Cost-of-living crisis about falling pay

Workers on low and middle incomes are experiencing the biggest decline in their living standards since reliable records began in the 19^th century. For the average worker, wages have fallen by £1,300 every year since the Coalition government took office in 2010.

But whether employed by public sector organisations or private companies, wage increases for ordinary workers have actually been on a declining path since the early years of this century. For those employed directly by the public sector, this general pattern is made worse by the government’s five-year pay freeze and cap, which union leaders have done nothing to oppose. As a result,  recent figures suggest that those working in the public sector are an average of £2,073 a year worse off than in 2010.

These stark findings on falling pay come from the New Economics Foundation, in a report commissioned by public sector union Unison.  It finds that falling pay has resulted in and compounds the worsening conditions of the low-paid:

• At least one in five workers in the UK economy earns low pay – too little to live on at £7.47 per hour or less, equivalent to £13,600 or less for someone working full-time.
• More than half of individuals, including children, living in poverty in the UK live in households where at least one adult is working.
• Low pay is a major problem in parts of public service. An estimated one million public service workers are on low pay, including health and social care workers, school staff and local authority employees.
• Growing numbers of public service employees are formally part of the private sector though paid for through taxes as outsourcing gathers pace. Evidence suggests that the shift from public to private can result in diminished pay and rights for workers with private sector discounting apparent for some occupations.
• Low pay is being compounded in the public services by the blight of zero hours in areas like social care.

As the report also shows, the proportion of low-paid workers (defined as those on 60% of the median income for the economy as a whole) rose from around 12% of the workforce in the mid-1970s to 20% by the mid-1990s, where it has stayed.  Moreover, the proportion of households which are poor despite having at least one working adult has been rising for a decade or more so that now in-work poverty outstrips poverty associated with worklessness.

What their figures show, but both the NEF and Unison ignore, is that low and falling wages are and have been essential to sustaining the economy throughout the credit-fuelled period of globalisation. And this applies whether we’re talking about the UK on its own, or as part of the world economy. The evidence from the UK is there to see in the report:

“Gross Domestic Product is the headline measure of benefits from economic activity. The two major components within this are compensation to employees (wages) and operating surplus (profits). Over the past 30 years the share of benefits received by workers in the form of wages has been falling. The wage share averaged 59% of Gross Domestic Product in the 1950s and 1960s and then peaked in the mid-1970s at 65.5%. From then it followed a gradually declining trend, reaching 53% by 2007. A temporary increase occurred in 2009 as the financial crisis hit business activity and profits but the share has since declined again to its 2007 level.”

So all One Nation Labour’s talk of a cost-of-living crisis disguises what has really taken place. There has been, and continues to be, a transfer of wealth from workers to employers in the shape of lower wages and higher profits. This has gone for decades, under successive governments and is the price workers are paying so that corporate-driven globalisation can sustain itself.

When the ConDems talk about austerity lasting into the distant future, this is what they mean. They are waging a one-sided class war while union leaders sit on their hand hoping that the election of a Labour government will improve their members’ prospects. Fat chance!

Gerry Gold

Economics editor

Memo to McCluskey: you can't fight the ConDems with hot air

The second wave of austerity without end, if not halted, will mean the end of many public services, a huge increase in unemployment and huge subsidies for big corporations so they can cash in on infrastructure projects.

A continuing massive transfer of wealth from taxpayers to the private sector is what lies at the heart of the ConDems’ latest budget cuts pencilled in for 2015-16. They are intended to commit the next government to the planned spending cuts.

There won’t be a problem for the Tories. And with Labour pledged to stand by the coalition’s cuts, it means that the general election scheduled for 2015 will be as meaningless as the 2010 one in terms of voter choice.

A vote for any of the mainstream parties will bring massive, sustained cuts in public spending on services provided by local councils, further real wage cuts as well as further attacks on welfare benefits. Your vote will count for very little indeed.

Ed Miliband’s party says it needs “time” to think about its response to chancellor Osborne’s decision to extend the time before unemployed people can lodge a claim to seven days. In other words, Labour supports it, as they do other benefit cuts.

The more you look at Osborne’s plans, the more astonishingly savage it all gets. To finance more roads, nuclear power stations and a railway project designed to favour shareholder dividends, the latest package - £11.5bn of spending cuts for 2015-16 – is in addition to what will have been five years of austerity.

It will lead to the sacking of another 144,000 public sector workers, delivers student debt into the hands of private sector specialists in extortion, ends pay rises for public sector workers and forces millions of unemployed and those in work but dependent on benefits into increased reliance on food banks and payday loans,

There will be a sell-off of publicly-owned land,  social housing rents will rise faster than inflation and vital services provided by local councils will simply cease to exist. And yet, the savagery does not begin to match the scale of the crisis facing capitalism in Britain and globally.

As revised figures revealed by the Office for National Statistics show, the sadistic scale of this new round of slashing cuts in government spending fails by light-years to match up to task set for the coalition by the 2007/8 crash and its aftermath, as  the spending review will have been based on earlier, much more optimistic estimates. The recession was deeper than thought. Compared with the 1997 to 2008 average, output is now 17.7% below that line.

The growth in output that the system requires to expand is simply not coming through. Instead, the crash continues to take its toll. With mountains of debt still in the system – with trillions added by central banks since 2007 through “quantitative easing” – worse is to come.

Institute for Fiscal Studies director Paul Johnson said the scale of cuts would have caused social unrest in any other era. "At almost any other moment in the past 60 years, announcements of spending cuts of this scale would have created a storm. As would an announcement that 144,000 public sector jobs would go in one year as part of a programme that could see one million jobs lost by 2017-18."

The absence of the “storm” that Johnson refers to is down entirely to the Labour and trade union leaders’ response – or should that be lack of one. Labour has effectively endorsed the government’s plans, including the singling out of benefit claimants.

As for the union leaders, it is hot air all round. Last week, Len McCluskey, general secretary of the Unite union, talking of making Britain “ungovernable” while TUC general secretary Francis O’Grady also made militant noises about resisting the ConDems. Well, Osborne’s new attack is a golden opportunity for them to make good on their rhetoric.

Don’t hold your breath. 

Gerry Gold and Paul Feldman

Separating rhetoric from reality over general strike call

Talk of a one-day general strike against ConDem policies is being floated, led by the Unite union. While any action against this most reactionary of governments is to be supported, we need to separate the rhetoric from reality.

Last September, the TUC Congress voted to investigate the legality of a general strike. Most legal opinion indicates that, given the scope of anti-union laws, all-out action would be deemed unlawful and challenged in the courts.

So a general strike would have to be in defiance of the draconian legislation introduced by the Thatcher government and upheld by New Labour. For over 30 years, the trade union bureaucracy has run absolutely scared of the laws that prohibit spontaneous strikes, solidarity action and mass picketing.  

Any defiance wouldn’t, naturally, have the support of Labour, which is heavily dependent on Unite’s money. A Labour spokesman said: “There is no consensus for a general strike across the trade union movement. Strikes should be a last resort, and we are not in favour of a general strike.”

The record of actual resistance to the ConDems’ austerity drive by trade union leaders is poor to non-existent. Apart from the civil servants’ PCS union, whose members are on strike again today, there has been no sustained challenge.

Unite and Unison have constantly thwarted strike plans against cuts in jobs and services at local council level. When the ConDems announced plans to reduce public service pensions, Unison general secretary said he had a “war chest” of £20 million to back strike action. In the end, the government went ahead with its plans with minimal opposition.

In a submission to the TUC, which meets later this month to discuss the issue, Unite says it  believes a 24-hour general strike "would be a landmark in our movement's recovery of its morale, strength and capacity to play a leading part in a society crying out for credible and honourable leadership".

But any general strike – even a one-day protest - is much more than that. It is a challenge to the state and its power, its authority and legitimacy.  

You can be sure that the ConDem coalition will meet any challenge in the spirit of Stanley Baldwin, the Tory prime minister at the time of the historic 1926 general strike. He famously declared: “Constitutional government is being attacked… the General Strike is a challenge to Parliament and is the road to anarchy and ruin.”

The TUC had threatened a General Strike as a negotiating tactic to try and prevent a cut in miners’ pay and a lengthening of their working day. But their bluff was called and the strike got under way without any serious preparation.The army and the police were mobilised and strike-breakers recruited.

TUC leaders quickly entered into secret negotiations and the indefinite general strike was called off after nine days, with the miners abandoned to their fate.

In 1926, between 400 and 500 Councils of Action emerged in the course of the general strike. Made up of strikers and their supporters, they took responsibility for co-ordinating the strike, propaganda, communications, transport, entertainment, picketing and the delivery of food. They represented, in effect, the emergence of potentially alternative sites of power to the state at local level.

A showdown is coming with the ConDem government and the state as justified grievances over a pay freeze, spending cuts, the break-up of the NHS and the attack on the welfare state, come together.

Instead of waiting for union leaders to get serious, trade unionists and their supporters ought to prepare for confrontation now. They should create People’s Assemblies in each area, bringing together trade unionists, the unemployed, private sector workers, older people, campaign groups, small businesses, students, black and ethnic minority communities and everyone in the firing line.

Assemblies can do what the union leaders won’t – take seriously the implications of a general strike and the question of who rules Britain. They can plan for a transfer of political and economic power away from a ruinous capitalist elite and their lapdog politicians into the hands of ordinary people. In other words, going beyond resistance.

Paul Feldman

Communications editor

Resistance by Cypriots deepens eurozone crisis

The deepening crisis in Cyprus, where every single MP voted against plans to steal a portion of people’s savings, has thrown eurozone leaders into turmoil. Clearly the snail pace of parliamentary processes forcing through austerity is proving too slow for Europe’s ruling elites.

Cypriot MPs effectively rejecting the blackmail letter drawn up by Berlin and sent via the dreaded Troika of European Union, European Central Bank and the International Monetary Fund. 

Buoyed up by the huge anger uniting its people and to everyone’s surprise, not even the MPs of the right-wing government voted in favour of the ‘deal’ which would have seen the EU dipping its hands into every bank account to extract 10% of any money they can find.

In saying ‘No’, the MPs joined the growing resistance across Europe – from Italy, to Spain and Greece – to austerity measures that are designed to rescue a capitalist system that is drowning in debt.

The attack on savings – while leaving bank creditors out of the frame – is a new tactic designed to extract tribute for the sovereign debt monster affecting so many countries blown up in the wake of the Great Global Crash of 2007-8.

Even the Church of Cyprus’ Archbishop Chrysostomos is with the opposition, at least for the moment: "The entire wealth of the Church is at the disposal of the country ... so that we can stand on our own two feet and not on those of foreigners." The church is a major shareholder in Cyprus's third-largest domestic lender, Hellenic Bank

Banks and the stock market remain closed. No one knows when (or should that be if?) they will reopen. The 1.1 million population of the small island, as well as the bevy of foreign tax-avoiders are denied access to their funds. But the threat of a Europe-wide bank run contagion is very real. People everywhere are eyeing up the security of their savings. Those that have any.

The fragile peace engineered by the co-conspirators of the Troika in the form of a Europe-wide banking union has been shattered. In a sign of nervousness in other eurozone countries, Spain’s finance minister declared savings accounts in his country

“sacred”, adding Cyprus was “special and unique”. Wishful thinking.

But as Cypriot finance minister Michael Sarris flew to Moscow seeking help, much to the consternation of EU officials, the problems mounted. Even if Russia granted an extension of an existing loan and reduced the interest rate, it wouldn’t make a difference. Cyprus may even offer newly-discovered gas resources could also be on offer.

Wolfgang Schäuble, German finance minister, is insisting that the Troika’s plan prevails.

After the vote in Cyprus, he said: “Cyprus is living with a banking sector with low taxes and favourable laws that is completely overdrawn and that makes Cyprus bankrupt. This business model is not sustainable.”

With the two big Cypriot banks living off emergency liquidity from the central bank, the real possibility is that the country will be ejected from the euro, plunging the single currency into a downward spiral.

Cyprus is part of a growing global contagion which austerity policies have deepened,

Inflation is rising just as manufacturing is declining. With only the faintest signs of life in the US economy, investors have now begun to assess the likelihood - and catastrophic consequences - of an end to the years of historically low interest rates.

Ben Bernanke, chairman of the US Federal Reserve ominously began a speech with these words: ‘Why are long-term interest rates so low in the United States and in other major industrial countries?’ Later today, he’s expected to give his views on the end of quantitative easing.

With these new developments in an increasingly desperate situation, our attention must turn from just resisting austerity to replacing the bankrupt system altogether. A global network of peoples’ assemblies has to take control of the banks and the financial networks. Then they could be converted into a democratically run not-for-profit service to co-operative enterprises producing for need.  

Gerry Gold

Economics editor

The politics of increasingly small differences

It’s reached the point where you need a high-powered microscope to detect the differences between the major political parties. If there are any, they are at sub-atomic level as the much-heralded speech on the economy by Ed Miliband demonstrates.

The economy is in crisis, in its deepest recession since the 1930s. People have stopped spending because they don’t have the money. Retail sales fell last month and not just because of the bad weather.

Most ordinary people are either repaying debts or simply don’t have the income. If you have a job, your wages are falling in real terms; if you’re unemployed your benefits are miserly and also declining.

ConDem austerity policies have made a bad thing worse. But then they are also caught up in the crisis not just of the British economy but of the global capitalist system. Yesterday Germany and France reported deep contractions in their economies, for example.

Corporations are ripping off the taxpayer while the privatised utilities, rail networks and supermarkets are banging up prices like there is no tomorrow. Meanwhile, the supermarkets have never bothered to check whether beef is actually horsemeat. 

People are angry, fed up and increasingly desperate for a solution.

Enter the Labour leader Miliband. Did he promise a cut in train fares, control of soaring private rents or a return of gas and electricity to public ownership? Did he hell! All he came up with was the return of a 10p tax rate for the low paid scrapped by the previous Labour government and a so-called “mansion tax”.

The Tories are thinking of introducing the tax rate and the Liberal Democrats are in favour of the mansion tax. So forgive me for declaring Miliband’s speech to be a prime example of the politics of small differences. As The Independent noted:

What was striking was the overlap with either existing Coalition plans or proposals from one or other of its members. Even the repeated references to “working people” sounded suspiciously similar to the Tory pre-occupation with “strivers”.

It’s not as if the sums even add up. A 10p tax rate for low earners would cost the Treasury about £7 billion. The best estimates for the revenue for a tax on high value homes is £2 billion, according to experts at the Institute for Fiscal Studies (IFS), which noted:

"To have observed lower starting rates of tax being introduced and abolished by governments of both complexions over the last three decades and then to propose the same thing again suggests a remarkable failure to learn from history." The same aims, the IFS added, could be achieved by increasing personal tax allowances.

On the mansion tax proposals, the IFS described the idea as a bandage over the regressive council tax system which under-taxes valuable properties. "Rather than adding a mansion tax on top of an unreformed and deficient council tax, it would be better to reform council tax itself to make it proportional to current property values," the think tank said.

Perhaps Labour will abandon the mansion tax proposal –  which is widely viewed as a bid to cosy up to the Liberal Democrats in case the next election is a stalemate – when it realises that several of its MPs will be in the firing line.

David Miliband’s home is in the £2 million-plus bracket which Labour intends to use as a benchmark. So is deputy leader Harriet Harman’s home in Herne Hill, south London, which she bought with a cheap mortgage provided by her husband’s union (she also has another home in Suffolk).

And then there is the wealthy Labour MP for Feltham and Heston, Seema Malhotra who won a by-election in the relatively poor West London constituency. The market value of her home in fashionable Chelsea is reputedly over £3 million.

Finally, there is Ed himself. He lives in a house, in the name of his wife, which is valued at up to £2.3 million – a rise of £700,000 in the three years since it was purchased. Yes, they are all in it together. One big ConDemLab nation.

Paul Feldman

Communications editor

Worsening economy behind Coalition crisis

All the indications are that the British and European economies have now been drawn into the deepening contraction of global capitalism:

•   The Bank of England today slashed its forecast for UK economic growth in 2012 to zero from its May estimate of 0.8%.  Governor Sir Mervyn King said recovery hopes had consistently been dashed.
•   Last night, S&P cut Greece's outlook to from “stable” to “negative”. The ratings agency said the economy in the already crisis-hit nation was worsening.
•   The Banque de France, the country’s central bank, said that its preliminary figures show that gross domestic product will be down 0.1% in the third quarter, which ends on September 30. The bank had already predicted that GDP would fall the same amount in the second quarter.
•   German exports slowed by a more than expected 1.5% in June. Imports dropped 3%, against a 2% prediction.

The Cameron-Clegg Coalition’s current austerity programme of spending cuts and tax increases was based upon an unrealistic expectation of growth, which has now been replaced by the certainty of its opposite. This – and the crisis within the Coalition itself, spurred by the virulently anti-Cameron Old Tories - underlies the sharpening of tensions as the Tories abandon plans for reform of the House of Lords to focus attention on the economy.

As BBC economist Stephanie Flanders puts it, we are experiencing: “ by some measures “the worst four-year period for the UK, outside wartime, in at least 100 years - worse than what happened in the 1920s and 1930s, and worse than anything in the 1970s and 1980s”.

People in the UK face the same challenges as the rest of Europe in battling assaults on public services, jobs, pensions and benefits and the loss of their homes. Amongst the worst-hit countries is Spain, where unemployment amongst young people stands at around 50%. In Greece, the Orthodox Church has set up emergency feeding centres for hundreds of thousands of people who have lost everything. They include formerly well-paid professionals – architects, engineers, information technology specialists who hardly know what has hit them.

The contraction means demand is dropping fast, so exports, imports and production must follow. Government revenues from tax continue to drop, so “unaffordable” public services have to broken up and those parts that can be made profitable handed to the private sector. Then, as the spiral of recession deepens, comes the competitive elimination of surplus productive capacity – the mothballing of factories, boom-year housing estates left empty, infrastructure left to decline and rot, millions upon millions of people driven from their jobs and homes, left without food, abandoned to their fate.

In country after country people have protested, marched and even occupied workplaces.  The Trade Union Congress in Britain is calling for another demonstration in October. But the experience of its last national anti-austerity protest in the spring of 2011 showed that it changed not a whit of the Coalition’s policies. 

Thus resistance must be transformed into preparations to replace the broken system of capitalist social relations dominated by the giant global corporations. It is these which have undermined the legitimacy of the state and hollowed out the old forms of parliamentary democracy.

New forms of fully inclusive, participatory, direct and representative democracy are needed. They can learn from the experiences of those who’ve worked in not-for-profit institutions like the National Health Service, housing, education and social services as well as the workers’ co-operatives, credit unions, food coops and community shops that have spread around the world as people try to protect themselves against the worst effects of the crisis. These need to go further to develop policies and strategies to replace capitalist social relations.

A World to Win believes that a global network of People’s Assemblies can provide this framework. You’re invited to join the discussion at http://aworldtowin.ning.com/

Gerry Gold

Economics editor

'Going for growth' will bring new attacks

If Europe’s voters think “austerity” is bad for their health, it’s nothing compared to what some of the advocates of “growth” have in mind as the next stage of the crisis unfolds.

People like Mario Draghi, president of the European Central Bank, know all too well that providing trillions of euros in cheap loans to banks has not led to increased lending.

The eurozone is firmly in recession so plan B is on the agenda. As far as Draghi is concerned, the aim is “structural reforms” like “labour-market flexibility” and increased competitiveness through speed up and lower wages.

In other words, living standards have to be driven down faster and further for there to be any chance of the eurozone coming out of recession.

What Draghi’s plan confirms is that the crisis has entered a new, more dangerous phase - economically and politically. The deadlock is absolutely clear in Greece.

The rejection of the draconian EU-IMF bail-out terms in the Greek election cannot be satisfied by any political deals amongst the minority left parties. Demands by Alexis Tsipras, leader of the Syriza party to tear up the deal cannot be met because the global capitalist economy is imploding.

Some like to say that “austerity isn’t working” and should be abandoned in favour of growth. The Guardian’s Seamus Milne remarks: “Cutting jobs and pay while increasing taxes isn't reducing borrowing and debt, let alone leading to economic recovery. It's deepening recession, increasing debt and destroying jobs and squeezing living standards across the eurozone – in countries such as Spain and Greece, catastrophically – as well as in Britain.”

This is stating the blindingly obvious but ignores a salient fact. Forced to contract by its own logic, capitalism is beyond the control of any political initiative that leaves the system intact.

The reality is “going for growth” just means moving to the next stage of a brutal contraction that will see workers sacked, factories closed, shutting down unprofitable production, driving up rates of exploitation.

New measures by the Con Dem coalition in the Queen’s speech like reducing public sector pensions and making it easier to sack workers, are part of this process.

The scale of what has to come if the current system is to survive is too terrible to contemplate. Attention must now turn to the means by which a new system can be created.

The interdependence of politics and economics rules out talk of a new direction for the economic system without a new political arrangement that removes the power of global corporations to dictate to governments.

Seismic shifts in electoral results in Europe follow on from mass movements in North Africa and the Middle East which have toppled regimes that ruled throughout the latter part of the twentieth century.

With unemployment soaring, anger cannot be contained and will explode on the streets  throughout Europe in the coming months.     

Replacing a bankrupt for-profit system with new forms of common ownership can only be carried out by new political formations, not co-existing with the world of capitalist corporations and global financial institutions, but challenging and replacing them.  

People’s assemblies, where everyone participates in the decision-making, can take the place of a five-yearly cycle of voting for representatives who immediately become subjects of capital.

A global network of people’s assemblies can establish democratic control over the financial and productive resources of the world, protecting them against the threat of destruction, turning them to the satisfaction of need. 

We should not ignore the other message from Greece, where an openly fascist party won 20 seats in parliament. People’s assemblies have to become the future shape of democracy because the old political order is crumbling but does not intend to go quietly.

Gerry Gold

Economics editor 

The real looters

The coalition government has placed an emergency army battalion on standby and is considering authorising the use of water cannon and tear gas to quell disorder and looting around the country.

But the threat of a mailed fist is a desperate response to an out-of-control social and political crisis. It cannot possibly solve the deeper issues that lie behind the anger and contempt for authority seen in British cities since Saturday night.

The looting of sportswear and plasma screens from high street shops shrinks to insignificance in comparison with the havoc wreaked in the global economy by those in charge. The hard men and women who have come to the aid of the ailing capitalist system have their own economic wrecking ball.

Governments in the United States, Europe and elsewhere have sought to resuscitate growth and bring about a recovery of production following the 2007/8 credit collapse. But their attempts have precipitated a new, far deeper crisis as the debt tsunami engulfs the world’s richest nations.

The truth now emerging is that a return to profitable growth is impossible without imposing equally impossible intolerable conditions of exploitation. ‘Austerity’ doesn’t even begin to describe what must follow if capitalist society is to survive.

It’s not only government cuts that will hurt people. Over the last seven days alone, £200 billion was wiped from the market - and about £300 billion in the past month, drastically reducing people’s pensions and savings.

The United States, still the world’s biggest economy, is no longer able to inspire confidence in the global financial markets. On Friday it experienced a humiliating downgrading of its debt. Standard and Poor, one of the credit rating agencies which speak for the gamblers, speculators - so-called ‘investors’ - whose interests seem all-powerful today, expressed their contempt for the outcome of the US political process and are driving the crisis into a new, more dangerous stage.

President Obama whistled in the dark when he responded on Monday to the historic downgrade of US debt. “No matter what some agency may say, we have always been and always will be a triple-A country,” said the President, as he tried to reassure the investors whose power commands governments.

But whether or not Obama believed that his words could unite the warring factions amongst Democrats and Republicans into accepting his demand for slashing cuts to Medicare and tax increases, they failed to halt the world’s stock markets plunging into the darkness.

The Federal Reserve’s despairing decision to hold interest rates at historic lows for two years cannot restore the US economy any more than it has in the UK in the last two years or in Japan in the last decade. The towering edifice of fantasy credit and debt has to be eliminated, and as a consequence the capitalist economy will contract. Surplus productive capacity has to be physically destroyed.

The nature of the capitalist system is the heart of this crisis – a system first revealed around 150 years ago when Karl Marx published the first volume of Das Kapital, his analysis of the capitalist mode of production.

The words of a critic were incorporated into an afterword to the second German edition in 1873. “The scientific value of such an inquiry” he said “ lies in 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. And it is this value that, in point of fact, Marx’s book has.”

Resolving the current crisis by replacing the present system with a democratised economic and political form of society is on the order of the day.

Gerry Gold

A World to Win economics editor