Can't pay, won't pay!

Who was consulted when Gordon Brown and Alistair Darling decided to put the rescue of the global capitalist system ahead of every other priority? Was there a rash of Blair-style focus groups? Were any opinion polls commissioned? Not that we know of.

But, even as the grip of winter brings activity to a halt across the Northern Hemisphere, something is stirring once again in Iceland.

Yesterday, President Olafur R. Grimsson delivered a major blow to the global financial system when he responded positively to a petition by a quarter of the country’s population of just 320,000. Opinion polls say that two-thirds of the population are with the petitioners in opposing government proposals to raise interest rates to help repay £3.4bn of Icesave deposits owed to the UK and Netherlands.

The bill amounts to £40,000 for every household in Iceland – an eerily similar sum to that New Labour has tied round the neck of UK householders.

Grimsson, who is serving his fourth term as the elected president, said it was in the interests of democracy to put the plan to a referendum, given the importance of the issue to Iceland’s future.

“It has steadily become more apparent that the people must be convinced that they themselves determine the future course,” he said. “The involvement of the whole nation in the final decision is therefore the prerequisite for a successful solution, reconciliation and recovery.”

The idea that people might have a say in their future sent shock waves around the world. There’s a real fear that a vote by Iceland’s people against repayment could trigger a similar revolt in countries with much deeper debt – like Spain, the US, and the UK.

Capital’s advanced guard struck back as Iceland’s credit rating was reduced to junk status by global agency Fitch. Further help from the International Monetary Fund has been thrown into doubt. New Labour minister Lord Myners was wheeled out to warn Iceland that it wouldn’t be able to join the European Union if the money wasn’t repaid.

What happens if the referendum takes place and the people vote “No” is anyone’s guess. Countries have defaulted on their debts before, but never has the world of finance been so interconnected and so interdependent. You’ll remember that New Labour used anti-terrorist legislation late in 2008 freezing all Icelandic assets on UK soil.

Iceland is small, but the impact could be world-changing. Even Premier League football club West Ham United is caught up in the net. It is currently up for sale by its current owner CB Holdings whose biggest shareholder is Icelandic bank Straumur. This went bust last year in the wake of the global crisis which saw off the three largest banks Glitnir, Landsbanki and Kaupthing. Before the crash their combined debt exceeded approximately six times the value of the nation's annual output.

It’s just less than a year since the “Saucepan Revolution" – so called because of the pots and pans protesters had with them - that made Geir Hilmar Haarde the first leader to resign as a result of the global economic crisis.

President Grimsson, clearly senses the potential for a repeat performance on an even more dramatic scale. A few months ago he told the Global Creative Leadership Summit that during the global financial meltdown “the political system was tested to its limit,” adding: “Even in the most stable and secure democracies, it almost resembled the revolutionary situations we read about in history books.”

Grimmson was quick to add: “But we have the capability and the mandate to solve these problems.” Yesterday, by refusing to sign the legislation agreeing to punitive repayments to Britain and the Netherlands, Grimmson himself discovered that this “mandate” is more imaginary than real. The Icelandic people themselves have spoken: Can’t pay, won’t pay! It should become the rallying call around the world.

Gerry Gold
Economics editor

The state we are in

That capitalism today requires incredible, almost unimaginable levels of financial support and assistance from the state just to keep the system on life support in intensive care, is beyond dispute. What is also apparent is that both the state and the cap-in-hand former masters of the universe who run capitalism have fatally wounded the case for their own continuance.

What is the point of a state that is bankrupting the very same state in the interests of big business and the banks (the claim that his will help ordinary people is one of the great lies of the crisis)? In Britain, the £3,000 billion bail-out of the banks brings a whole range of tottering institutions right into the heart of the state. The money to buy up shares in fairly useless companies is, of course, going to be borrowed at interest.

No one is rating highly the chances of getting this money back. The economy is sliding deeper into recession, with today’s unemployment figures expected to show a steep rise; the capacity of ordinary people and companies to repay debts/mortgages/loans to the banks is ebbing away fast. As the major shareholder in several banks, what will the state do? Using its powers of force and coercion, the state will defend its interests in ways which today seem inconceivable.

Which brings us to the nature of the “state”. The takeover of the state by the banks over the last few weeks should leave no one in any doubt that this a capitalist state as opposed to a state in capitalist society (which reformists like to characterise it as). The capitalist state is not a neutral body which can become anti-capitalist under popular pressure.

Today’s British state exists primarily to uphold capitalist private property and ownership and to defend an economic system driven by profit accrued through the exploitation of human labour. When Gordon Brown says he will do “what it takes” to prop up the banking system, he means just that. That’s what presiding over the capitalist state is all about.

So, where does this leave us in political terms? Popular anger is growing against the bail-outs. On the BBC news forum dedicated to Bush’s sudden U-turn on the banks, Trevor Tinker writes: “The governments of the world reigned in human rights after 9-11. A few well organized religious fanatics killed several thousand people and affected the lives of several thousand more. The financial terrorists (read financial engineers) who's actions have affected millions if not billions around the world vaporizing savings and pushing people to despair if not suicide with their insatiable greed remain unpunished. When will we see a global witch hunt against the financial terrorists?” There are many more comments along similar lines.

While the Financial Times story “Undertakers deliver last rites for US capitalism” is good for a laugh, it is unfortunately not quite the case. The body is still breathing – and inflicting great damage in terms of unemployment, repossessions, inflation as well as state bankruptcy.

To halt this process and create a sane economic and financial system will require real power – state power. Establishing people’s power in place of corporate power leads directly to the creation of a truly democratic, transitional state in place of the existing capitalist state. Then, instead of bailing out bankers, society would be in a position to put people before profit. On Saturday, at our Stand Up for Your Rights festival, our new book, Unmasking the State – a rough guide to real democracy, will be on sale for the first time. It is a handy thing to have in these times!

Paul Feldman
AWTW Communications editor

Meltdown and revolt

The global capitalist financial system is grinding to a halt amid a meltdown of support for bailing out banks and political paralysis in the United States, the most indebted country of all. Without forms of finance/credit, the economy itself cannot function. It’s that serious.

When two-thirds of Bush’s own capitalist, right-wing Republican Party refused to endorse a $700 billion transfer of taxpayers’ money to financiers in return for worthless, toxic “assets”, they were looking nervously over their shoulders at a grassroots revolt. An overwhelming majority of their constituents are opposed to the hand-out while they suffer job losses, repossession and falling living standards. Many have taken to the streets in spontaneous protests on Wall Street and throughout America.

The fact that capitalist politicians baulked at rushing through a bill which was painted by president Bush as necessary to prevent a collapse of the financial system, is just one of many insoluble contradictions:

– In a world drowning in credit there isn’t enough money in the world to prevent the implosion of the global financial markets. Even if a deal were to be made on mortgage debt, much worse money mayhem is on its way.

– The relentless, profit-driven expansion of the global economy over the last 30 years led to and was eventually driven by the array of fantasy finance now unravelling before our very eyes.

– The cost to taxpayers of bailing out the banks is beyond their ability to pay. The credit crisis first erupted when people reached the limits of their ability to service the debts they’d accumulated, so attempts to pass them the [now valueless] buck only wakes a long-dormant opposition, stirring the rage of the working people. Jobs, homes and pensions are melting away as the price of food and energy skyrockets.

– With interest rates rising, attempts to blackmail us with the story that the pain of not stabilising the system will be greater than the cost of attempting to patch it up falls on ears deafened by the ever-louder demands of the debt collector.

– A new consciousness is appearing on the streets because hundreds of millions of people around the globe can’t see why we should have to pay for a crisis that we’ve been seduced into by failed promises of the good life continuing forever, when those who appear to be responsible are walking away with fortunes.

– Attempts which are anyway failing to resuscitate the hardly-regulated capitalist markets take the form of socialisation, (the work of “communists” according to Republicans). This sticks in the throat of those who claimed that “free markets” were the ultimate success of the capitalist system and its victory over socialism.

In the end, there are no capitalist-type “solutions” to this momentous crisis. They would have been discovered by now if there were any. Politicians and financiers are powerless to control and direct events because ultimately capitalism functions in an unplanned, uncontrolled and anarchic way and is prone to catastrophic crises like the one now unfolding.

Capitalist socialisation of the failing banks is a backhanded acknowledgement that private ownership for profit has failed. Now is the time to seize the initiative and finish what the capitalist politicians cannot. Millions mostly new to political action can coalesce into an organised movement to refuse to pay their existing debt. From there we must build a movement that aims to create a new democratic power.

This would take control of both financial institutions and the essential productive side of the economy. Then we could re-establish these resources on sane, rational lines and operate them on a not-for-profit basis for the benefit of the majority. These are without doubt revolutionary proposals that will take some achieving. Yet it would be dishonest to suggest that there are more palatable, less challenging ways forward in these dangerous times.

Gerry Gold
Economics editor

'Managing' the crash

Every passing day sees more of the consequences of the global meltdown coming to light. Financial institutions implode and disappear and increasingly desperate measures are taken by private sector banks, central banks and governments.

Now the focus has changed from trying to avert the crash, to managing its descent, softening its landing as it falls to earth, ensuring that the capitalist financial system survives, at all costs.

This is the real meaning of Alistair Darling’s statement that "financial stability had to trump the competition concerns". This justifies changing the law to allow the new Lloyds TSB-HBOS conglomerate to dominate the British banking system. "We will take whatever action is appropriate to maintain stability in the banking system," he said. "The entire economy depends on that."

On the other side of the Atlantic, the US Treasury is proposing a plan to absorb all of the bad debt arising from the mortgage crisis. Unsurprisingly, since this would pass the whole cost directly to US taxpayers and the Chinese financiers of American government debt, the US stock market had its best day for years.

It can’t and won’t last. This is a truly insane open-ended proposal, given that, as a result of the decades of unregulated explosion of fantasy finance, nobody in the world has any idea of the true value of the outstanding credit and debt. Hey, but we could then get back to raking in the profits.

For Darling, Brown and Bush, survival of the system that has failed, is broken, will come even at the expense of millions, perhaps billions of people who will be its victims as the markets find their “solutions”. With a week of dramatic, unprecedented contraction and consolidation in the finance industry comes the first wave of unemployment. Estimates of 40,000 job losses from the New Labour-sponsored takeover of HBOS by Lloyds-TSB are hardly even the tip of the iceberg. Predictions for the impact on the US workforce put job losses as high as 500,000 per month.

In response to the news that Britain has seen the biggest climb in unemployment benefit claims in 16 years, Trades Union Congress general secretary Brendan Barber said the "figures show that unemployment is starting to accelerate and it now looks very likely that total unemployment will reach two million during 2009." So what stirring message has he for the six million plus trades union members as recession engulfs the economy?

“the TUC is concerned that unemployment has been sneaking up in the last few months and it's up to unions, employers and the government to halt and reverse this trend as soon as possible. With unemployment rising, people are looking to the government for a response and economic measures will be far more welcome than yet another round of welfare reforms.”

The TUC’s “expert” was just as hopeless as his boss. Head of economics and social affairs Adam Lent said: "Poor growth and falling consumer confidence are a far greater risk to the economy than inflation, which is still relatively low. The Bank of England can play a key role in helping to reinvigorate the economy by cutting interest rates this month." To the TUC bureaucracy, we say: Thank you and good night.

Even the Tory Daily Telegraph has acknowledged that the crisis may have something to do with the “internal contradictions of capitalism”. One aspect of this is that New Labour is the party using the levers of the capitalist state to shore up the system, whatever it takes. We are witnessing not just market failure on a grand scale but the utilisation of the machinery of state by bankers and corporations to save their skins. This road leads in one direction only, as history has demonstrated.

The Convention of the Left starts tomorrow. Those attending have an historic responsibility to shape and build a movement that answers the capitalist crisis by posing the revolutionary alternative – an economy based on co-ownership and self-management and a truly democratic politics based on people’s power in place of corporate power.

Gerry Gold
Economics editor