Rating agencies tighten the screw

Moody’s has joined other credit rating agencies in downgrading its assessments for France and Spain when it comes to repaying loans. What logic is unfolding here?

The full name of the credit rating agency – Moody’s Investors Service – says it all. The analysis these agencies make and the actions they take are intended to assist those with money to magnify the value of their investments.

Over the last few months, as the crisis has deepened, the significance of Moody’s and the small number of other similar agencies has grown and grown.

In many ways they provide the information needed to allow the operation of the free market, advising investors on the credit-worthiness of borrowers, and helping borrowers to improve their attractiveness to lenders.

Informed investors profit from crisis, as they speculate against future market prices for shares and bonds.

Moody’s cut in Spain’s rating and its warning to France measures the deterioration in conditions in those countries as the recession exposes the weakness of the banks.

The downgraded ratings don’t just measure, however. They have a dual role. They are intended as a direct intimidation to those countries’ governments (and to all the others who are next in firing line).

Unless you take action to ensure that you overcome your difficulties in making these payments, the increased cost of borrowing more will make life impossibly difficult. It’s the classic money lenders’ threat.

The objective conditions that provide evidence for the downgrade are slowing growth, and accelerating recession leading to falling tax revenues which, in turn, make it more and more difficult for governments to make the interest payments due on the money they’ve borrowed.

So the rating cut also translates into a more severe assault on the lives of the people who live in the countries affected. The news about Spain and France came just as trades unions in Greece prepared for a 48 hour strike supported by the burgeoning network of new organisations that have formed to fight the impact of the mounting attacks on living standards.

For governments subservient to the capitalist economy, like the ‘socialist’ Pasok in Greece, cuts are not optional.

For the millions of people whose wages and pensions are melting away, whose jobs are being destroyed, health, education and social support systems being swept from under their feet, fighting the cuts is not optional either.

What resolution can there be to these opposite interests?

Strikes, protests, demonstrations, occupations are all now everyday events. Last Saturday’s occupation of towns and cities throughout the world is an important part of the answer to Moody’s symbolic measure of the power of capital.

But only a part. The regulation of finance demanded by many protestors is not an option for capital either.

This is an epochal moment providing both the necessity and opportunity to replace the rule of capital.

Those who claim to the know, like Mervyn King, governor of the Bank of England, are warning that “time is running out” for the global capitalist economy and that even dealing with Greece and the eurozone crisis will not provide the “solution”.

He is right there. The capitalist system has plunged into an irreversible crisis in which the only answer for the ruling classes is to punish the overwhelming majority through an unprecedented assault on living standards, services, job and right.

In all the temporary and permanent occupations of towns and cities, the question to be raised is not how to better manage capitalist society but how to achieve the democratic ownership and control of the banks, the factories, the mines and the supermarkets.

Gerry Gold

Economics editor

Resistance grows as crisis deepens

Suddenly, as if from nowhere, a wave of opposition is engulfing Europe. Workers are joining a wave of action which threatens to bring the continent to a standstill as they try to resist being made to bear the costs of the deepening global crisis.

Today in Greece more than three million public and private sector workers embark on a 24-hour walkout in response to the latest austerity measures announced by the PASOK government. Employees in government ministries, municipal offices, hospitals, schools, universities, banks, courts and factory workers are among those set to strike. Rail, road, sea and air transport across the country will be affected. With journalists expected to join the strike, a virtual news blackout is expected.

Yesterday, Spain’s debt-laden Socialist government faced the first mass protests by unions in its six years in power as anger over a plan to raise the retirement age spilled into the streets. The country's two largest unions, the UGT and the CCOO, called demonstrations in several major cities, including Madrid, Barcelona and Valencia. Further protests are planned in the rest of the country up until March 6 against the plan announced last month by the government of Prime Minister Jose Luis Rodriguez Zapatero to raise the legal retirement age from 65 to 67.

Greeks and Spaniards are joining action by airline staff from Air-France-KLM, Lufthansa, and British Airways, French refinery workers and air-traffic controllers, pilots in the Welsh oil port of Milford Haven, IT staff contracted to the BBC, and gallery attendants at the National Gallery in London to name just a few.

After years of declining membership, the question for trades unionists is this: what can they hope to achieve using the methods available to them? Certainly they remain strong and effective in some key industries, but how can they expect to resist the inevitable dive into recession?

The global economy is entering a period of capital destruction. The effects of the financial stimulus packages, unprecedented outside of war, are fading and all hopes of recovery are slipping away.

The private sector assault on jobs, wages and pensions is accelerating. The deepening global crisis is co-ordinating the actions of the hedge fund managers, currency speculators, and market traders. Together with the International Monetary Fund, the Bank for International Settlements and other global agencies they are launching an assault on capitalist governments, forcing them to introduce austerity programs which will see public services dismantled and benefits eliminated in the attempt to avoid payment defaults on mounting debt leading to state bankruptcy.

The capitalist system of production is in a mortal crisis. The measures needed for its survival, to enable it to continue extracting value from the workers employed by for-profit corporations, are driving the transnational capitalist class into open confrontation.

Workers in trade unions must work together with those who are yet to be organised. They must forge and strengthen international connections. Preparations must be made to strengthen defensive strategies comprising strikes, demonstrations and occupations.

These alone will, however, be insufficient to protect living conditions in the months ahead as employers and governments turn to the forces of the state to protect the interests of private property, capital accumulation and the law-governed right and necessity to turn a profit.

This sudden burst of strikes and protests marks a qualitative change presaging revolutionary confrontations. In our draft Manifesto of Revolutionary Solutions we offer a vision of an alternative, democratically-run, not-for profit society, and an outline of the kind of organisation needed to bring it about.

Gerry Gold
Economics editor