The economy is in such a steep decline that the top global corporations are now feeling the impact. The collapse of consumer demand is cutting the ground from under giants like Sony, which expects a record $2.9 billion annual operating loss, and Microsoft which is cutting 5,000 jobs worldwide – about 5% of its estimated 96,000 employees – and refusing to make a forecast of future profitability.
With the news that December car production by global manufacturers operating in the UK declined to barely half of its 2007 level, the Society of Motor Manufacturers is looking for government support to sustain “valuable industrial capability during this exceptionally difficult period”. This is a hardly veiled threat to cease production altogether following Honda’s doubling of its two month Christmas shutdown.
Some market watchers are at last beginning to appreciate the scale of the problem in the economy beyond the financial markets. "It is pretty bad when things are deteriorating so fast that even the largest companies in the world don't know how rapidly it is happening," said analyst Katherine Egbert. "We are certainly in the midst of a once-in-a-lifetime set of economic conditions," according to Microsoft’s chief executive Steve Ballmer. "The economy is resetting to a lower level" of spending, he said, adding that he did not expect a quick economic rebound.
A UK survey of 100 major private sector employers reveals the toll that the crisis is taking on company pension schemes. The bursting of the credit balloon has driven the collective deficit of the UK's final salary pension schemes up to £195bn in December, and 25 of the 100 will act soon to end the schemes for current contributors, thereby abandoning the companies’ responsibilities for their employees’ future.
The Pension Protection Fund said the deficit rose by 43% from the £136bn recorded at the end of November. The deterioration in pension finance has been largely due to the international credit crunch, the worldwide economic slowdown and the accompanying slump in share prices. In other words, the value of private sector pensions has simply blown away. Those who manage to hold on to their jobs until retirement age in the UK will have nothing to live on beyond what the state offers, which is now the worst in Europe.
January 2009 marks 100 years since Lloyd George, Chancellor of the Exchequer under the Liberal government led by Herbert Asquith, paid the first UK state pensions. Lloyd George was influenced by the ideas of Tom Paine and especially his book The Rights of Man published in 1791. Paine strongly recommended progressive taxation, family allowances, old age pensions, maternity grants (as well as the abolition of the House of Lords and the creation of a democratic republic).
The 21st century deepening global financial and economic disaster demands a renewal of Paine’s ideas in a radically fresh context. Paine’s ideas were ultimately incorporated into most bourgeois democratic states and economies. Now the state cannot deliver a basic standard of living for older citizens, and companies are destroying workers’ pensions. A transfer of political and economic power along the lines advocated in our People’s Charter for Democracy is where we should begin.