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 Europe .
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 UK
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.
Gerry Gold
Economics editor
