.

Two NSA whistleblowers, army reservist Adrienne Kinne and Navy Linguist David Murfee Faulk have come out to denounce the activities of their bosses in the NSA, risking their careers and possible prosecution by the US government. They have revealed that post-9/11 intercepts involved “more and more numbers that belonged not to any organisations affiliated with terrorism or with military… but with humanitarian aid organisations, non-governmental organisations, who include the International Red Cross, Red Crescent, Doctors Without Borders, a whole host of humanitarian aid organisations. And it also included journalists”. They also listened in to intimate exchanges between US troops in Iraq and their loved ones back home.

What these inside accounts reveal is the deeply degenerate, bungling nature of the American state, which makes spying on its own people the number one priority under the guise of the “war on terror”. The notion of this crowd organising 9/11 is too laughable for words. The real conspiracy is the ongoing one against the human rights of the American people. Today’s states are nothing to do with democracy and need to be reconstructed along the lines proposed in A World to Win’s new book, Unmasking the State – a rough guide to real democracy.

Corinna Lotz
Secretary, A World to Win

When limits are reached

Alan Greenspan, former head of the US Federal Reserve, admitted yesterday that the credit crisis had exceeded anything he had imagined. Talking about the operation of financial markets he said: “I had been going for 40 years with considerable evidence that it was working very well.” Either he was looking down the wrong end of the telescope, or his theoretical models were wrong.

Speaking before Congress, Greenspan, who stood down as chairman of the US central bank in 2006, said the crisis had left him "in a state of shocked disbelief". That sense of bewilderment has produced all sorts of reactions. For example, this week, the Financial Times said: “When the US authorities allowed Lehman Brothers to fail last month, nobody expected that the decision would trigger a wave of nationalisations, rescues and government interventions across Europe.”

Just a few phrases from the discussion on BBC2’s Newsnight last night (a UK TV news magazine, for those reading from abroad): “A remarkably steep downturn”; “Business failures inevitable”; “Could turn out to be quite frightening”; “This recession could go on a long time”

This quite sudden series of admissions is the conscious expression of the dramatic, unprecedented global crisis as it is reflected in the minds of economists, financial analysts, and politicians the world over. It marks a moment of qualitative change in the trajectory of the global financial and economic crisis as it transmutes, its effects leaping from banks and financial institutions to threaten and bankrupt a collection of countries.

As the BBC’s Robert Peston put it “Queuing up for the intensive care ward are Iceland, Hungary, Pakistan, Ukraine and Belarus, all of which are in discussions about accessing special loans from the International Monetary Fund, the emergency medical service for the global economy. But there has also been a substantial withdrawal of capital from South Africa, Argentina and - most worrying of all - South Korea.”

Why the leap? Having exhausted the profits to be made from the banking crash, speculators have moved their attention to the currency exchange market where the volume and scale of transactions with fantasy finance outdistance the rest of the credit markets by a degree comparable to the difference between our solar system and extent of the known universe.

How could they all get it so wrong? And how, as many are now saying, could Marx be so right? What can we learn from something written almost one and a half centuries ago? As one of his main critics put it soon after Das Capital was published in 1867, the real value of Marx’s inquiry is ‘the disclosing of the special laws that regulate the origin, existence, development, death of a given social organism and its replacement by another and higher one”.

The dialectical method that Marx used was, and is scientific. It enabled prediction on the basis of a general understanding of how things change, which he took in its upside-down from the German philosopher Hegel. Marx used this method to guide his detailed empirical and historical study of the rapidly developing and already crisis-ridden economy. This approach enables us to follow quantitative changes and be alert to the moment when limits are reached and have to be breached – the moment of qualitative change, the leap to something new.

Others have continued that work since. We used it in our analytically prophetic book A House of Cards, from fantasy finance to global crash, published one year ago, whilst Gordon Brown was assuring the world about sound fundamentals. There are many more qualitative changes afoot. Many supporters of state intervention are beginning to realise that the game is up. The cost of fixing the crisis is just too great. Limits have been reached. Watch this space.

Gerry Gold
Economics editor

Still 'business as usual' when it comes to climate change

Nicholas Stern – who wrote the 2006 report on the economics of climate change for New Labour – argues that recession “is the time to build a low-carbon future with the investment vital for economy and planet”. In an article entitled Green routes to growth (“growth” appears no fewer than 11 times) he proposes a quasi-Keynesian solution to climate change and recession, which is superficially attractive.

His argument in today’s Guardian goes like this: We know business as usual would bring catastrophic climate change by the middle of this century. But the credit crunch and slump in demand, means business as usual is no longer on the table. And that provides an opportunity to use public money and private investment to build a low-carbon future.

But the problem with Stern’s approach is that capitalism goes for growth in pursuit of profit. Profit, not growth in and for itself, is the criteria. And just because “the public” recently bought a massive stake in the ruins of some banks, it does not mean we have any control over their investment decisions. Any investment in “green technologies” would take place in the same profit-driven context – and that simply means more fraud, greenwash and unmet targets.

Alongside Stern’s fiscal optimism would run the continued exploitation of the planet – the unavoidable outcome of private property in land and resources. Even if there is some small investment of capital by the state – such as plans to fund more energy-efficient homes - this will not alter the rapacious nature of capitalist production. Stern puts his faith in measures like the Clean Development Mechanism to reward companies that cut carbon. But with so-called “Clean Coal” now included, the CDM is more corrupt than ever. As Carbon Trade Watch’s Kevin Smith explained in a recent article, the dirtiest fossil fuel technology is now earning billions in subsidies. And corporations with the most appalling human rights records are being rewarded with public funds.

Stern writes: “And if, as we must, we halt deforestation - the source of 20% of greenhouse gas emissions - at the same time we can also protect and enhance our biodiversity and water systems.” But how is this to be done? Where is the “Keynesian mechanism” that will bring about that miracle? The exploitation of land will become more ruthless and less safe, as the capitalist drive for profits enters a new, desperate phase. “Clean coal” power generation will demand more destructive forms of coal production. By supporting new nuclear power, governments will be forced to allow mining corporations access to deposits of uranium currently closed to them for environmental or social reasons.

Other indications are just as serious. Earlier this month the Chinese government announced the biggest shift of land from public to private hands since the collapse of the Soviet Union. Millions of acres of small collective farms may now be sold off into private hands. The claim is this will allow peasants to share the profits that have enriched China’s middle class. In reality, they will be robbed of their land wholesale, which will be used to develop agri-business, growing GM Soya for bio-fuel, for example. And in the meantime the people will go hungry as food prices rise.

The reality is that whilst “business as usual” may not be on the cards, “profit-driven globalised capitalism as usual” is – and that will be even worse for the planet. The only way to halt catastrophic climate change is to bring land and banks into common ownership and create new democratic decision-making over what the economy produces, and how.

Penny Cole
Environment editor

The spectre of Marx looms large

As Bank of England governor Mervyn King warns that UK is entering recession and the pound plunges, websites and newspapers around the world are noting that the ideas of Karl Marx have a new relevance.

Yesterday Marx’s iconic bearded face graced the front page of The Times, followed by four pages about the German refugee who eked out an impoverished existence in Soho when he arrived here on the run from the Prussian authorities. Under the headline, “He’s back”, The Times' newest leader writer and former Blair speechwriter, Philip Collins asks: “Could it be that Marx’s hour has come at last?”

The Times' idiot’s hop, skip and jump through Marx’s most famous book Capital is jaundiced and superficial, as one might expect. But at the same time, Collins is compelled to recognise that “Marx was on to something”, adding: “Capitalism wasn’t just nasty, it was doomed. It would collapse under the weight of its own internal contradictions. A bit like Lehman Brothers.”

Collins in fact ignores Marx’s core analysis of what capitalism actually is and what makes the system tick. Marx showed that capitalism is a system of commodity production for exchange, and that money (and credit) arose on the basis of the exchange of goods.

Through vast research and an epic intellectual effort, he demonstrated that things only acquire value as a result of the power of living human beings – labour. From this basis, he analysed the historic evolution of capital and how the growth of credit was central in capital’s need constantly to expand. Marx explained the fundamental contradiction between private ownership for profit and the vast, socialised nature of the productive forces as the source of capitalism’s inherent tendency to crises.

What the renewed interest in Marxist ideas proves without doubt is that the financial crisis and its effects have brought a widespread distrust combined with huge anger about the system and the governments like that of Brown. So, for the ruling classes the race is on to find pseudo-Marxists who can discredit any thoughts of a revolutionary transition to a different system.

Enter the media’s favourite “radicals”, longstanding not so ex-Stalinists Martin Jacques and Professor Eric Hobsbawm – who provided the ideological rationale for New Labour in the late1980s - closely followed by Frank Furedi, Mick Hume and Claire Fox, formerly leading lights in the dodgy Living Marxism magazine and now prominent within the so-called Institute of Ideas. Jacques, now visiting professor at Renmin University, Beijing, yearns for a return to Big Government (echoes of Stalin?) and social democracy while Fox looks forward to “a period of enforced austerity”.

Environment campaigner George Monbiot some time back outed the sinister way in which Fox and company have infiltrated the media and discussion circles. As Monbiot points out: “The LM network promote an extreme libertarian ideology - no restrictions on paedophilia, race hate etc. - and eulogise technologies like nuclear power, genetic engineering and human cloning.”

Clearly people like Fox have nothing to do with Marxist ideas and everything to do with promoting the interests of Big Oil, Big Pharma, and global agro-business. They are paraded in Murdoch’s newspapers (and on the BBC where Fox appears as an “expert” on the Moral Maze) to discredit Marxism and revolutionary ideas in general amongst students and young people looking for alternatives to the ideologies and stereotypes of the media and education system.

Corinna Lotz
Secretary, A World to Win

No easy fixes

To those who have been preaching state intervention as the solution to the credit crunch and the recession it must seem as though their time has come. Out go the discredited free-market assumptions of the late 20th century and in come the theories that found favour in the late 1930s and the immediate post-war.

These were largely the work of the British economist John Maynard Keynes. He claimed that relatively low government spending and/or high taxes had contributed to and then reinforced the economic depression of the 1930s. Now New Labour has apparently gone back to Keynes in their desperation to find some answers to the lethal cocktail of a collapse in jobs, sharp falls in consumer spending and financial meltdown.

But bringing forward a few infrastructure projects does not even begin to address the enormity and breadth of what is a global economic as well as a financial catastrophe. Bringing already budgeted spending forward, funded by new borrowing but without creating new money, is at best a new twist on an old solution to a different problem.

All forms of credit and debt, including money, are promises to pay in the future, so the prescription to bring future spending forward most certainly means a massive expansion of the injections of the drug that produced the current mayhem. The system can’t survive without it. New Labour already has accumulated record debt, and some doubts have already been raised about the availability of enough lenders to fund the new borrowing needed to bail out the bankers. Where will these additional lenders be found? When they fail to materialise, will the government simply print money?

With many of world’s banks and corporate behemoths - Ford, GM, Chrysler, GE on the point of bankruptcy, and most, including Starbucks in retreat, the cost of limiting the recession and preventing or even reducing the looming prospect of a depression, will be too great. There’s simply not - and can’t be - enough real value in the economy to service the debt already accumulated during the last years of globalisation. It’s why we have the present crisis.

The vast unimaginable gulf between the value of global production, even before the recession set in ($65 trillion), and the monstrous imploding balloons of credit and debt ($550 trillion in the credit derivatives markets alone – this is a small fraction of the total) puts the few trillion guaranteed to the banks into perspective. There is not, and reflation cannot provide sufficient real value in the economy to stave off the financial hurricanes still building to force 5 and beyond.

In any case, tax rates are at rock bottom thanks to decades of Tory/New Labour policies; UK consumers are weighed down with personal debt (with millions now in negative equity); tax income from medium-sized business is falling away (the transnational corporations hardly pay any tax in Britain); and unemployment is growing rapidly throughout the world. The global crisis is now penetrating China, with that country’s export markets in a state of collapse.

The sudden infatuation with Keynes (even the right-wing Daily Mail is on board) should also come with a health warning. Claims that Keynesian policies were working before World War II are simply not true. Unemployment in the United States – where his theories were put into practice by Roosevelt – remained persistently high until the preparations for war began to reflate the economy.

A return to growth was only possible once the overcapacity produced in the speculative frenzy of the run up to the Wall Street crash 1929 was destroyed in the war itself. And then, when the orgy of destruction abated (including the slaughter of 60 million people) Keynes was once again called upon to provide a means of restarting production and capital accumulation, at Bretton Woods. And, lest we forget, that agreement broke down in crisis by the late 1960s.

What all this shows is that are no simple, state-led fixes to the recession we are now in and that leaving power in the hands of New Labour and their corporate/financial friends is a recipe for large-scale social disaster.

Gerry Gold
Economics editor

A Charter for Democracy

How to defend our rights but also secure them in a lasting way was the overall theme running through our Stand Up for Your Rights festival at the weekend. Dramas portraying the struggles of the Levellers of the 17th century and the Chartist movement of the mid-19th century attested to the fact that this is not a new question.

There is, however, plenty of evidence to indicate that new opportunities are rapidly emerging that could, if grasped, enable us to do complete the unfinished business of great movements for rights that form an essential part of our deliberately obscured revolutionary tradition.

A World to Win does not claim to have all the answers. That is why we work with others. But we know this:

• the existing capitalist state and the capitalist economic and financial system it presides over are in deep crisis.
• they cannot control the slide from recession to depression – the markets have spoken.
• neither the state nor the economic system can be reformed in any meaningful way.
• pressure and protest will provide the fuel and energy but cannot in themselves bring about the change we have to have.
• the state and the government are weak, desperate and discredited.
• they have actually lost any assumed right to rule over us.
• creating democratic people’s power in place of corporate power is not a long -term dream but the immediate issue before us.

We need a movement, a force of people that is irresistible, in order to achieve this goal. That is why at the festival we launched a Charter for Democracy. In June 1837, the East London Democratic Association passed a resolution proposed by George Harney that “their brethren of the working and productive classes” form similar associations as the “only rational means of obtaining universal suffrage” and “the overthrow of the monied tyrants who grind the sons of labour to the dust”. In that spirit, the Charter of 2008 says:

The existing system of government fails to represent the interests of the vast majority of people and is democratic in name only. Instead, the state’s primary purpose is to promote business interests at the expense of ordinary working people.

Under these conditions, our hard-won right to vote is undermined and the mass of people are effectively disenfranchised. As the global financial and economic disaster deepens, we refuse to pay for the crisis of capitalism through mass unemployment, repossession of homes, loss of pensions, tax and price rises and cuts in spending on vital services.

We therefore support the campaign for a republican Britain based on a written constitution that would:

• end the rule of political elites and bureaucracies and instead create new local, regional and national Assemblies, representing diverse communities and workplaces

• extend democracy through co-operative forms of ownership and workplace control of major corporations, enterprises and services

• establish social rights to housing, education, health, transport, training, employment, pensions and care in older age

• guarantee basic human rights to organise, strike, speak and act free from state surveillance and interference

• safeguard the civil and religious rights of minority communities and adopt a “no borders” approach to refugees and asylum seekers

• eliminate speculation and profit as the basis for society, ensuring that both ecological care and basic human needs shape production, consumption and lifestyles.

We will initiate, encourage and support all actions such as campaigns to stop repossessions, occupations of threatened workplaces and the rejection of higher fuel and transport charges.

To this end, we will work to establish local and national Conventions for Democracy to build support for the transfer of political and economic power to the majority.

We appeal to everyone to take part in this project for the Charter as a matter of priority. That’s the best way to stand up for our rights.


Paul Feldman
Communications editor

Time to cut the losses

In the last week, stock markets the world over have been showing the classic signs of bipolar disorder, but in the most concentrated form. Euphoric, manic, hysterical highs followed by the deepest depression. Much of it, say some of the commentators, is internally generated, the result of speculators feeding off each other’s panic.

But as everyone else knows, there are clear external causes. The soaring highs are the direct result of a renewed series of injections, by governments and central banks, of credit – the same stuff that the world’s financial system became addicted to and wholly dependent on during the “long boom”. It doesn’t help. Yesterday, the two largest Swiss banks UBS and Credit Suisse were obliged to seek new capital in a further attempt to prevent them turning into non-banks, ceasing to exist, becoming, as Monty Python had it, dead parrots. When the Swiss banks fall, there’s nowhere safe left for your money.

The stock market lows – a five-year retreat reached in the UK and back to the 1980s in Japan – are the result of an avalanche of indications that the recession is not only with us, but will last for years. Giant corporations are bankrupt, jobs falling off a cliff, house prices dropping like a stone. Even the price of oil has fallen back, as the speculators move their money elsewhere. China, which has powered the global economy, is cutting back and shutting down factories.

The Brown-led government, which has taken on the role of street-level pushers, are looking to raise the money that they are guaranteeing to the banks by issuing more debt to the investment markets. But there’s a limit to what can be raised. The rest will come from an assault on government spending, public services, the elimination of the legal guarantee for public sector pensions, and last but not least, any measures to deal with climate change – irrespective of Miliband the Younger’s pronouncement on an 80% emissions reduction by 2050.

Early signs of the brutal reality that will result came from the news that under Brown and Darling’s control, Northern Rock has been foreclosing, repossessing and evicting at double the rate of the rest of the industry. So much for the benefits of “nationalisation”.

Brown knows that the bankers’ bail-out won’t stop the rot, so he’s promoting a restructuring of the world’s economy, along the lines of the Bretton Woods arrangements that laid the basis for the post-war recovery and the boom years. The Financial Times says this is premature, adding:

“Lest we forget, Mr Brown himself was in charge of the IMF’s ministerial steering committee for a large part of the past decade and yet signally failed to implement the ideas he is parading. During this time, it was repeatedly explained to him that every early warning system devised by the finest minds in international economics, including those at the fund, either predicts crises that never arrive or misses those that do.” The paper of business is correct. The basis for restoring stability after a decade and a half of the Great Depression wasn’t Keynes’s proposals, but the massive destruction of surplus productive capacity and human lives during the second world war.

A much easier, less destructive way out of the mess would be to cut the losses, admit the capitalist system is bankrupt and make the transition to a new kind of economy altogether. One based on not-for-profit production, social ownership, self-management, planned production for need, distributed via an intelligent market informed by democratic processes and expressed preferences. That’s what we will be discussing tomorrow at the Stand Up for Your Rights festival. Be there!

Gerry Gold
Economics editor

Too much 'civilisation'

Nothing sums up the insanity of the capitalist system more than unemployment. Just think about it. People want to work; the means of production like offices, shops, factories, plant and equipment all exist; yet all of a sudden, workers are thrown on the dole.

People desperately need affordable housing, for example. Yet tens of thousands of building workers have lost their jobs this year, developments have been abandoned and stockpiles of bricks are growing. And so does homelessness. The causes are not difficult to establish and lie right at the heart of capitalism.

Developers and house builders can’t make a profit because house prices have soared beyond many people’s reach and sales have slumped; the banking system has seized up so there are no mortgages in any case; and levels of personal debt weigh like millstones on the population’s necks. So, no profit equals no building work equals unemployment.

While the bankers are bailed out to the tune of £37 billion – with taxpayers’ commitments possibly rising to £3 trillion – the people who actually do the work and create real wealth as opposed to fantasy finance, are discarded without as so much as a by your leave. No bail-out for them!

Long quotes from 19th century philosopher-revolutionaries can be a bit dry and seem remote from 21st century global capitalism. But when you read what Marx and Engels had to say in 1848 in the Communist Manifesto, you are struck by how fresh their summary of capitalist crisis is:

Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells. For many a decade past the history of industry and commerce is but the history of the revolt of modern productive forces against modern conditions of production, against the property relations that are the conditions for the existence of the bourgeois and of its rule.

It is enough to mention the commercial crises that by their periodical return put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of overproduction. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why?

Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce. The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of bourgeois society, endanger the existence of bourgeois property. The conditions of bourgeois society are too narrow to comprise the wealth created by them.

Brilliant! The productive forces are too powerful for the system of private ownership of the means of production. So they must be and are destroyed, jobs included. This what bringing “stability” back to the banking system actually means in practice. The case for reorganising society on co-operative, not-for-profit lines has never been stronger. That would give us the control over resources to keep people in work and meet basic needs like housing. Creating the means to turn the old order upside down is the immediate challenge.

Paul Feldman
AWTW communications editor

The state we are in

That capitalism today requires incredible, almost unimaginable levels of financial support and assistance from the state just to keep the system on life support in intensive care, is beyond dispute. What is also apparent is that both the state and the cap-in-hand former masters of the universe who run capitalism have fatally wounded the case for their own continuance.

What is the point of a state that is bankrupting the very same state in the interests of big business and the banks (the claim that his will help ordinary people is one of the great lies of the crisis)? In Britain, the £3,000 billion bail-out of the banks brings a whole range of tottering institutions right into the heart of the state. The money to buy up shares in fairly useless companies is, of course, going to be borrowed at interest.

No one is rating highly the chances of getting this money back. The economy is sliding deeper into recession, with today’s unemployment figures expected to show a steep rise; the capacity of ordinary people and companies to repay debts/mortgages/loans to the banks is ebbing away fast. As the major shareholder in several banks, what will the state do? Using its powers of force and coercion, the state will defend its interests in ways which today seem inconceivable.

Which brings us to the nature of the “state”. The takeover of the state by the banks over the last few weeks should leave no one in any doubt that this a capitalist state as opposed to a state in capitalist society (which reformists like to characterise it as). The capitalist state is not a neutral body which can become anti-capitalist under popular pressure.

Today’s British state exists primarily to uphold capitalist private property and ownership and to defend an economic system driven by profit accrued through the exploitation of human labour. When Gordon Brown says he will do “what it takes” to prop up the banking system, he means just that. That’s what presiding over the capitalist state is all about.

So, where does this leave us in political terms? Popular anger is growing against the bail-outs. On the BBC news forum dedicated to Bush’s sudden U-turn on the banks, Trevor Tinker writes: “The governments of the world reigned in human rights after 9-11. A few well organized religious fanatics killed several thousand people and affected the lives of several thousand more. The financial terrorists (read financial engineers) who's actions have affected millions if not billions around the world vaporizing savings and pushing people to despair if not suicide with their insatiable greed remain unpunished. When will we see a global witch hunt against the financial terrorists?” There are many more comments along similar lines.

While the Financial Times story “Undertakers deliver last rites for US capitalism” is good for a laugh, it is unfortunately not quite the case. The body is still breathing – and inflicting great damage in terms of unemployment, repossessions, inflation as well as state bankruptcy.

To halt this process and create a sane economic and financial system will require real power – state power. Establishing people’s power in place of corporate power leads directly to the creation of a truly democratic, transitional state in place of the existing capitalist state. Then, instead of bailing out bankers, society would be in a position to put people before profit. On Saturday, at our Stand Up for Your Rights festival, our new book, Unmasking the State – a rough guide to real democracy, will be on sale for the first time. It is a handy thing to have in these times!

Paul Feldman
AWTW Communications editor

The storm is just starting to blow

Gordon Brown is being feted as the “master of the universe”. Stock markets yesterday were delirious with joy, making record-breaking, stratospheric leaps yesterday as governments around the world bailed out the banks. Right-wing Tory newspapers joined in unalloyed praise for the bankers’ government.

Is the financial storm over then? Er, no actually.

So far, sums approaching £2,000 billion (= £2 trillion) of taxpayers’ money has been committed by the governments of America, the UK and Europe to the bankers’ bail-out. Central banks are pouring “unlimited” amounts of US dollars into the global financial system in what will prove yet another failed attempt to prevent the mother of all meltdowns.

How can we be so sure?

Yes, £2 trillion sounds a lot, but the collecting bucket is effectively bottomless. This unimaginably large sum of money is dwarfed by a series of other giant hot-air balloons of fantasy finance queuing to burst in the background whilst Brown’s Punch to the bankers’ Judy struts temporarily in the foreground.

Among the balloons is the market in credit default swaps (CDS), a way of trading in risk. It began life in the mid-1990s and, largely because it has always been unregulated, and appeared to offer the possibility of reducing, or at least sharing risk, it attracted a great deal of interest.

The simple version of the story goes that a swap enables an organisation making a loan to a customer to insure against the customer defaulting on payments by establishing a private contract with a third party, paying a kind of insurance premium. It can’t be called “insurance” because that would make it liable to regulation. You wouldn’t want to call it “protection” either. People might think you’re a gangster.

The market grew very fast. Most major organisations are now caught up with each other in a lacework of interconnected contracts. Ok, so how much are we talking about? It’s difficult to be precise, because all the trading is in unregulated contracts hidden from public view. Nobody really knows. Data from the International Swaps and Derivatives Association (!) show that at the end of June, the CDS market had a notional value of $54 trillion. That's the same as the planet's 2007 GDP and nearly four times the value of all shares traded on the New York Stock Exchange. Other estimates puts the figure nearer $65 trillion. So what is the chance of this particular balloon bursting? It already did. On Friday, Moneyweek put it like this:

“When one side of a trade defaults, it starts a chain reaction that raises the risk of others losing money. That's called 'counterparty risk', and is partly what has spooked investors into selling off assets and lenders into curbing credit. The collapse of Lehman Brothers has had a particularly big impact. Lehman wrote more than $700bn-worth of CDS. Now it's gone bust, investors who had taken out these CDS have been left without the insurance, so they're having to buy more, even though prices are now rising because of the general turmoil.”

Initial results of the auction to determine the value of CDS on Lehman Brothers showed banks, hedge funds and other sellers of protection facing losses in the area of 90.25% of the insurance they sold.

The CDS market is only 10% of the global derivatives market, which covers all contracts taken out to minimise risk. This is the mysterious, unregulated world of futures, forwards, options and swaps. According to the Bank for International Settlements, the notional amounts outstanding at the end of 2007 totalled about $550 trillion on contracts privately traded between parties. As the global recession deepens, the number of parties unable to fulfil contracts will grow rapidly.

Is the storm over? It’s only just beginning to blow!

Gerry Gold
Economics editor

'The worst is yet to come'

The emergency state bail-out today of Britain’s major banks to the tune of £37 billion marks the end of an era and is the clearest indication that the recession that prompted the global financial crash is already turning into economic depression.

Shortly before he became prime minister, in July 2007, Gordon Brown told bankers that the previous ten years has been a period “that history will record as the beginning of a new golden age for the City of London”. He praised bankers for being “pioneers of free trade” with a “deep and abiding belief in open markets”.

How times have changed! Over the weekend, the very same bankers were forced to go cap in hand to the state to try and stave off total collapse. But boosting banks’ capital assets with taxpayers’ billions will not save the banks from the globally economic tsunami that is building with each passing day. As recession turns to depression, the indebtedness of the banks will grow exponentially as ordinary people can’t pay their debts and businesses go broke.

What is ending is the era of corporate-driven, debt-fuelled globalisation. The consequence is not some slowdown but the destruction of large portions of capital created in this period, leading to a cycle of mass unemployment, sharp reductions in consumption, even more job losses and the wiping out of lenders when people/corporations can’t service their debts.

As one commentator observed: “Usually, a banking crisis follows some form of economic crisis: lenders are hit by wave after wave of customer bankruptcies until they themselves cannot take any more and topple over. This time, the banking collapse has preceded the recession… Instead, last week’s stock market rout marked the point when the usual direction of cause and effect was reversed: now it is the real economy that is expected to take its cue from the markets.”

The indications are all present. A slowing world economy has forced down the price of oil, while mining companies are in difficulties because China is importing less. General Motors, once the world’s largest carmaker, is one of several colossal companies on the verge of bankruptcy. It has already temporarily shut down its European factories to preserve its precious cash reserves.

In Britain, Keith McGregor, restructuring partner at Ernst & Young, said: "UK profit warnings continued to come thick and fast during the third quarter, crossing over the 100 mark once again. It is deeply concerning to think that the worst is almost certainly yet to come for UK corporates." It is predicted that 2 million people could lose their jobs by the end of the year.

Homelessness charity Shelter predicted last week that there will be around 45,000 repossessions this year, with one in 150 homeowners already three months or more behind on their mortgage repayments. The number of court orders for mortgage repossessions is 24% higher than last year. The number of homes being sold in Britain has fallen to its lowest level since 1959 in August. The new house-building sector has collapsed, with tens of thousands being laid off.

Under these conditions, for the state to take on the debts of the banks is not only a massive transfer of wealth to the private sector – it also focuses future risk on itself. The next stage could be a currency crisis as government debt spirals out of control. Britain could then easily face its own “Iceland moment” and state bankruptcy. As a result of today’s actions, national public debt is likely to exceed total national income. Tax increases and spending cuts are on the immediate horizon.

The crash of banks and other financial institutions is at the same time the failure of the capitalist economic system as a whole, whose thirst for profit-driven expansion at any cost has brought humanity to this point of disaster and catastrophe. This the fundamental issue we will address at our Stand Up for Your Rights festival this Saturday.


Paul Feldman
AWTW communications editor

From fantasy finance to economic crash

When corporations at the heart of American capitalism, Ford and General Motors, find themselves close to bankruptcy, there is no surer sign that financial mayhem is turning into economic disaster for the masses who actually work for a living rather than speculate with other people’s money and lives.

As Wall Street crashed (again) yesterday, the car giants found themselves in the eye of the storm, their shares valued at next to nothing. Sales have slumped as lending to consumers dries up. Both Detroit corporations had their credit ratings reduced to “junk”, making it impossible for them to borrow. Bankruptcy looms as the unthinkable becomes reality.
In Britain, the trade deficit between imports and exports is the biggest since the end of the 17th century. Paul Dales, UK economist at Capital Economics, said the data supported other evidence suggesting that Britain entered a recession in the past three months. Exports orders have fallen rapidly as the global economy goes into reverse.

So as finance ministers from the major economies began to gather for an emergency session in Washington, we had this admission from Alistair Darling yesterday: “The world economy is changing. Sticking with the solutions of the past is not an option. Now, more than ever, we need new ideas.” But this is the man who has been a willing, even fervent promoter of the no-alternative school which holds that global capitalism is the only game in town.

So all of their energy, as well as our savings, taxes, pensions, livelihoods, and council services, are devoted to the task of ensuring that the system survives. The “new idea” is that politicians pledge to work together to do “whatever it takes” to restore “stability”. The plan is that the bankers cash in and the rest of us take the pain. In that, all the major bourgeois parties are agreed in an outbreak of “bipartisanship”, which meant the House of Commons devoted an entire 19 minutes to the crisis yesterday. Democracy? It's a luxury at a time of national crisis.

Certainly there can be no effective action to prevent the descent into an unprecedented slump. And the market speculators know it, selling shares not just in banks but in retailers and manufacturers. The souring of relations between Britain and Iceland, with the government using anti-terror laws to freeze accounts, shows how the breakdown of the global financial system turns friends into enemies overnight.

We’re not alone in pointing out that following the 1929 Crash, it took a decade and a half of the Great Depression and the destruction of surplus productive capacity and tens of millions of human beings in a world war. Only then, could the 1944 Bretton Woods agreement establish the basis for restarting the process of profit making and capital accumulation.

The post-war period of growth induced by a controlled expansion of the money supply began to suffer a series of worsening setbacks and shocks from the end of the 1960s. Control had given way to uncontrolled inflation and the Bretton Woods arrangements broke down in 1971. This left the world prey to three and a half decades of naked credit-led growth. This produced global corporations and subservient governments which encouraged gross over-consumption.

It had to end. More and worse financial shocks reverberated around the world throughout the 1990s. The bursting of dot com bubble in 2000 was the writing on the wall. When the outpouring of commodities bought on credit overwhelmed the consumers’ ability to service their debts by 2004, the game was already up. (NB Chancellor Darling).

Darling says that “All forecasters, including the International Monetary Fund, have been surprised by the profound impact of this shock.” Not us, chum. We wrote about it in 2004 in our book A World to Win. And we continued to study it until, at the end of 2007, we published A House of Cards, with its prophetic sub-title, from fantasy finance to global crash.

But Darling is right about one thing, sticking to “solutions of the past” won’t do the trick. A revolutionary break with the past is needed in opposition to international plans for bailing out bankers while ordinary people suffer. We’ll be discussing our solutions on Saturday week, October 18, at the Stand Up for Your Rights festival. And, we can promise you, we won’t be talking about how to save the present financial and economic system.

Gerry Gold
Economics editor

End of an era

In a talk to black Londoners last night, American-born playwright Bonnie Greer remarked that we are witnessing the end of an era – the age of bling and its associated cultures. She is right. We have reached the end of the age of easy credit and growth-driven consumerism – along with all the illusions that went with it.

The ruling classes hope that the unprecedented £500 billion rescue package and interest rate cut announced by the New Labour government yesterday will stabilise the markets and prevent further gigantic meltdowns. But the biggest banking bail-out ever will certainly not prevent what the International Monetary Fund (IMF) describes as “a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s.” As the IMF’s chief economist has said: “The situation is exceptionally uncertain and subject to considerable downside risks.”

The bail-out may provide temporary relief and give Brown some political credibility. But underneath the hopes, everyone is aware that it is a short-term fix which relies on a confidence trick. In reality, bail-outs simultaneously create the basis for even greater defaults – that of entire governments. It is one thing for Iceland or Ireland to underwrite their banks, it is another for Britain or the US. They will also lead to tax increases, inflation and public spending cuts.

J.K Galbraith, historian of the 1929 Wall Street collapse, speculated in his famous book, The Great Crash, whether it would ever be repeated. He concluded that there was a built-in disconnect between a “regulated” form of capitalism and the reality of the markets. As all speculative bubbles have shown, there are no limits to corporate and individual greed, and the willingness of people to take risks. Events today have proved him right.

A crucial difference between 1929 and today, however, is that the forces of globalisation have made it impossible to localise capital or debt. Globalisation has drawn the world’s population together in an entirely new way. It is not an American, British or even Western crisis. The near-collapse of the US mortgage giants, Fannie Mae and Freddie Mac, meant that a fifth of China’s currency reserves were also endangered. In fact, China stands to lose more than any other country for a US financial collapse.

At least one financial journalist has noted the helplessness of governments around the world. Anthony Hilton of the Evening Standard remarked that “no one has ever seen anything like this before, so they are making it up as they go along. As a result much of what they have done so far has contributed to make things much worse.” Hilton proposes that the IMF should be enabled to deal with the crisis as a kind of “neutral” overseer. Governments unable to face financial meltdown on their own, would be backed up by “a global policeman” (Brown’s words). However, the resources of the IMF are puny in comparison with the estimated black hole of $45 trillion in fantasy finance which is haunting the US financial system alone. It is simply impossible for the IMF to stuff the genie of global debt back into the bottle.

People interviewed yesterday in the streets of London expressed their anger at being held responsible for a mess that they had not created. “Let those who made the mess clean it up”, was the reaction of one young worker. Let’s go a step further. Global capitalism’s seismic disarray can only be “cleaned up” by a democratic ownership and control of the financial and economic system itself. Let’s make this the dawn of a new era in which there is a real future for the majority.

Corinna Lotz
AWTW secretary

Banks bail-out is a con and a swindle

The £50 billion bail-out of the banks is a desperate act by a cornered government. Worse, it is a futile bid to shore up a capitalist financial system that is in meltdown precisely because of the actions of the very same people the money is being handed over to.

Christmas has come early for banks who, egged on by New Labour and the Tories before them, created a world of fantasy finance based on building and trading in debt. Now that the wheels have come off the financial merry-go-round, the banks have gone cap in hand to the state.

They have not been disappointed. New Labour, without any shred of democratic approval, is to buy shares in eight banks and building societies (the shares will have no voting rights attached) and make another £250 billion available through the Bank of England.

So the banks are being handed new capital so that they can pay off their creditors and cover bad debts over the coming years. In other words, other banks and lenders are the priority, not ordinary people’s savings and deposits. There’s no guarantee that any of this money will ever find its way back to the Treasury. In fact, as the global financial crisis worsens the likelihood of the banks staying afloat diminishes by the day.

Financial capitalists are the ones who benefit from this state-perpetrated con and swindle. While New Labour can find cash for the bankers, the rest of us have to suffer the consequences of a crisis not of our making:

* There’s no state bail-out for people losing their jobs.

* Repossessions and homelessness are growing but the state washes its hands.

* New cancer drugs are too “expensive”, so there’s no state funds for those.

* Fuel and energy prices have gone through the roof but surprise, surprise, New Labour won’t do anything.

* The cost of living is soaring but the government says workers have to accept below-inflation pay deals.

From the trade unions and Parliament there is a deafening silence, a cowardly acquiescence as New Labour makes bailing out capitalism its only mission in life. One of the few honourable exceptions is the MP John McDonnell, who rejected the rescue package, saying: “Pouring taxpayers money into bailing out the banks by recapitalisation without nationalisation will mean that ordinary taxpayers pay for the crisis caused by the mistakes and greed of the bankers. Nationalisation to control the banks, prevent repossessions and halt company closures is the only way to provide the security needed."

The question is, however: Who is to carry through public ownership of the banks? Certainly not New Labour! This is an out-and-out capitalist government, as events of the last few weeks have demonstrated for all to see, which is as bankrupt as the system it presides over.

And the crisis will deepen as the world of fantasy finance continues to unravel under its own momentum, driving the real economy into slump. The system is beyond bailing out, as the negative reaction of the US markets to the $800 billion toxic debt buy-up package approved by Congress shows. State insolvency has hit Iceland and the United States could be next in line.

The entire financial system has failed but that doesn’t mean that capitalism itself will simply walk off the stage of history. We need to create a new revolutionary politics in the course of building mass opposition to the New Labour government and its policies. There is an urgent need to work out a plan to reconstruct the financial system along new lines, refounding them as people’s banks. These would have no private shareholders and repudiate the toxic debts accumulated by reckless speculation. They would put social needs first and not be driven by profit.

Achieving this transformation is, of course, an immense task. Rejecting the bankers’ bail-out is an important first step. Taking part in AWTW's October 18 Stand Up for Your Rights festival would be a great second step!

Paul Feldman
AWTW Communications editor


Who Pays for the Credit Crunch?
Monday 13th October, 7.30pm
Committee Room 10, House of Commons
Organised by the Left Economic Advisory Panel

One law for the rich...

The global credit crisis provides unparalleled opportunities to expose not just the failure of capitalism as an economic and financial system but also to confront governments like New Labour that are desperately trying to keep the show on the road, whatever it takes.

Ordinary people in financial difficulties as a result of losing their jobs, rising loan charges or lack of credit are left to their own devices. They are at the mercy of the very same banks that are being lined up for a massive hand-out. Increasing numbers of people’s homes are being repossessed while the bankers form a queue for state aid. As the old proverb goes, it’s one law for the rich and another for the poor.

The financial meltdown thus has the merit of clearing the air in a political sense. Who can deny now that the New Labour government is a corporate and bankers’ regime, which is deploying the power and resources of the capitalist state to try and save the system from itself? Where are the differences in outlook between New Labour and other capitalist parties like the Tories or Liberal Democrats? You can use a microscope if you want, but you won’t discover anything significant.

In these circumstances, there is absolutely no point in focusing protest and pressure on the New Labour government in the hope that it may somehow, in some miraculous, semi-religious fashion, undergo a conversion and become anti-capitalist. New Labour is what it is and has been since the Blair/Brown/Mandelson counter-revolution that began in the early 1990s. In fact, the cabinet reshuffle has only strengthened its business orientation.

Of course, this situation throws up its own problems. The conventional political approach on the Left has always been to make demands of government, especially ones elected under a Labour banner. As such an approach is today absolutely unrealistic and may even unwittingly reinforce the fast-disappearing credibility of New Labour, a new line of attack is required.

The labour and trade union movement should therefore seize the chance created by the crisis to campaign against the government, in the spirit that workers fought the Callaghan government in 1978-9, whose policies opened the door for Thatcherism (and later, Blairism).

Such a campaign could easily show how the crash of 2008 arises from a system based on the ruthless pursuit of profit and that alternatives are urgently needed. Policies developed in opposition to a bankers’ bail-out would raise the possibility of reorganising the economy along not-for-profit lines. This could best be done by revisiting some well-established principles in the light of conditions transformed by corpoate-driven globalisation.

They could, for example, incorporate new forms of democratic power in opposition to the authoritarian, capitalist state. Democracy could and should be extended through co-operative forms of ownership and workplace control of major corporations, enterprises and services. Restoring the right to strike and freedom for trade unions along with new social rights would be essential. Those Labour MPs like John McDonnell who are opposed to the government, could seize the initiative and demand that trade union leaders adopt this strategy and mobilise their members.

As to who is to implement such a programme, this extremely important question will need to be raised as part of the building of an independent movement against this government and the other parties waiting in line to either take over or join a coalition. As New Labour is patently not the vehicle for revolutionary (or even reformist) change, new political solutions will be elaborated and discovered in the course of building support for the campaign. The importance of taking the first steps along this path cannot be over-emphasised.

Paul Feldman
Communications editor

Political crisis takes centre stage

The scale and spread of the historically unprecedented disintegration of the world’s financial system, and its impact on global markets is beyond the control of any one government. And now it is equally clear that no co-ordinated action is possible either.

Events of the last few days reveal how the financial and economic emergency is immediately being reflected in political turbulence. Iceland is set to become the first of many failed states to be added to the lengthening list of failed banks while the European Union’s “joint response” agreed on Saturday lasted less than 24 hours as Germany took unilateral action to guarantee 100% of all deposits.

This was chancellor Merkel’s panic reaction to the collapse of Hypo Real Estate, one of the country’s biggest mortgage and public sector lender. Germany and Austria joined Ireland and Greece in their attempts to prevent a proliferation of the queues that formed last year outside Northern Rock as people withdrew their savings.

In Britain, an embryo national government is taking shape, with all the major parties close to agreeing to hand over taxpayers’ money directly to bankers in return for not very much at all.

As the value of its currency melted away, Geir Haarde, Iceland’s prime minister, was trying to put together at least a partial rescue package for his country’s shattered banking sector. He asked the trade unions to bring back their pensions investments from overseas and to accept a wage freeze. Meanwhile, the Belgian government confirmed on Sunday it would sell the parts of Fortis which were not nationalised last week by the Dutch government to BNP Paribas, the French bank. Also on Sunday, the Italian bank UniCredit approved the raising of €6bn in new capital as it moved to shore up its defences against a sliding share price.

On Friday, the US administration scraped a yes vote for its wholly inadequate $700 billion bail-out plan for the banks only by privately threatening martial law as the likely alternative as the popular revolt grew. Stock markets continued to fall, because the traders know that there’s no way out of a deep recession. The richest state of all, California, is warning that it will run out of funds by the end of the month, unless the federal government comes up with some cash.

In Britain, Gordon Brown has handed responsibility for the economy to an emergency National Economic Council – which includes unelected executives of leading corporations. Among them is Sir John Bond, the former HSBC boss, who led the bank into billions of pounds of debt in America's sub-prime housing meltdown. Just the man you need. Also present will be Paul Myners, the new minister for the City. He is on the board of GLG Partners, which made huge profits by "short selling" shares in Bradford & Bingley, which collapsed last week.

The council meets today for the first time under the direction of the equally unaccountable and ennobled Peter Mandelson. Mandelson’s return to government is part of New Labour’s attempt to show that it is committed to saving capitalism at all costs. As fellow cabinet minister Ed Miliband put it on hearing the news: “I think British business will be thinking, actually, Peter Mandelson's a good person to be in charge of our interests in government."

Hundreds of millions of people are suddenly discovering that their lives are being turned upside down by the crisis. Anger is rising as they see governments trying to rescue the bankers, financiers, speculators and gamblers, doing “whatever it takes” to stabilise a failing system while jobs are lost, homes repossessed and standards of living plummet.

Rather than allowing New Labour to hand the economy to the capitalist corporations, the challenge is to create a new democratic politics, a movement that can replace the anarchic crisis-prone profit system with one based on planned production for need. AWTW’s Stand Up for Your Rights festival on October 18 is an important step in that direction.

Gerry Gold
Economics editor

Celtic Tiger defanged

With unemployment rising by over a third in the last year as recession bites in and with a national debt of €45 billion, the Irish government is guaranteeing the bank and building society deposits to the tune of a staggering €400 billion. That’s equivalent to €100,000 for each man, woman and child!

Just don’t call it nationalisation for heaven’s sake. it is merely a temporary measure to “restore balance to the economy” amid assertions that the banking system is still fundamentally sound. This aid guarantees the banks for just two years after which time they will have to pay it back and taxpayers will be remunerated, or so they say.

This emergency action by finance minster Brian Lenihan on behalf of the government is not original, it is not sensible and will probably be disastrous in the longer term. But such considerations have never stopped neo-liberal administrations from protecting the interests of profit-generating capitalist concerns in the past and they’re not stopping them now.

The €400 billion seems a vastly disproportionate amount of money, to put it mildly, for a country with a population of just over 4 million that, geographically speaking, would leave barely a ripple if it were to be dropped into Lake Michigan. But after a decade of burgeoning growth with property prices in particular being wildly over-valued, driven largely by lending institutions dishing out mortgages at several time the incomes of putative buyers, and with property developers and speculators given free rein to overheat the whole economic pot to such a degree that when the inevitable boiling point arrived, emergency temperature regulation seemed the only solution.

The Celtic Tiger is being defanged and it hurts. It all began when our old friend “sub prime” crashed the party last year and began to bring the festive house of cards tumbling down. But there’s worse to come because American investment in both the South and the North of Ireland is immense. So large scale withdrawal by U.S. corporations which is now more than likely, will help to send the place reeling back to the bad old days of recession and high unemployment.

Memories of the “bad old days” in Ireland are still fresh despite all the recent glitter, and behind the optimism there was always the niggling anxiety that all the fevered consumption and all the short-termism would somehow, some day have to be paid for. The days of reckoning appear to have arrived. Or maybe not, because after all money is flooding into Irish banks already. Investors large and small in Britain are moving their assets to the six large Irish financial houses now in the process of being shored up. But now Greece, not exactly an economic powerhouse, has joined the bail-out stampede and is also “guaranteeing” deposits!

Back in Ireland meanwhile, as unemployment continues to rise and living standards fall there is nowhere else to go, for that old spectre and saviour, emigration, is now no longer feasible. The ocean of bad debt, economic downturn and subsequent recession washing over the U.K and the U.S. has seen to that.

The mood has been stoical on the whole, but people are getting angry and finally waking up to the possibility that there must be other ways out of the debacle. Minds are being concentrated, so now is a time like no other for the left to rise to the challenge and point out clearly all the ways capitalism has served the many so badly for the benefit of the few, and to demonstrate the numerous alternative and lasting solutions that have been developed.

Fiona Harrington

Naive and dangerous

As the global credit crisis lurches out of control, you can always find some consolation if you look hard enough, especially if you are a Guardian columnist with words of advice for the political and financial élites who are allegedly in control.

Economics editor Larry Elliott believes that financial market mayhem makes the case for returning to some golden age of regulated capitalism and the policies of the economist Keynes, after which everything will be more or less just hunky dorry. Unfortunately for him, the globalisation of financial markets alongside transnational corporations make this scenario a pipe-dream.

But wait. Today, comment editor Seumas Milne sees hope for the future in the actions of the state in response to the convulsions in the global financial system. “What,” he writes, “last week seemed outlandish becomes today's common sense”. After rather stupidly attacking the Tories for being “irrelevant” (if only that were true!), Milne says the scope for “piecemeal interventions may be coming to an end”, adding:

“In particular, if the HBOS deal, the last rampart of a private solution, were to unravel, there is already speculation that wholesale nationalisation of banks could become unavoidable.” Milne, who likes to think himself as a man of the Left, is particularly infatuated with what’s going on in America, declaring: “When a US Republican treasury secretary comes up with a $700bn bank rescue package, the potential of what governments can do with political will is thrown into unusually sharp relief.”

So all that’s lacking is the “political will”? Milne’s touching faith in the state to provide the answers and solve the crisis is extremely dangerous as well as naïve. When he writes that “the battle has been won over the necessity of intervention”, he is reinforcing the illusion that the crisis can some how be brought under control by a set of rational actions drawn up by the Guardian.

This assumes that the state is actually capable of imposing some sort of order and that this in itself would be a good thing. All the evidence is that recession is turning to slump and the state can do nothing about it, except try to save capitalism from itself at the expense of jobs, homes and living standards. And lest Milne, who has a reputation as an apologist for Stalinism, has forgotten his history, we should remind him that when the capitalist state comes together with corporate and financial power it equals fascism.

We have a double bind. The mass of the people are disenfranchised because the major parties stand for the same thing. And the state is openly the plaything of big business and finance. So the challenge is to create a new democratic politics and state that can propose a sane economic system based on production for need and not profit. Working on that project would be more fruitful than expecting the capitalist state to somehow become progressive in the midst of the gravest crisis since the 1930s.

Paul Feldman
Communications editor

The 'bipartisan' fraud

“Bipartisanship” has broken out all over. Just as we are confronted with the gravest economic and financial crisis since the 1930s, politicians on both sides of the Atlantic have decided that politics is a luxury society cannot afford. Well, there’s a surprise.

In America, both major parties have come together to impose the $700 billion hand-out to bankers. Senators Obama and McCain are rushing back to Washington today to vote for the package that the House of Representatives rejected on Monday. In truth, neither presidential candidate really supports the Bush plan but “bipartisanship” will prevail.

In Britain, the Tories have offered support to the beleaguered New Labour government, with leader David Cameron making an emergency statement to his party’s conference, to say that “we are not playing politics with this”. He has offered to back legislation that the Brown government wants to introduce. The only problem is that Parliament isn’t sitting and no New Labour MP has demanded a recall to discuss the crisis. That, presumably, would be carrying “politics” too far.

The Tory Evening Standard has caught the political mood and declared last night: “This crisis is too big for politics.” The paper commented approvingly that Cameron had offered “a bipartisan (that word again) response to the crisis”. In practice, and without any recourse to the electorate, all this amounts to a national government. New Labour will, as Brown puts it, do “everything it takes” to save the financial system from collapse and the Tories are right behind the government.

This attempt to shut down conventional politics for the duration speaks volumes about the fraud of the existing political process. Politicians like Brown and Cameron, together with their parties, are tied in countless ways to the status quo of corporate and financial power. Their parties take turns in administering a capitalist state that is directed towards sustaining and developing the insane and irrational profit system that has produced the current crisis. Now they are trying to enrol the population in their attempts to save the financial system from itself at the expense of jobs, homes, pensions and savings.

New Labour and the Tories pass off responsibility for helping to create the conditions for the growth of fantasy finance which led to the credit crunch. Yet without their actions in reorganising the state, in deregulating finance and privatising state industries, in encouraging people to get rich quick through inflated house prices, in reducing the power of the trade unions, in promoting transnational corporations and the power of the City, none of what we are experiencing today would have been possible. But this is playing politics, when we know that it really is the time for bipartisanship.

As the political class clearly has nothing worthwhile to say and intends to dump the bankers’ crisis on our backs, they are inadvertently making out the case for their own demise. There are solutions to the crisis to be found through the development of alternative models of common ownership and democratic control that take us beyond the madhouse that is capitalism. Carrying that forward falls on movements like A World to Win and other organisations and has to lead to the creation of a politics that is vibrant and genuine in place of the “bipartisan” nonsense we are burdened with today.

Paul Feldman
Communications editor