March for a real alternative

Figures published on the eve of the Budget shed more light on an unrelenting global crisis that pays little or no attention to chancellor Osborne, or to his shadow-boxing “critics” at the Trades Union Congress.

Ever since the TUC announced its March for the Alternative way back in October, it has been promoting the slogan – “Jobs, Growth, Justice”. In practice, it's no alternative at all.

To back up its central plea for growth, the TUC has been arguing that spending cuts announced last October and being implemented around the country by Labour and Tory councils alike, are just not necessary. They are simply part of a conspiracy by the government to favour the bankers who are really the culprits and should be made to pay the cost of the yawning deficit.

This simplistic, muddle-headed “analysis” has, unfortunately, been picked up and broadcast onwards by people engaged in the most radical of actions. As one student in a college occupation said: “There are real alternatives to the problems facing higher education funding ... what we are seeing are ideological political choices, not necessities… It is the public sector, including students and lecturers, who are being made to pay, not the overzealous banking system who caused many problems that the country is now dealing with.”

At the heart of it all is a global crisis of capitalism, however, not just a bunch of crazed bankers who got out of hand. This can’t be sorted by pumping more money into the economy and can make even matters worse, as figures from the Office for National Statistics show. The injection of massive doses of credit to shock the stopped heart of global capital back to life after 2008 has at best put the economy back on the accelerating inflationary path it has been following for more than 10 years, whilst gross domestic product – the key measure of growth – has failed to recover.

The Consumer Prices Index annual rate of inflation has risen to 4.4%, while a more realistic index shows a rate of price increases of 5.5%. All the essentials are soaring: clothing, footwear, food and fuel. Diesel prices have passed 140 pence per litre at the pump in some areas. Clearly much worse is to come as events in the Middle East unfold.

The combined effect of the crisis and actions by governments has been to reduce the incomes of households in the UK. The real income of those in the middle of the income distribution will be 1.6% lower in 2011 than it was in 2008, wiping out all the gains made in the previous 50 years. Pensioner households saw their average income fall even further, by 2.4%. As Stephanie Flanders, the BBC’s economics editor has it, for most people “the recovery has been more painful so far than the recession”.

All the analysts agree on one thing: Osborne has little room for manoeuvre. So we’re likely to see plans to revive the Wild West-style low tax, low regulation, low-wage economy of enterprise zone of the 1980s. It's desperate stuff from a cornered government that, however, knows it faces little official opposition in Parliament or from the TUC.

This isn’t a peculiarly British phenomenon that can be fixed with more credit, or even by changing the government. The TUC’s policies of more taxes and higher public spending wilfully fail to address the real issue: the meltdown at the core of the economic system of production for profit, aka capitalism, for which there are no quick fixes. Avoiding the challenge of an alternative not-for-profit model of ecologically-sustainable production for need, simply strengthens the hand of Osborne and company.

Gerry Gold

Economics editor

A victory for instability

Perhaps the most telling statistic in the Labour leadership election was the abysmal turn-out in the trade union section of the electoral college. At 9%, it was lower than during the ballot for the party’s deputy leadership held in 2007.

Despite, (or more likely as a result of), a huge effort by trade union bureaucrats to get members to vote for Ed Miliband, more than 90% who could have voted for him or one of the other four candidates chose not to. In one union, the shopworkers’ USDAW, only 4.3% voted.

That tells you something about trade unionists’ patent lack of faith in their own “leaders” and the advice they received, as well as the widespread disillusionment with Labour politics.

All the trumpeted headlines about “red Ed” are, of course, a smokescreen designed to help the Lib-Con coalition. Ed is no more “socialist” than his brother David. He sat on his hands while New Labour cosied up to the banks and corporations and wrote the party’s recent election manifesto.

Unlike his brother, however, Ed Miliband – who was politically close to Gordon Brown – realised that New Labour was discredited and needs a makeover if the electorate is to be fooled into voting for them again. He is a British version of “change you can believe in”, which became Obama’s mantra.

But because his margin of win was so thin – and with local parties giving Ed Miliband first preference in only 72 of the 635 constituencies – it’s a pyrrhic and unstable victory. This point is reinforced by the barely concealed hostility to him expressed by the party establishment who saw their way back to power through brother David.

A sophisticated operator, Ed Miliband studied at Oxford under Marxist tutor Andrew Glynn. There the comparison with his father – the notable Marxist academic Ralph – ends. The brothers consciously decided that Old Labour was a burden and took the New Labour oath. Distancing yourself from your past in a dishonest manner, as Ed Miliband has done, in order to achieve office is the worst kind of opportunism.

The support given to Ed Miliband by the leaders of the main affiliated unions – which enabled him to overtake his brother at the last gasp – was a reflection (albeit a distorted one) of rank-and-file discontent and concern about the impending massive cuts in public spending and the impact this will have on jobs, services and pensions.

At the same time, it is the explicit desire of union bureaucrats to maintain the status quo and to hold the groundswell of opposition to government within old framework of parliamentary politics and prevent things spinning out of control.

They have hopes of making Ed Miliband their proxy. The Unite union campaigned by texting, phone banking and emailing members, an operation run by Charlie Whelan, its political officer and former fixer for Brown. Whelan persuaded six union-backed MPs to switch their second preferences from David to Ed. "I can retire now after helping deliver this for Ed," he said.

But Unite and other unions are certain to be disappointed. There is immediate and massive pressure on Ed Miliband to “disavow his own campaign”, as the Times’ leader puts it, “which set out unserious positions on banking, capitalism and the deficit in the public services”.

The new Labour leader has already said he wants to help middle England and scotched any idea that his election is a “move to the left”. Labour councils will soon be implementing coalition cuts and the party leadership will do nothing to stop this assault.

Ed Miliband’s election and the political stalemate it has created in Labour’s ranks, is a mirror of the instability and insecurity among voters as a whole that produced a cobbled-together coalition after June’s general election. As the global financial crisis worsens, there is a crisis of leadership in every section of society. How this is resolved will determine our future history.

Paul Feldman
Communications editor

The crisis and spending cuts: cause and effect

The Lib Dem-Tory government stands accused of making cuts in public spending that are purely “ideologically driven”, that are “unnecessary” and being carried through just to please their rich City friends.

In launching the Coalition of Resistance in The Guardian this week, former Labour cabinet minister Tony Benn wrote: “We reject these cuts as simply malicious ideological vandalism, hitting the most vulnerable the hardest.”

In the same spirit, writer and blogger Richard Seymour claims that “there is no urgent need to pay off Britain’s debts”, and that the cuts agenda was driven by big business interests. This view is shared by many trade union leaders.

If, as is suggested, the Coalition’s intentions are essentially “ideological” and not necessary, it follows that they can be stopped in their tracks and even reversed by a great deal of protest and systematic opposition.

After all, the cuts are but a policy decision taken by a right-wing government when there are other options available. Or so it is implied. So if sufficient pressure is applied, the Coalition might be persuaded to change course.

This is the first of several difficulties with this approach. It helps to foster the illusion that the Coalition could be for turning and that there are more rational, progressive options available.

Nor is it true that all sections of business support the cuts programme. There are at least 1 million private sector jobs that are dependent on public sector contracts who are already losing out, while the risk of plunging the economy deeper into recession are very real.

What is sidestepped and even ignored is the profound and deepening crisis of the capitalist system as a whole as the source of the cuts. In fact, the term “capitalism” isn’t used by Benn once in his otherwise forthright appeal to come together to fight the cuts.

The truth is that the budget crisis facing Britain is but one aspect of the great unravelling of decades of debt that sustained the global economy and the financial system.

Debt increased at every level, from consumers to companies to banks to whole countries. A survey by the McKinsey Global Institute found that average total debt (private and public sector combined) in ten mature economies rose from 200% of GDP in 1995 to 300% in 2008. In Iceland and Ireland, debt-to-GDP ratios reached 1,200% and 700% respectively.

In 2007, the bubble began to burst when poor Americans were unable to pay for their subprime mortgages. The following year, the global financial system went to the edge of collapse, plunging capitalist economies into a deep recession which is worsening.

Even The Economist had to acknowledge the connection. In a special edition on debt, the magazine acknowledged: “Hyman Minsky… argued that these debt crises were both inherent in the capitalist system and cyclical. Prosperous times encourage individuals and companies to take on more risk, meaning more debt. Initially such speculation is successful and encourages others to follow suit; eventually credit is extended to those who will be able to repay the debt only if asset prices keep rising (a succinct description of the subprime-lending boom). In the end the pyramid collapses.”

There is, therefore, a material cause-effect relationship between the crisis of the system as a whole and the mountains of debt that leave the British state having to find £40 billion a year in interest payments on government bonds. Attempts to buck financial markets failed in Greece, Ireland and Spain, which led all the major British parties to pledge substantial cuts during the election campaign

Capitalism has to drive down living standards to sustain the profit system and the cuts are part of this onslaught. We don’t need to try and find a substitute budget to help capitalism out of its problems. The challenge is to develop an alternative to capitalism itself and build a coalition of forces to challenge for state power through a network of People’s Assemblies.

Paul Feldman
Communications editor