The grapes of wrath are back

President Obama’s tour of Asia may have plenty of celebrity star status about it but cannot disguise the reality that the United States is on its knees economically and financially and needs all the help it can get, particularly from China. The Chinese have their own agenda, however, and helping out its former adversary is not exactly top of Beijing’s list of priorities.

Despite the multi-trillion bank bail-outs and stimulus packages introduced by the Obama White House and his predecessor, the US economy hangs by a thread and the social toll is mounting.

For example, in what must be one of the most embarrassing United Nations reports ever written, a special envoy has accused America of “shameful neglect” of its homeless. UN special rapporteur Raquel Rolnik for the right to adequate housing has just completed a seven-city tour of America.

“The housing crisis is invisible for many in the US," she said. "I learned through this visit that real affordable housing and poverty is something that hasn't been dealt with as an issue. Even if we talk about the financial crisis and government stepping in order to promote economic recovery, there is no such help for the homeless."

She added: "I think those who are suffering the most in this whole situation are the very poor, the low-income population. The burden is disproportionately on them and it's of course disproportionately on African-Americans, on Latinos and immigrant communities, and on Native Americans."

The US government compiles statistics galore – but none on homelessness. Campaign groups say that more than 3 million people were homeless at some point over the past year. Los Angeles is no city of angels, with 17,000 households a night without shelter.

RealtyTrac describes itself as “the leading online marketplace of foreclosure properties”, with more than 1.5 million default, auction and bank-owned listings from over 2,200 US counties, along with detailed property, loan and home sales data. Its October report showed that 332,000 properties were claimed back last month alone.

More Americans have lost their homes this year than during the entire decade of the Great Depression. California, of course, was where many workers migrated to during the 1930s, their experiences captured in John Steinbeck’s great Novel, The Grapes of Wrath. The state posted the nation’s second highest state foreclosure rate for the second month in a row, with 85,420 properties seized in October.

With unemployment in the America up to 16% on some measures, the slide towards another Great Depression continues. Calls are now going out for measures to protect the US economy from the Chinese, who have used the last 12 months to extend their industrial capacity at a phenomenal rate and to produce goods at rock bottom prices for export to you know where. Respected economists like Paul Krugman have accused China of dumping its employment abroad and “stealing American jobs”.

So the scene is set for a new phase of the global crisis, one where trade wars and protectionism take centre stage. Obama may be feted in China, but the country’s leaders have no intention of raising the yuan’s value against the dollar to make exports more expensive, as the White House wants. Obama will return to Washington empty handed as the combined social crisis of homelessness and unemployment reaches tipping point.

Paul Feldman
Communications editor

Not holding back the tide

US President Obama has re-appointed Bob Bernanke as chairman of the US central bank the Federal Reserve for a second four-year term. You can see why.

Bernanke is an expert on the Great Depression, and has sophisticated views about what he sees as policy errors that brought it about following a catastrophic financial crisis. Sounds familiar?

Bernanke is justly famous for the ideas on monetary policy he adopted from Milton Friedman – Margaret Thatcher’s economic mentor. These ideas were a big factor in the introduction of quantitative easing designed to increase the flow of credit (and debt) once interest rates had fallen to zero. “QE”, as it’s become known, is credited with a slight slowdown in the rate of economic deterioration.

It was back in 2002 that Bernanke referred to the use of the ‘helicopter drop’ of paper money directly into the hands of the population, bypassing the banks as a way of restoring demand. Astonishingly, that policy was used for real during the invasion of Iraq.

The effect of his policies can be seen in the White House’s latest estimate of its budget deficit: $2,000bn – that’s $2 trillion - higher over the next 10 years than it had predicted as recently as March.

As the recession drives US unemployment beyond 10%, those losing their homes through foreclosure have spread from the sub-prime mortgage holders in the poorer areas to the middle classes, and the numbers are increasing. Government income from tax is being hit hard, and the cost of the limited benefits that the US states do provide – food stamps and short-term payments to the newly unemployed - is accelerating.

And, despite optimistic predictions about a recovery, the White House’s near-term revised expectation is for the US economy to shrink by 2.8% this year – far worse than its previous estimate of a 1.2% decline.

It’s not just the White House that got it so wrong. The Congressional Budget Office released sharply higher deficit projections predicting the 10-year deficit would reach $7,140bn, some $2,700bn more than it had thought in March. The newly published figures on the rising tide of debt don’t even include the effect of Obama’s latest plans. Bill Gale, a senior economist at the respected Brookings Institution says taking these into account implies a ‘deeply alarming’ deficit increase way in excess of $10 trillion over the next decade.

The only conclusion to be drawn from the latest US figures is that the economy is way beyond the control of Bob Bernanke. Four decades of globalisation have ensured that the financial and economic juggernaut can not be guided, let alone controlled by the pilot of even the world’s most powerful economy.

As the global capitalist crisis deepens, it exposes the absurd optimism – indeed, the helplessness - of those supposedly in charge of putting things right. Indeed, the pink pages of the financial world’s most prestigious daily, The Financial Times, are sprinkled with perplexed mutterings. On the back of this week’s “Fund Management” review, for example, is the headline: “Time to ditch all economic models”. Writer Vince Heaney argues that the “efficient markets hypthothesis”, - the EMH, has a “lack of relevance to how financial markets actually work”. In other words, the Friedman-Thatcherite-New Labour dogma that market forces must be allowed to prevail has been exposed as a formula for disaster. Heaney goes on to warn of coming “extreme events” in the financial markets.

Bernanke’s middle name is ‘Shalom’. It means peace, but don’t expect it anytime soon.

Gerry Gold
Economics Editor

Unite against our common enemies

The angry walk-outs by engineers and construction workers at refineries and power plants around Britain in defence of their livelihoods is the first major - and explosive - reaction to the economic crisis in the UK. That said, the form these strikes has taken urgently needs redirecting. They cannot be endorsed so long as they are aimed principally against foreign workers. 

When strikers have the enthusiastic backing of the far-right British National Party because their main demand is “British Jobs for British Workers”, it is necessary to ask: What is going on here? When a few hundred Italian workers are too scared to show themselves in public, you have to say that this is shocking and unacceptable. 

The contradiction between the essence of this struggle and the form it has assumed is not surprising. Getting right to the heart of the matter - the emerging capitalist slump and the crisis of governments as unemployment accelerates - demands a united, revolutionary stance against the joint rule of global corporations like Total and client regimes like New Labour. 

Then, and only then, can we begin to find solutions to the immediate and pressing question of unemployment affecting workers who were passed over for jobs at Lindsey when the French-based global corporation Total awarded a contract to an Italian firm (which itself is sub-contracted by an American company) which brought its own workforce along.

If there were jobs available locally, then no one would be on strike. But how can employment, new jobs, be generated? That question won’t be answered by driving a few Italians home and lining up authentic “British” workers to take their place. If workers from Europe or elsewhere should not take “British” jobs does that mean that British workers in other countries should be driven home in similar fashion? 

Brown, who took up the BNP’s “British Jobs for British Workers” policy, says there are no ready solutions to the global capitalist crisis to hand and no lessons to be learned from history. In that case, he and his wretched government should go now because it is of no use to man or beast. Ministers like Lord Mandelson, with his contemptuous remark that workers should get on their bikes and look for work elsewhere in Europe, are deservedly hated by the strikers. 

Trade union “leaders” like Derek Simpson, who have done nothing to defend jobs during the recession and who now encourage nationalism amongst their members for the most opportunist of reasons, should also be got shot of. Simpson, on £200,000 a year plus a luxury house for life, free, is standing for re-election and is cynically using the dispute to help his campaign. 

The issues involved in the walk-outs are all aspects of corporate-driven globalisation: contracting out, sub-contracting, flexible labour, a European Union run by and for the corporations and a trade union movement which has halved in membership and now largely led by donkeys whose respect for Tory/New Labour anti-union laws remains unbroken. 

Dividing workers along national lines, as the Unite bureaucrats are happy to do, plays into the hands of the global corporations and the political parties that service them. Defending the action on the grounds that workers are the victims of globalisation, is simply kow-towing to backwardness, instead of raising the level of their struggle. Like it or not, there is a new internationalisation of labour. The point is to turn it against the employers, not go backwards to insularity and localism. 

Workers in Iceland, Russia, Greece, Hungary, Latvia and France have demonstrated against their governments. In Ireland, workers at Waterford Crystal have occupied their plant, providing an inspiration to every worker by challenging the right of owners to decide their future. Now is the time to move against an unsustainable profit-based system based on exploitation of human and natural resources. The epochal character of the crisis means that the time for defensive actions is past. 

It's not an accident that this sudden eruption of anger takes place in the oil industry - control over the use of fossil fuels is at the heart of the global crisis. If workers are unhappy at the way Total divides up jobs and plays one group off against another, then let the plant be occupied and the management driven out. Bring Total under permanent workers’ control and management as a first step towards reorganising the corporation. Decisions about the production and distribution of oil can be on a sustainable not-for-profit basis. 

Bring down New Labour, the bosses’ government! The government is in secret talks with the army and the police and could spring an authoritarian national government on Britain as the crisis worsens. Don’t give them the chance. Replace Unite leaders with those committed to fighting New Labour. 

Start to build local Assemblies to represent all workers of whatever nationality and origin, and other sections of the community, as a step towards transferring political and economic power to working people. 

Launch a programme of publicly-financed building projects to create new homes, schools and other infrastructure so that work is available to all who need it. 

Fighting for policies along these lines would take the strikes in a different, outward looking direction and inspire millions to join them in the project to transform society to one which puts the interests of ALL workers first. 

Paul Feldman
AWTW communications editor

New Labour isn’t working

This is where New Labour came in. Unemployment is now back to 1997 levels and the claimant count has seen its biggest increase in over 15 years as the global economic and financial crisis sweeps through the highly vulnerable, debt-ridden British economy. It ought to be where New Labour goes out.

The Brown-Blair governments participated enthusiastically in the build-up of debt and fantasy finance that is now wreaking its havoc in terms of its devastating impact on real people who are losing real jobs that have paid mortgages and fed and clothed families.

Losing your bank through reckless, speculative behaviour entitles you to massive state bail-outs. By contrast, losing your job in Brown’s Britain plunges you into instant poverty. The Job Seeker's Allowance (JSA) for a newly unemployed single person over 25 is just £60.50 a week. New Labour has not only made it far harder to claim, but has also reduced the JSA’s real value year by year.

The Trades Union Congress (TUC) calculates that if JSA had been increased in line with earnings over the last 30 years, the rate for a single person over 25 would now be more than £100 a week. To make matters worse, workers have no right to any redundancy pay until they have been working for their employer for two years and roughly one worker in three is excluded by this rule, the TUC says.

Despite the bleating of the TUC and pleas for an increase in the JSA, New Labour doesn’t give a damn that recent research into minimum income standards has shown that a single working age adult needs an income of at least £153 a week “in order to have the opportunities and choices necessary to participate in society”.

Spurred on by the Blair-Brown governments’ infatuation with financial services and the City of London, the productive economy has fallen into sharp decline; the number of manufacturing jobs has plummeted to 2.86 million, the lowest figure since records began. And today’s unemployment figures take no account of redundancies announced yesterday, with 5,000 jobs going at firms that include Virgin Media, Yell, Taylor Wimpey and GlaxoSmithKline.

New Labour is not the only thing that isn’t working. The government presides over a free-for-all capitalist system that is clearly heading for slump at a rapid rate, with all that means for the lives of millions of ordinary people throughout the world. The crisis is way beyond solving through interest rate reductions or even modest tax cuts.

People are being laid off because their employers – over whom they have no control – can no longer make a profit selling the goods or services they supply. Yet in many cases, although not all, the jobs that are going are socially useful in terms, for example, of building new homes or researching new drugs.

Therein lies the problem – and the solution. We could keep the jobs, scrap the profit-driven approach and run an economy on the basis of social need rather than the requirements of shareholders and stock markets. Getting there is obviously a major, revolutionary challenge. It entails getting rid of governments like New Labour and turning the state into a democratic instrument for social change in place of one that turns its back on the unemployed. A first step would be the occupation of all workplaces threatened with closure or job losses.

A World to Win has come up with bold proposals in its publications A House of Cards and Unmasking the State. Check them out and then join us on this mission.

Paul Feldman
AWTW communications editor

Escape from Neverland

New Labour’s crisis deepened over the weekend, with the Chancellor Alistair Darling’s open admission about the seriousness of the credit crunch. He said today’s economic times are “arguably the worst they’ve been in 60 years”, causing the pound to fall against the Euro and the dollar.

As the government’s popularity – and with it Brown’s status - sinks ever lower, Darling decided it was best to go for broke and admit the truth that everyone else had already known, and in doing so, steal a march on the Prime Minister.

After a year of denial, the Chancellor pricked the bubble of New Labour’s fantasies, to shock all around. Like his namesake Wendy Darling in the fairytale world of Peter Pan, he preferred telling stories and fantasising to the mundane everyday world of real life the rest of us have to deal with, but at last he has been forced to admit that there’s a big problem. “I think it's going to be more profound and long-lasting than people thought", he told a Guardian journalist.

He claimed that when he first became Chancellor, “we knew that the economy was going to slow down”, but he did not have “any idea” that there would be a major financial crisis: “No, no one did. No one had any idea,” he claimed. But to any serious observer of the global economy, it was already clear back then that a huge financial crisis was starting to blow as the US mortgage market went into tail-spin.

A World to Win warned about its effect on the British economy well over a year ago:

‘The contagion is certain to spread as there are very many over-borrowed, over-stretched corporations - not just financial institutions - as well as the millions upon millions of individuals who find themselves in trouble in every country. The British economy is particularly vulnerable... Some observers are comparing the situation to 1929, when the Wall Street crash led to a world-wide slump...’

Now, as house prices have fallen by over 10% in a year, widening the gap between the mortgage debt millstone millions of people are struggling to repay and the value of the property they are trying to buy. More than 30% of all UK borrowers – around 3 million households - are expected to be caught in the negative equity trap if prices drop by a further 30%, as many are predicting.

Even the remaining mutual Building Societies, like the small but successful Swansea, which has continued to lend only against the money its savers have deposited, are caught up in the vastly overblown finance fantasy.

Whilst banks and financial institutions are free to simply write down the declining value of the assets they have accumulated, no such freedom exists for those who are stuck with impossible levels of mortgage payments. In the US, around 1 in 5 of the population are already in negative equity, and many who are unable to sell their houses in an already oversupplied market are simply walking away.

Our solution? Rather than passing the buck to local councils to take over a portion of the debt – effectively using even more taxpayers’ money to shore up the private usurers - investors and borrowers should take control of the mortgage lenders without compensation to shareholders and, following the banks’ example, write down the value of the property as prices fall, and recalculate outstanding loans based on the now much lower value. Simple. But not something New Labour can countenance whoever the leader might be.

Gerry Gold
Economics Editor

Dr Who and the economic crisis

An economic crisis like the one we are now in has a ruthless, market-driven logic all of its own. As it takes its toll of jobs, homes and living standards, the results of the collapse of credit-fuelled growth also exposes fundamental limitations of the capitalist state system and advance the case for revolutionary change.

New Labour is confused and close to paralysis, like rabbits caught in the headlights of an oncoming car, as the economy spins out of control. This week alone business confidence is reported at a 16 year low; mortgage approvals are down 60% in a year and house prices are heading south in a big way; builders like Wimpey are laying off workers; Marks and Spencers have reported a dramatic fall in food sales and lorry drivers are in London today in a protest against rising fuel prices.

Oh, and shares plunged yesterday, taking the FTSE 100 more than a 1,000 points lower since May when there was talk of the credit crunch being at its highest peak. Now the financial sector is bracing for more bad news as decades of fantasy finance deals continue to implode. Both to governments and ordinary people, it seems as if external forces from the outer limits of the solar system have taken over. But this is not an episode of Dr Who with the Daleks taking over Earth.

The facts are that capitalism is a system based on creating economic forces and processes that are then subordinated to the unseen hand of markets for sale at a profit. Commodities are produced that may or may not sell, that use up resources at a rapid rate, within a credit-driven production and purchasing system. While workers co-operate across the globe in producing commodities and services, their products are placed on the market in a haphazard and chaotic way.

This anarchic side of capitalism lies behind past and present crises. Today’s disruption to the economy has aspects which are unique and which contribute to the impotence of states to make any impact. The corporate-driven globalisation process has created economic and financial activities that transcend state borders and national controls in their scope. This makes governments fearful of intervening lest they drive capital away to other parts of the globe.

But even before the recent globalisation period, capitalist states and governments hardly exhibited the capacity to overcome recessions and slumps. This is no mystery, although it is often presented as one. The present-day state system evolved out of the need for capitalists to find a political expression which could facilitate their activities in the broadest sense. Their requirement, for example, of an educated, fit workforce is formally delivered by a state (although corporations are increasingly “partners” in this process).

Restrictions on the right to strike are implemented through laws and courts, for example. While the democratic side of the state has allowed people a vote in who governs them, it cannot alter this essential characteristic of the political system as a mechanism for maintaining and developing capitalism itself.

Therein lies the weakness of the state when economic crisis becomes the dominant issue in society, as it is doing in Britain today. The forces at work are largely outside of its control in the shape of privately-owned corporations and financial systems. These capitalist forces themselves are equally unable to buck the market, as Marks and Spencers has found out. In this situation, adjusting interest rates or bailing out a bank or two has negligible impact or can even make matters worse. People rapidly lose confidence in existing politics and governments as a way of solving problems, as New Labour found out last week when it finished fifth in the Henley by-election behind the far-right BNP.

This is not merely an issue about New Labour but about the state system as a whole. The state has demonstrated on countless occasions that it is a creature/prisoner of the very forces that when they spin out of control, devastate millions of lives and threaten global conflict. Bringing economic forces under some kind of social, democratic control, therefore, is absolutely necessary if we are to begin the task of getting to grips with the crisis. The key to this is building support for the project of replacing the failed capitalist state with a democratic, alternative model based on people’s power.

Paul Feldman
Communications editor

The R word raises its head

You could argue that ordinary people understand the immediacy of the global economic crisis of capitalism better than political activists because working people are struggling with rising prices for food and energy, mounting debts, lower wages and redundancies. The coincidence of all these facts of daily existence with a mounting political crisis in Britain adds up to an even greater test for political campaigners.

There no obvious immediate “practical” solutions to recession plus inflation, especially when the market state and client governments like New Labour have neither the capacity nor the political will to intervene. So it’s a kind of double bind which provokes the development of ideas that link to immediate problems but raise the spectre of revolutionary change.

For example, on the energy crisis, the case for social ownership of power generating and oil corporations increases daily. This essential resource should not be left in private hands or market forces. In the interim, the state could slash prices and subsidise energy through the scrapping of Trident and foreign wars. To save energy, public transport fares could be reduced drastically and services reorganised so that people could get to and from work without using their cars. Rail and bus networks would then be taken back into public ownership.

Food prices could be frozen and steps taken towards bringing the supermarket chains into co-operative ownership, ending their profiteering at consumers’ expense. People threatened with repossession should be allowed to stay in their homes pending plans to convert everyone’s mortgage debt into something more affordable and less of a long-term burden. Speculating in commodities and currencies should be blocked and a programme of turning private sector finance into mutual, co-operatively owned enterprises launched.

The big question of questions looms: Who on earth is going to implement such a programme? New Labour? You can’t be serious. The Tories or Lib Dems? You are obviously joking. The apparent political impasse leads to the spectre already mentioned, that of a break with the capitalist present and a leap into a revolutionary future. It’s difficult to conceive of but it’s an eminently practical solution given that There is No Alternative.

The R word is being used by all sorts of people, including the environmentalist Jonathon Porritt. In his blog earlier this month, he sounded the alarm bells: “‘So, food security is back on the political agenda. Climate change is omni-present. Peak Oil is rising. The credit crunch is the new player on the block. Resource wars are looming. Rainforest destruction just won’t go away. Species loss is as bad as ever, but no one cares – for now. Water shortages are chronic. But much, much more worrying are the linkages between all these notionally ‘separate’ phenomena. The synergies, feedback loops, interdependencies.

“At long last, people are starting to make the connections – and are even beginning to link all those separate symptoms back to their root cause: today’s literally insane notion of getting richer by trashing the planet and screwing the poor.” Porritt summed it up pretty well. And then he went on: ‘Don’t hold your breath, but pretty soon you might even hear one or two of them start talking about population. And then you’ll know revolution is on the way.” And then on Newsnight last night, someone did. It was him.

As an advisor at the heart of the Brown government, Porritt is well-placed to know that collectively they just don’t get it about any of the truly catastrophic interdependent threats and crises that worry the hell out of the rest of us. And when they do, when for example a few hundred truckers try to drive slowly into town (stopped by the police), the only market-dependent, profit-enhancing “solutions” they can come up with are bound to make everything worse. Like tax breaks on oil – not for hard-pressed hauliers and farmers, but to encourage increased production in the North Sea. Climate change? Somebody else’s problem.

Porritt’s dangerous and reactionary talk about population numbers was in response to the global food crisis. But the Organisation For Economic Co-operation and Development (OECD) and the United Nations Food And Agriculture Organisation (FAO) tell a different story in their joint Agricultural Outlook 2008-2017. World population growth is declining and food production is increasing. But US attempts to keep corporate profits rolling in are driving the world over the edge into mass starvation.

A broad range of different ideas and proposals to bring this most dangerous period of capitalist production to an end came from the large number of concerned people who attended last Saturday’s Beyond the Market Economy conference (the discussion is now continuing online). Many saw the need to end corporate power and establish 21st century models of social ownership. The real challenge is to create the leadership and organisation needed to bring such policies to fruition. The urgency of achieving this cannot be overstated.

Gerry Gold & Paul Feldman
Co-authors A House of Cards – from fantasy finance to global crash