Today’s forlorn protest by the TUC designed to put “pressure on chancellor George Osborne to change course” as he puts his final touches to next week’s budget will fall on deaf ears.
Prime minister Cameron last week insisted that the austerity programme would continue. It was brought in to deal with the spiralling increase in government debt which became unsustainable when the financial system crashed and recession followed.
The aim is to pass the burden of the debt on to backs of millions of ordinary people who have no say in government policy, not any influence on the contents of the budget.
Naturally, the austerity programme has failed. The debt has continued to soar as a result, claims Cameron, of external factors beyond the government’s control, like the ongoing crisis in
But the Office for Budget Responsibility also made clear that deep spending
cuts had contributed to the recession in the UK.
Despite extreme, unconventional measures taken by governments and central banks, the world economic system – aka global capitalism – shows no sign of recovering to anything like its pre-crash level. The sharp decline in
manufacturing reported yesterday is a case in point.
An almost covert, but massive devaluation of the pound has driven the cost of imports up but had minimal impact on exports. The Bank of England, unable to explain declining productivity, is abandoning its duty to keep inflation below 2%. By “looking through” the target, it is admitting that continuing with the attempt to slow price increases threatens to tip the economy into a new, more catastrophic slump.
Instead it will focus on its attempts to stimulate the economy, with low interest rates, issuing itself with the money to buy more government bonds and more lending. It is encouraging the government to do the same, even though the ConDems Funding for Lending scheme has flopped.
The BoE has floated the idea of negative interest rates, whilst those to the right of the ConDem coalition are pushing for even more stringent cuts. The Tory right want to intensify the current programme which, designed with absurdly optimistic expectations of a return to growth, is not even a third of the way through. People like Liam Fox have health and welfare budgets in their sights, combined with tax cuts. It’s all adding to the pressure on Cameron, whose political future looks less rosy by the day.
But the real story is that the recession is deepening, confirmed by the so-called “productivity puzzle”. The mystery is that productivity measured both by output per worker, and output per hour has fallen by as much as 14% since the crash.
The pre-budget report from the Institute for Fiscal Studies thinks it has an explanation. In a simplified form it is clear that in the wake of the crash, investment in capital goods has fallen because, with no sign of a return to growth, investors are holding on to their cash.
Wages have fallen as unemployment has risen, but unemployment hasn’t increased as much as might have been expected. Employers have forced wages down, turned to cheaper labour associated with part-time working and more labour intensive forms of production.
In summary then, the capitalist imperative of increasing productivity is operating in reverse. In terms that Marx might have used, the rate of exploitation of labour is increasing. And as the crisis worsens the impoverishment of the masses is certain to increase.
So the TUC’s shock headline figure, that within two years, almost 7.1m of the nation’s 13m youngsters will be in homes with incomes judged to be less than the minimum necessary for a decent standard of living, will prove to be a monstrous understatement. As for the TUC itself, fewer words and action against the government is needed if we are not to conclude that Congress House is actually a mausoleum.