Osborne's budget for business at our expense

Put simply this was a ConDem budget statement for business at the expense of those who depend on public services, those who have to rely on benefits and the millions who will have to wait years longer to draw their state pension.

The aim of the ConDems is to roll back all the post-war achievements of the welfare state. This is confirmed by the fact that the Office for Budget Responsibility says that if the governments meets its target, spending as a proportion of total national income (GDP) will be the smallest since 1948.

The short-term view (leaving out spending commitments beyond the election) disguises the necessity for further huge cuts and intensification of austerity after 2015, when the optimistically forecast limited “growth”  is expected to decline.

Chancellor George Osborne announced a cap on the total welfare budget, to be voted on each year (daring Labour to oppose, which it won’t), further cuts in public spending and also brought forward the plan to make people work longer before they can get a pension.

That’s if they can hang on to a job until they’re 70. As Caroline Abrahams from Age UK commented: "Far too many people are losing their jobs in their 50s and 60s." Osborne’s plans will leave them penniless for a decade.

He ratcheted up the threat to withdraw benefits from the young unemployed claimants unless they took workfare jobs dressed up as “training”.

Another £3 billion of spending cuts are to be piled on top of the major reductions still to be fully felt as local councils, in particular, struggle to reduce their budgets by 25% over the lifetime of this parliament with their tax powers frozen.

There will be even fewer resources for councils following Osborne’s concessions on business rates for small firms, who were handed out all sorts of tax breaks by the government.

Despite the window-dressing of new tax-avoidance plans, these will leave untouched the global corporations like Amazon who “offshore” their payments, leaving the UK with precious little revenue from the major transnationals’ activities. Meanwhile, fracking firms drilling for shale gas are going to get even more tax concessions on their first profits.

At the same time, the sale of social housing will be accelerated and more and more people made dependent on unaffordable private housing, either to rent or, if they are extremely well off, to buy in a market that produced soaring prices.

The real story is an economy desperate to attract inward investment from China for infrastructure energy and transport projects.

Making the UK more attractive to corporations and sovereign wealth funds held by China and other countries in deteriorating conditions worldwide comes at immense, unbearable cost to increasing numbers of hard-pressed households huddling up over the winter, with many dependent on foodbanks, and others have to choose between heating and eating.

Osborne and the ConDems fool no one. The burgeoning trade gap is due to the fact that the so-called “recovery” is  driven by consumer borrowing and cheap (for now) mortgages. With productivity stagnant, the conditions are being set for rapid inflation and a house price asset bubble.

Already price increases continue to outstrip earnings, leaving ordinary people far worse off than before the recession. The UK has equal highest inflation rate among 28 European Union countries and despite the measures to cut fuel bills, they will still rise above inflation next year.

What we saw today was the confident determination of a line of front-bench millionaires insistent on reducing benefits to those on low-pay, in increasing the proportion of part-time, zero-hour contracts and striving to overcome falling profit rates for the global corporations.

Despite Osborne’s boast about reducing spending, the long-term, underlying “structural deficit” has barely changed since 2010. So behind all the public relations bravado, the ConDems plan is for austerity for as far as the eye can see.

Their ambition is a market economy where workers are totally at the mercy of the employers and the state. Ending austerity not only involves removing this government. It must also suggest alternatives to a capitalist system that offers only pain and more pain to the majority of its citizens.

Gerry Gold and Paul Feldman

UK economy living on borrowing - and borrowed time

There’s one thing that prime minister Cameron got right during his speech to the City - the need for a “fundamental culture change”, because the UK economy is diving deeper into debt in a bid by the ConDems to engineer a mini-boom.      

Cameron is now promising a continuing assault on public spending, and a permanent reduction in the size of the public sector, whilst drawing as many people as he can into a life of permanent debt servitude as the ConDems pump up house price inflation.

Imagining what that might add up to isn’t going to cheer up anyone who uses health, education, social services, or anyone dependent on benefits. But as the BBC has been investigating, it’ll be a roll-over bonanza for companies like Serco, Virgin Care and Circle competing for the rapidly expanding marketplace in privatised service provision.

In Wales, it’s not the future that looks grim, but immediately now, this winter. Huge Westminster imposed cuts on budgets have dramatically reduced health and local government spending.

The announcement from local health board Hywel Dda, covering Pembrokeshire, Cardiganshire and Carmarthenshire, that it will cancel elective surgical procedures from November 22 throughout the winter period has sent shock waves throughout the country. Local councils throughout Wales are also hard at work on plans to slash the services they provide.  

Many are claiming that the new turn in Cameron’s speech, when the economy is supposedly “returning to growth”, proves that the attack on living standards is driven by “ideology” rather than necessity. This is clearly not the case.

Despite Cameron’s proud claim to have reduced the government's budget deficit by a third, only last week the European Commission forecast that Britain's current account deficit – trade in goods and services –  will rise to 4.4% of GDP in 2014, with little improvement after that.

This is the highest trade deficit of any major industrial country, and far higher than the US, as its exploitation of shale makes  moves the world’s richest country towards energy independence. 

The Commission said Britain still has a structural government budget deficit of 5.7% of GDP even after years of austerity. This compares to minus 1.5% in the eurozone, minus 0.8% in Italy, and a surplus of 0.5% in Germany.  

So-called growth in the UK economy is being driven by a steady fall in the household savings rate, down to 6.2% this year from 7.3% in 2010. The Commission said it expects UK consumers to "dip into their savings" to cover spending. "The debt burden of households remains a distinct risk to private consumption."  

Clearly, the UK economy is living not just on borrowing but borrowed time.

The pressure from the ongoing global economic crisis of capitalism continues to bear down on the UK as it does on the rest of Europe.

Greece’s coalition government will step up its version of permanent, deepening austerity after it survived a no-confidence vote. The challenge was launched by the anti-austerity Syrizia party after riot police ended the five-month occupation by former employees of the ERT broadcasting station.

Their jobs were sacrificed to demands from the Troika - the European Commission, the European Central Bank and the International Monetary Fund - for 2,000 public sector job cuts by last June. 

Now the Troika wants to see a further 15,000 jobs go by 2015 in the budget to be finalised next week, adding to the 27% unemployment rate, and giving no hope at all to the close to 60% of unemployed young people.

Misery for the majority throughout Europe and the rest of the world is certain to increase as corporate control of the democratic process tightens its grip. Talks delayed by the shut-down of the US government have begun between the EU and the US on TAFTA, a transatlantic free trade agreement. This is intended to remove regulatory barriers impeding the growth of the big global corporations. 

What’s needed is a different kind of culture change from the one envisaged by Cameron. Or, as Bob Dylan put it ‘"There must be some way out of here" said the joker to the thief "There's too much confusion."’ Global, democratic, not-for-profit alternatives anyone?  

Gerry Gold

Economics editor

A capitalism that lacks legitimacy

While Ed Miliband brings Labour into an ever-closer alignment with Tory arguments (and policies) on the economy, it falls to the Financial Times to ask whether capitalism can respond to an historic crisis of legitimacy.

As the FT notes: “The system, in all its different varieties, is widely perceived to be failing to deliver.” This is a genuinely serious question which in turn raises real issues about democracy (or the absence of it) and whether the system is capable of re-enlisting the support it once enjoyed.

Miliband, naturally, is incapable of addressing these matters because they strike at the heart of the system of political rule which acts as a proxy for corporate and financial power in every country (and which he is so desperate to be part of).

In fact, his acceptance today of spending cuts to reduce the deficit, attacks on welfare (even questioning the winter fuel allowance for older people) – in effect, setting out Labour’s very own austerity package – will only deepen the growing hostility to the system itself.

Actually naming its series of articles “Capitalism in Crisis”, the paper of choice for business executives, acknowledges that “democratic legitimacy has been largely lacking” in the measures taken by governments over the last four years.

“On both sides of the Atlantic there is now a risk that reasonable aspirations to equality of opportunity are being undermined, accompanied by a growing threat of political instability. Support for open trade and free markets is also being adversely affected.”

The significance of this lack of consent should not be underestimated. As a system based on private control of wealth and resources, capitalism actually depends on a measure of acceptance by the 99% which is mostly expressed through the political process.

When consent declines in any significance, the nature of capitalism itself stands revealed and becomes more reviled (which the article points out has happened several times over the last 200 years). “Greedy bankers, overpaid executives, anaemic growth, stubbornly high unemployment – these are just a few of the things that have lately driven protesters on to the streets and caused the wider public in the developed world to become disgruntled about capitalism,” the FT remarks.

In a recent survey about trust, under 50% of Americans and British asked said they had “faith in business to do what is right”. The US and the UK were only just ahead of Russia.

The FT believes that growing income inequality is at the root of the discontent rather than growing poverty. In this they are partly right. In 1975, the ratio of the pay of a CEO to an average worker was 35 times greater; by 2010 the ratio had soared to 325 times. Large sections of the middle-class also did very well in the halcyon days of globalisation.

There’s no doubt that perceptions of unfairness drive many protests. But demands that workers pay for a crisis they did not create through lower pensions, reduced wages and unemployment is about defending an often modest standard of living and brought millions out on strike.

For the FT, as for Miliband, the question is “how to improve the existing model of capitalism”. Here they both run into a major difficulty. The globalisation process created a hydra-headed beast that knows no borders, has more power than nation states and is very much immune to political processes.

The trust survey showed an even greater mistrust of government than of business, which must in part be due to the fact that politics is seen to do the bidding of and be in the pockets of the wealthy. Meanwhile, as the FT admits, “efforts to re-regulate the banking system…have failed to convince many experts that an even larger financial crisis can be avoided”.

In sum, capitalism has little room for manoeuvre and a negligible chance of restoring consent for its continued rule. Of course, it’s not giving up power voluntarily time soon either. But the opportunities to argue for and achieve a revolutionary democratic transformation of capitalist society are more favourable than for a very long time.

Paul Feldman
Communications editor

Osborne declares class war

On the eve of today’s historic strike by public sector workers in defence of hard-won pensions, the unelected coalition ConDem government yesterday delivered a new, more vicious, sustained assault on living standards.

What chancellor George Osborne announced in his autumn statement was a blatant transfer of wealth from working people to the corporations and bankers who are responsible for the accelerating crisis of capitalism. In doing so, he effectively ushered in an unprecedented period of social conflict.

With imagined growth failing to materialise, the global economic crisis deteriorating rapidly, government borrowing soaring by a shock £111bn, and the credit rating agencies looking over his shoulders, breathing heavily, chancellor Osborne slashed his way through public spending.

Before the statement, ratings agency Fitch threatened that Britain's ability to absorb further economic shocks while keeping its top triple-A credit rating was "largely exhausted" unless the government took further steps to cut its deficit.

And so it has.

Public sector job losses will rise to 710,000 from an original estimate of around 400,000. Government spending will fall by 0.9 per cent in real terms for the period 2015-17. That is a bigger cut than in the period from 2011 to 2015. Public sector pay will be held well below the rate of inflation - a pay cut by another name.

The new, much bigger attack is certain to intensify the slow-burning anger over pensions that built over months into today’s strike by as many as two million trades unionists.

According to RMT transport union leader Bob Crow:

"George Osborne has ratcheted up the class war and has made it clear through his attack on pay and employment rights that he wants the workers to keep taking the hit while the rich get richer. After two years of a freeze, pay for millions of key workers will go up by 1 percent in the next two years.

With inflation over 5 percent, and the increase in pension contributions, that means nurses and the others we rely on will be around 25 percent worse off after four years of this ConDem government while top bosses pay goes up by 12 percent a year. That's a scandal."

After the statement, Fitch patted Osborne on the back, but warned further steps will be needed.

Former Conservative minister Michael Portillo also says it won’t be enough. Foreshadowing a much more brutal style of bankers’ government, like those recently installed in Greece and Italy he says:

“Britain will have to reduce welfare and public sector employment dramatically. The state will need to step back from education and health where it simply doesn’t do a good enough job. Such changes may be too draconian for a coalition, yet the public may find them too radical to accept from a single-party government. The only question, however, is whether we will tackle those big issues soon, or merely ensure prolonged stagnation by postponing the inevitable.”

The stark reality is that capitalist society can no longer sustain the public sector no matter how loud the protest. A series of general strikes in Greece have failed to stop repeated attacks on living standards demanded by the ratings agencies and imposed by the European Union, European Central Bank and the International Monetary Fund.

The conflict moved to a new stage with the sweeping away of the elected PASOK government and its replacing by a coalition (including an ultra-right party) led by an advisor to investment bank Goldman Sachs.

With the eurozone careering towards an apocalyptic collapse, the ramifications are being felt throughout the world. Late last night, ratings agency Standard and Poor downgraded the biggest banks in the US, including the Bank of America which is heavily exposed to euro loans.

The response to Osborne and the ConDems from rallies in towns and cities throughout Britain should be to support the worldwide occupy movement and form People’s Assemblies. These can become the power which will lead and shape a new democratically-owned and controlled, sustainable economic, social and political system. As someone once said, there is no alternative.

Gerry Gold

Economics editor

Portugal: another triumph for the bond dealers

As Portugal declares state bankruptcy, after its Socialist Party government failed to get an austerity package through parliament, it’s another triumph for the dictatorship of the money markets and bond dealers.

Now, even though Portugal is without a government, the price demanded by Germany and the richer EU countries for an €80 billion bail-out is even deeper cuts in public spending than were first proposed. The upcoming general election is definitely one to lose.

Portugal’s finances collapsed because its budget deficit grew rapidly following the onset of the global recession. But the money markets drove up interest rates until Portugal was borrowing at over 8.5%, adding to the total deficit at a rate which made it impossible to repay.

In the last year, Greece – which still has a “socialist” government and Ireland, which saw the ruling party wiped out at the recent general election, have suffered the same fate. Does the “contagion” stop at Lisbon, or is Madrid next?

Spain’s government – yet another one that claims the rubric “socialist”– is confident it can avoid Portugal’s fate – because it says it’s already making deep cuts in public spending! Youth unemployment is running at over 40% as a consequence. Meanwhile, Spanish bank assets are worth far less than before because of the collapse in property values and refinancing is increasingly expensive and hard to come by.

As the United States today desperately tries to avoid a shut-down of government activities as deadlock looms on reining in a federal budget swelled by endless borrowing, it is clear that capitalism is in a global bind.

You can cut – as the Coalition is doing in Britain – to avoid higher borrowing rates but that only deepens the recession. Spending more would leader to higher borrowing raters, which the banks won’t like. Why? Because in the perverse world of capitalist finance, the value of the government bonds, which they hold as assets, depreciates as rates rise.

At the same time, British banks are steadfastly refusing to resume rates of lending last seen before the credit crunch of 2007. That’s because their balance sheets remain toxic and full of bad debt. Even the right-wing press is fed up with the banks.

On Monday, the Independent Commission on Banking set up by the government reports and no one expects it to suggest any fundamental changes. The Daily Telegraph’s Jeff Randall, who is deeply pessimistic about the report, remarks: “The banks have captured our money twice over: as cash in their vaults and investments in their shares. We own all of Northern Rock, most of Royal Bank of Scotland and nearly half of Lloyds Banking Group. We rescued them – and in so doing became their prisoners.”

But this is not a new problem. By the outbreak of World War One, the banks and the monopolies had formed an unholy alliance against ordinary working people and elected governments alike. After creating the Federal Reserve – America’s central bank – President Woodrow Wilson declared:

I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilised world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.

In the recent period of corporate-driven globalisation, the tensions and contradictions between the capitalist state and capitalist finance have deepened to the point where governments tread warily. The only way to sort that out is to put an end to the power of the bond dealers, banks and money markets and create a new, socially-driven financial system. It doesn’t need me to tell you that bourgeois governments are not capable of such a revolutionary change.

Paul Feldman
Communications editor

Obama's stimulus plans deepen debt crisis

As the political front man for the world’s most powerful capitalist nation, you might expect President Barack Obama to have some degree of control, or at least influence, over the future direction of both US and global economy.

But his proposed budget for 2012 shows exactly the opposite to be the case. The trajectory of the global capitalist economy is beyond the control of Obama or anyone else.

The first big number of note is the projected government budget deficit for 2011 which the White House expects to soar to $1.65 trillion (1 trillion = a thousand billion), equal to 11%of the country’s annual output (just about the same as the UK’s deficit, by the way).

By themselves the two numbers don’t tell us much. But in the era of sovereign defaults or state bankruptcies, it’s important to note that this will turn out to be the largest deficit as a share of the US economy since World War II.

The projected figure is significantly larger than the $1.48 trillion recommended by the non-party Congressional Budget Office (CBO) only a few weeks ago. And it will be 28% higher than last year’s deficit of $1.29 trillion. Unless this week’s battle in Congress manages to achieve what the Republicans want: a savage and immediate programme of slashing cuts for the spending programmes on which millions of Americans impoverished by the crisis increasingly depend.

Some 48 million are already receiving food stamps and the rate of repossessions is increasing. (Incidentally, the more people there are on food stamps, and the more who are driven out of their homes, the more financial corporations like JP Morgan Chase, who are paid to process them, make in profits).

There’s not a lot Obama can do about all this without enraging the people that elected him. The projected deficit is the result of many factors. The most obvious amongst them is the $600 billion printed to offset the effects of the deepening recession, declining tax revenues and the refusal of Republicans to accept the end of tax concessions for the rich.

The budget for 2012 - and the ten years beyond - is based on fairyland estimates of growth (high) and inflation (low), so the details underpinning the intention to reduce the 2012 deficit to $1.1 trillion are hardly worth considering.

But the progress of the ongoing struggle over reducing the deficit is itself directly influenced by the rising cost of servicing the debt charged by lenders. The CBO warned last month that debt interest is "poised to skyrocket" without drastic cuts. Even if Washington faces up to the crisis by raising taxes by a third, it said, debt interest costs alone will still jump from 1.5% to 3.3% of annual output.

But there’s a longer term chronic problem: the one that blew up in 2007. For more than 50 years, each additional dollar of credit issued (and there have been an awful lot of them) bought a declining amount of growth. There lies the insoluble contradiction for Obama and all those trying to solve the problems the crisis presents.

Attempts to stimulate the economy end up costing more than can be repaid. They have failed to reduce unemployment. Youth unemployment in the UK has risen to a fresh record high, with more than one in five 16 to 24-year-olds out of work after a rise of 66,000 to 965,000 without jobs. Printing money has helped send the price of food soaring around the world and inflation is taking off, as yesterday’s figures from Britain confirm, with interest rates sure to rise soon. In Egypt, these were key factors behind the uprising that ousted the Mubarak regime.

China has now become the world’s second largest economy, behind a faltering US. The tensions between the two are palpable. The challenge before us to end a system of production that has entered a deeply destructive mode before trade conflict takes an altogether more aggressive form.

Gerry Gold
Economics editor

Uniting theory and practice

At a recent meeting of students who had come together from a range of occupations against the rise in tuition fees, a proposal about creating People’s Assemblies (PAs) was described as a “deeply philosophical” question. The remark, which was not made in a derogatory way, was spot on.

Advancing a concept like PAs is both practical and theoretical at the same time, which appears as a philosophical conundrum. That’s a good sign because all revolutionary ideas – and PAs are just that – are rooted in both the present as well as the future. They are, therefore, a real contradiction.

But isn’t that bad? Aren’t contradictions harmful? Wouldn’t the world be better off without them? Can’t we come up with a simpler proposal that everyone can grasp immediately without further reflection and put into practice?

In the struggle against the Coalition’s draconian public spending cuts – made in a bid to rescue capitalism from itself – “simpler” proposals and plans have emerged spontaneously. Anti-cuts campaigns have spread throughout the country. Protests and lobbies take place on a nightly basis. Students and education workers reacted to the cuts with strikes, marches and occupations.

Now that movement is at a turning point. The cuts are going through town halls – many of them Labour controlled. Tuition fees rises have passed through Parliament along with the abolition of educational maintenance allowances. Planned cuts in higher education spending will devastate the universities.

The weakness of the direction of the movement so far is that it is largely restricted to the “present” situation. It is aimed at stopping, halting or reversing the cuts made by a government that has staked its existence on carrying through a massive reduction in the budget deficit. The deficit itself is a product of the global crisis of capitalism and the devastating way it has impacted on the British economy.

The government has made it clear that it is not for turning. Indeed, were it to collapse under the weight of events, a likely outcome would be a national government rather than some mythical formation that would immediately start on a programme of public spending. As we know, Labour is also committed to reducing the deficit and is doing so with gusto at local government level.


So where do we go from here? Putting all our hopes on the results of the March 26 demonstration called by the Trades Union Congress would be a mistake. One demonstration, however large, is not going to change the world. Ask those who took part in the two-million strong march against plans for the invasion of Iraq in 2003.

That’s where PAs come in. They are connected to the present by presenting an opportunity to all those with grievances that the Parliamentary system tied to corporate and financial power is incapable of addressing. These include trade unionists, service users, students, the unemployed, minorities and climate change activists.

They also build on the struggle for democracy and representation that dates at least from the Levellers and Diggers of the English Revolution – and in other ways is traced back to the Peasants Revolt of 1381 and the Magna Carta of 1215. But PAs go further in proposing new forms of democracy beyond the existing capitalist state framework, which can then begin to transform how the economy is owned and run.

They are a philosophical question in the sense that PAs require a leap in thinking out of the present ideological framework which is dominated by impressions and acceptance of the capitalist status quo. But they are also deeply practical because they offer a way forward to an alternative, progressive future.


Paul Feldman
Communications editor

What a balls up

The degree to which Ed Balls, as a key Treasury minister in the last New Labour government, is responsible for the government’s massive budget deficit is subject to argument. But what is not in dispute is Balls’ undying support for the unbridled, unregulated expansion of the financial sector which, as we know, went down in flames in 2008.

Balls, newly promoted as shadow chancellor following the sudden resignation of Alan Johnson, claimed yesterday that having studied economics for over 25 years, he knew what it was all about. Subsequent events prove a) how useless bourgeois economics is and b) how arrogant Balls is.

New Labour, as we know, transformed itself into a party that cheer-led the rise of corporate-driven globalisation and, in particular, the parallel growth of a financial sector that fuelled consumerism and, more to the point, had with government support, evaded all known regulatory frameworks.

As chancellor, Gordon Brown couldn’t believe it. The financial sector’s tax revenues grew apace. And in September 2006, Balls, then economic secretary to the Treasury under Brown, went to Hong Kong to sing the praises of London as a financial centre and how easy it was to do business under New Labour.

Balls told a joint meeting of the Hong Kong General Chamber of Commerce and the British Chamber of Commerce: “The UK’s financial tradition as a free, fair and open global market has resulted in tremendous growth in London’s international financial markets in the past decade – over-the-counter derivatives turnover up by 770%, foreign equities turnover up by 260%, cross-border bank lending up by 160% and foreign exchange turnover up by over 60%.”

After praising the growth of fantasy finance, Balls declared that central to London’s “success story” was “light-touch principle-based regulation” which New Labour was entirely responsible for. Giving the Bank of England independence was Brown’s first act in May 1997. Creating the toothless Financial Services Authority was act two.

Admiring the Big Bang of 1986, when the Thatcher government opened up the City to global competition as “decisive”, Balls went on to laud the FSA which had “confounded those who feared the FSA might become a heavy-handed and inflexible regulator.” In fact, Britain’s “regulatory regime continues to be the best in the world”.

Famous last words or what, considering there were queues outside Northern Rock branches 12 months later as people scrambled to withdrew their money from a bank that had failed in every respect?

The truth is that regulation was non-existent, not so much a light touch as light-headed. Bankers were running rings round the FSA and the Bank of England – and everyone knew it. “Products” like derivatives lay completely outside the scope of the regulators, yet Balls praised them as if they were a new form of gold.

At the time, this is how the political class and the financial elites saw it. Money could beget more money, profits would rise along with tax revenues, ordinary people could get as much credit as they wanted to buy commodities mostly made in other countries. Surely it could never end? As Brown himself said on the eve of the meltdown in July 2007, the City had entered a “new golden age”.

Then came the crash, an immediate recession and the crisis found its way into government finances, producing eye-watering deficits and interest payments on the debt heading towards £100 billion a year. So, yes, Balls does share political responsibility for the crisis. As he said in Hong Kong: “Government decisions … have an important role to play, for good or ill.”

Paul Feldman
Communications editor

German corporations demand survival of the fittest

The Eurozone is cracking apart as German-based industrial corporations demand the end of support for poorer, peripheral debt-laden countries so that wages can be forced down. In the back rooms of the financial powerhouses the talk is of leaving Portugal, Ireland, Spain and Belgium to collapse, throwing millions into permanent unemployment.

Why? Because globally co-ordinated attempts to bring the world’s financial institutions back from the brink of Armageddon by printing money, failed to produce anything more than a temporary – and phony – recovery of growth.

Phony, because the figures did nothing to hide the close to 10% unemployment in much of the developed part of the world, rising to 20% in Spain. Phony, because increased manufacturing filled stock levels but didn’t translate into enough increased sales. Phony because investment in China is giving way to inflation and export-dependent growth is slowing there and in India.

And now the debt contagion that is the principal feature of the global capitalist crisis, has spread to local and municipal authorities in the United States and other countries.

More than 100 US cities are already facing the prospect of bankruptcy. American cities and states have debts in total of as much as $2 trillion. In Europe, local and regional government borrowing is expected to reach a historical peak of nearly €1.3tn (£1.1tn) this year.

Cities from Detroit to Madrid are struggling to pay creditors, including providers of basic services such as street cleaning. Last week, Moody's ratings agency warned about a downgrade for the cities of Florence and Barcelona and cut the rating of the Basque country in northern Spain. The debts of Naples, Budapest and Istanbul's have achieved unenviable “junk” status.

You don’t need to try to imagine the consequences. Just look at Detroit. Fifty years ago, Detroit was home to almost 2 million people. Today, many of the once bustling, car-clogged streets of the motor city are largely abandoned. The population is less than half what it was. One in five houses is empty – in some areas it is eight out of ten. Property prices have collapsed to the point where houses can be had for $100, although the average price is $7,500 (£5,000). The city council gives homes away to those prepared to pay the outstanding property taxes.

Now the city authorities, faced with talk of bankruptcy, plan to downsize Detroit by cutting off services, such as policing and sewerage, to large parts of the blighted metropolis in an effort to pressure residents to move to core neighbourhoods of a smaller city.

The mayor of Detroit, Dave Bing, said that his administration cannot afford to go on providing services such as schools, firefighters, buses and rubbish collection to large areas of the city where the population has dropped sharply. The fall in the number of people paying property taxes has left a $300 million hole in the budget.

Bing told the Detroit Free Press that no one will be forced to move but those who remain outside of designated parts of the city "need to understand that they're not going to get the kind of services they require".

In Britain, rising interest rates and declining tax income are hitting hard already, driving the government’s deficit to record levels yet again. This can only intensify the increasingly shaky Coalition’s drive to cut spending, forcing hundreds of thousands out of work.

It couldn’t be clearer. Capitalist society is no longer able to provide the basics of life for the majority. Its replacement cannot come a moment too soon. People’s Assemblies can surely become the organising focus for a new kind of not-for-profit society. Remaking the financial system will be amongst their first tasks.

Gerry Gold
Economics editor

This will be our last blog before the holiday period. We will resume publication on Thursday, 30 December.

Don't let capitalism off the hook

Embarrassed by the vitality and determination of the student movement against higher tuition fees, some trade union leaders are making militant noises about co-ordinated strike action against the government’s spending cuts. Whether words become deeds is debatable.

Len McCluskey, the new general secretary of Unite, Britain’s largest union, has written in The Guardian that trade unions ought to be “preparing for battle” and should not let the anti-union laws paralyse them in the face of the cuts onslaught.

The Trades Union Congress (TUC), says McCluskey, will meet early in 2011 to discuss “co-ordinated industrial action and to analyse the possibilities and opportunities for a broad strike movement.” But before anyone gets too excited, let’s examine what is happening on the ground.

Yesterday, the TUC general secretary Brendan Barber and union leaders met David Cameron for mince pies and tea at Downing Street at their request. Afterwards, Barber would only say that they had warned Cameron of the consequences of the deficit-reduction plan, as if the prime minister didn’t know already. Only Bob Crow, leader of the RMT transport union, voiced support for McCluskey.

McCluskey, whose union’s endorsement was critical in getting Ed Miliband elected as Labour’s new leader, criticised the party’s front bench for meeting the Tory cuts programme halfway. Somehow he managed to excuse Miliband himself, although the Labour leader accepts that the budget deficit should be reduced. He simply wants the Coalition to move more slowly.

While Miliband quickly distanced himself from McCluskey’s support for strike action – showing that he who pays the piper doesn’t necessarily call the tune – in practice they agree in one key area. Labour-controlled local councils are busily preparing to make substantial cuts. Some like Lewisham have started implementing them already.

Instead of demanding that Labour councils refuse to draw up cuts budgets for 2011-12 based on substantial reductions in central government grant, McCluskey only says they should not be blamed “for the problem” because to do so is a “shortcut to splitting our movement”.

No-one is actually blaming them for the crisis. But local trade unionists rightly are demanding that Labour councils refuse to make the cuts as a matter of principle. Work on drawing up the budgets will begin immediately after the holiday season is over, with a view to getting them through the council by early March.

The TUC demonstration against spending cuts scheduled for March 26 will, therefore, be too late to save tens of thousands of jobs and services from the axe. Conflict between workers and Labour councils is inevitable in the next few months and trade unionists will want to know why McCluskey has nothing to say on this issue.

There is also meeting of minds between McCluskey and Barber on the ground of economic illiteracy. Both insist that the cuts are purely “ideologically driven”, being simply an attempt to destroy public services and the welfare state and are, therefore, totally unnecessary. If only it were that simple.

As we show in our downloadable Beyond Resistance booklet, the cuts are “ideological” only in the sense that capitalist governments are motivated to do everything they can to sustain the profit system. Britain’s budget deficit is part of the same global debt crisis that brought down the banks.

Deficits are a clear and present danger in so far as both governments and the financial markets are concerned. More to the point Barber and McCluskey cannot explain, for example, why parties in Greece, Spain and Portugal who call themselves socialist, have implemented massive cuts and faced down a series of general strikes.

Contrary to what McCluskey and Barber think, economic growth and tax justice is not an alternative to the cuts and lets capitalism off the hook. For any strike action to be effective, is will have to be part of a wider movement to bring down the Coalition while working up plans to replace the present madhouse with a not-for-profit economic and financial model. In other words, we need an ideologically-driven struggle against capitalism itself.


Paul Feldman
Communications editor

Time to remove cuts councillors

Absolutely savage cuts in council spending announced by the Coalition yesterday will lead to tens of thousands of jobs losses and the devastation of essential local services. The question is: How can this be stopped?

The reduction in government grant will hit poorer inner-city areas hardest. Hackney, Tower Hamlets, Newham, Manchester, Rochdale, Knowsley, Liverpool, St Helens, Doncaster and South Tyneside face grant cuts of nearly 9% from next April.

With council tax frozen by Whitehall order, the only way these councils can balance their books is to sack workers and shut down services. And it will get worse, with similar sized cuts scheduled for the following three years.

A number of things are already clear. Many if not most city councils are Labour controlled – and they are without question going to make the cuts. This is already happening in places like Manchester, Doncaster, Lewisham and Lambeth.

The official leaders of council trade unions like the GMB, Unite and Unison, agree with Labour councillors. In fact, Unite is calling Labour councillors to meetings to tell them what they wanted to hear and were already planning – that they should not defy the government. Labour leader Ed Miliband is backing this message.

Unison yesterday came out with the obvious statement that “the scale of the cuts means that communities will be feeling the pain for years to come.” Its main campaign is get a million signatures for public services, as if that will make the slightest difference as far the Lib-Con government is concerned.

Unison is supporting the TUC’s call for a demonstration for public services on March 26 next year – by which time the cuts will have been made.

Britain’s record budget deficit – with interest payments on loans alone heading towards the £100 billion a year mark – is what lies behind the cuts. In turn, the deficit results from the global recession that followed the 2008 financial meltdown.

From a capitalist point of view, the Coalition has no choice but to slash and burn. And inevitably, the burden of the capitalist crisis falls on local communities, which will resemble wastelands if these cuts are allowed to stand.

As the students have discovered, the Coalition has no intention of yielding to protest. Nor will Labour councillors, who overwhelmingly are New Labour types without principle or backbone who would like to be allowed to get away with say "we are only carrying out government orders".

A broad strategy is required that goes beyond resistance.

Councillors that refuse to stand up for their communities have no right to continue to represent local voters. A campaign should begin immediately, organised by council trade unionists, to force them to step aside.

They could organise their own ballots on the cuts as a way of mobilising local communities against those planning to vote for job losses and shutting down services.

Trade unionists and communities have to be prepared to take over the town halls themselves and block all attempts to pass cuts budgets.

Local government democracy was wiped out a long time ago. Councils exist to carry out government orders and communities have to create their own local democratic process.

Council chambers should become a base for creating genuine People’s Assemblies in local areas. A network of People’s Assemblies emerging out of the fight against council cuts would be in a position to defy central government and challenge the authority of Whitehall.

Assemblies could begin to work on economic and financial alternatives to a capitalist system that has patently broken down.

A groundswell of resistance is building throughout Britain. Hundreds of council workers marched through Doncaster yesterday against the Labour council’s plans to slash £80 million off spending. They were joined by students from Sheffield University and applauded calls to strike and occupy council offices to fight the cuts. They are heading in the right direction.

Paul Feldman
Communications editor

Public money - private profiteering

As NHS hospitals struggle to make £20 billion in cuts imposed under the previous New Labour government’s spending plans, a select group of large building contractors and developers will be smiling all the way to the bank.

Wards will close, operations cancelled and staff laid off to balance the books by hospital trusts that have new or modernised buildings. These were built under the so-called Private Finance Initiative (PFI).

New Labour championed PFI as a way to get new hospitals, schools and houses built without direct public spending on the projects. Instead, under PFI the private sector builds the schemes and the public sector leases them back over 30-40 years, effectively taking out an extremely long and costly mortgage.

Over 100 hospital schemes have been built at a value of £11.3 billion. The trouble is that the final bill works out at six times that figure at £65bn. And some NHS trusts are making annual repayments of more than 10% of their turnover, according to figures obtained by the BBC.

The case of the Edinburgh Royal Infirmary is particularly notorious. NHS Lothian will be a tenant for another 40 years. By then the total paid for a hospital which cost £190m to open in 2003 will have topped a staggering £2.4 billion.

The thing is, however, that if hospitals aren’t able to make the payments, the government will step in because ultimately these are state-backed contracts and will always be honoured. So the contractors can sleep happily in their beds, enjoying a guaranteed income stream, while the sick suffer.

Dr Mark Porter, of the British Medical Association, added: "Locking the NHS into long-term contracts with the private sector has made entire local health economies more vulnerable to changing conditions. Now the financial crisis has changed conditions beyond recognition, so trusts tied into PFI deals have even less freedom to make business decisions that protect services, making cuts and closures more likely."

And it’s not as if PFI contracts are good value for money. Public finance expert Allyson Pollock believes the bidding process is almost certainly rigged. One third of PFI projects attracted two bidders or fewer between 2004 and 2006 mainly because of lack of bidder interest. “PFI schemes are characterised by a small number of very large firms competing for contracts; very few firms have the economies of scale and financial muscle to lever in funds, while the high bidding costs and tendering periods act as serious disincentives. In several cases there has only been one bidder.”

Research shows how PFI hospitals on average almost double in costs, with significant changes to the design and specification, between the start and finish of the process.
At University College London Hospital, the costs of the PFI project increased from £120m to £430m in the three-year period prior to signing off. Fewer beds and facilities than originally planned was one result.

It’s a similar story with local authority housing modernisation schemes, according to a recent report. And in London, a variant of PFI has cost council taxpayers billions after a contractor literally went down the tube and others demanded higher payments. Gordon Brown was the architect of that particular disaster.

Contractors have also benefitted from refinancing deals at the expense of the taxpayer. In the Norfolk and Norwich hospital PFI scheme, refinancing increased the investors' rate of return from 16% to 60%. It’s a case of the private sector running rings round public officials who don’t have the expertise to cope with complicated refinancing deals.

This particular burden of debt is one but example of how society is oppressed by contractors, land owners and financial markets. Interest payments on the national debt this year alone will amount to more than £40 billion. That’s a straight transfer of wealth from taxpayer to profit bloodsuckers. It’s got to end sooner rather than later.

Paul Feldman
Communications editor

Plans to bail-out BP

Contingency plans for a possible collapse of BP are reportedly being drawn up in Whitehall as the oil corporation’s crisis continues in the wake of the Gulf of Mexico catastrophe. If the Coalition had to take the company over, it would blow the governments budget-reduction plans apart.

BP accounts for £1 in every £7 paid out to British pension schemes in dividends. The value of the company is uncertain following the largest offshore oil spill in history, which has wrecked ecosystems and affected jobs in US five states. And the thinking is that the Coalition could not allow BP to be broken up or fall into entirely foreign ownership if it meant that pension schemes would suffer.

BP’s management is apparently touring the Middle East looking for governments willing to put up some defensive cash to protect the company against takeover bids from its bigger competitors Royal Dutch Shell, and Exxon Mobil. You can be sure that more than one of Cameron and Clegg’s people are in there batting for BP.

On Fortune magazine’s list of the world’s largest corporations BP ranks fourth, behind WalMart. The company reported profits of US$21.2 billion on its revenue of US$367 billion last year. So the US$20 billion it has so far been obliged to set aside for the costs of the oil spill wipes out last year’s profit.

What happens to BP affects the entire global economy, and not just in terms of its revenue and profits. BP’s product is as important to capitalist production as its profits. The entire system is fuelled and lubricated by oil. This is why proposals to cap the leak altogether fall on deaf ears. Stopping the flow of oil isn’t on the agenda.

Despite the rampant destruction, all of the oil producers are intent on drilling deeper, overcoming all obstacles. It didn’t take long for the corporations to get the US Federal court to overrule Barack Obama’s six-month moratorium on all pending, current or approved drilling plans for new deepwater wells.

BP’s shares have been on the rise again after the price dropped by more than a half since the oil began leaking into the ocean, for three reasons. Firstly, the company declared it wouldn’t be issuing shares to raise capital, which would have diluted the share value even further; secondly, the relief well drilling which, it is hoped, will at least help to stop the leak in August is ahead of schedule; and thirdly, they have just begun deploying a new “super-skimmer”, a third vessel at the leak site that is hoped to nearly double BP's capacity to 53,000 barrels of the leaked oil a day from around 25,000. But rough seas are hampering efforts to finish the job, and more hurricanes are threatening as the effect of climate change induced by the burning of that same oil bites.

Rather than cap the leak BP must scoop up as much as it can. Oil corporations are the most powerful organisations in the world. So last month’s call from General Electric and Microsoft for the US government to more than triple its spending on clean energy research and development has little impact.

If the rest of BP, already 60% per cent owned by non-UK investors were to fall into foreign hands, the British government’s emergency budget will become irrelevant. There’s every chance that Cameron and Clegg will be forced to follow New Labour’s solution to the bankruptcy of the banks and take BP into state ownership.

At this rate, the state will soon control the commanding heights of the capitalist economy! So much for the virtues of private ownership. It’s not at all indispensable. What remains is the issue of the state itself. A corporate state that functions on behalf of a bankrupt capitalist system serves only narrow interests and we should work to replace it with a network of democratic People’s Assemblies. Then we would see some progress.

Gerry Gold

Economics editor

Rail union calls for 'co-ordinated strikes' against Coalition

The imposition of austerity budgets to reduce budget deficits – adopted across Europe by governments of all persuasions – is suddenly looking too dangerous to investors in the global markets.

Now these gamblers are worried about a self-defeating downward spiral in Europe, and shifting their funds to Japan, whilst piling on the political pressure for President Obama to issue a new pile of fantasy finance by way of the Federal printing presses.

Indicators of deflation and declining production have emerged as the latest and biggest threat to the global capitalist economy. Not least is the Baltic Dry Index that measures the shipping of bulk goods around the world. This dropped by 40% last month.

These signs of the economy once again falling off a cliff – the much feared “double-dip” - are sure to aggravate the latest phase of the financial crisis. Tomorrow the European Central Bank’s emergency facility of €442bn (£361bn) of one-year loans ends. It’s the largest sum ever lent by a central bank. If the ECB fails to renew the scheme, there are fears that it will trigger a catastrophic banking collapse in Spain.

The chaotic reversals in the bond markets which lend to governments show that neither austerity budgets nor more quantitative easing/printing money can stop the rapid deterioration of the global economy.

In Britain, for example, it is reported that the Coalition’s cuts programme will add another 1.5 million to the dole queue. They will certainly not be taking part in a growth of consumer spending.

In essence, this destruction of people’s jobs and livelihoods is the inevitable consequence of the capitalist crisis – not its cause. It is too simplistic to view the cuts just as old-fashioned Toryism, especially when the Greek and Spanish “socialist” governments are doing the same and New Labour had a similar programme in store if it had won the general election.

This is the context for general secretary Bob Crow’s spirited address to the Rail, Maritime and Transport union’s annual conference. He told the delegates: “‘This ConDem administration has thrown down the biggest challenge to the trade union movement since Margaret Thatcher took on the National Union of Mineworkers.

"I have no hesitation in saying that it will take general and co-ordinated strike action across the public and private sectors to stop their savage assault on jobs, living standards and public services."

He went on: "The trade unions must form alliances with community groups, campaigns and pensioners' organisations in the biggest show of united resistance since the success of the anti-poll tax movement. Waving banners and placards will not be enough - it will take direct action to stop the Cameron and Clegg cuts machine.”

Crow is on the right track, but resistance alone cannot withstand or push back the impact of this crisis. Its scale is unprecedented and opposing the cuts must involve more than trying to force the government to change course, which would be a hopeless and futile pursuit.

A key lesson of the miners’ strike for jobs that Crow referred to is that the state and the discredited parliamentary system is a front for global corporate and financial interests and this is what we have to transform.

“General and co-ordinated strike action” - which would have to defy the anti-union laws to happen - is certainly needed. But the assault on jobs, living standards and public services can only be dealt with if the alliances Crow calls for become the basis for People’s Assemblies in a direct challenge to the power of the capitalist state to rule over us.

People’s Assemblies will go beyond protest, taking control of the resources that make up the productive economy and the financial system, and converting them from the playthings of global speculators into the means of meeting the needs of the majority.

Gerry Gold
Economics editor

Prepare General Strike to bring down Coalition

Tory Chancellor Osborne’s collection of savage spending cuts and dramatic tax changes is intended to engineer a massive transfer of wealth to shareholders, whilst condemning millions to a life of grinding poverty on reduced benefits or on the dole. Claiming that “we are all in this together” is simply a lie.

It follows the £6 billion cuts announced in the days following the election. It comes in the wake of the scrapping of 12 major capital investment projects approved by New Labour in the dying days of its period of rule. And on top of cuts made by the outgoing New Labour government in higher education.

Much worse is to come. In the public sector, reducing the budget deficit will leave most departments – apart from health and international aid – facing a 25% reduction and the certainty of huge job losses. No advanced economy has ever made such drastic spending cuts in state budgets.

Pay for public sector workers will be frozen, initially for two years. As entire services are threatened with the axe, Cameron and Co. will be ratcheting up their caring, sharing approach. They will cynically encourage redundant workers to form co-operatives of volunteers to take them on with a pittance of a contract to cover expenses.

But for the private sector, the plan is quite different. Here the overarching idea is to make Britain an attractive place to do business, boosting profits by reducing corporation tax. Each year for four years the tax rate companies pay on the profits they fail to hide abroad will be reduced by 1%, bringing the headline rate down to 24% - amongst the lowest of all the developed countries.

With some of its measures, the Coalition is trying to disarm some of its potential critics with the appearance of concern for the poorest. As part-payment for the Liberal Democrats’ participation, the income tax allowance lower limit will be raised, exempting 880,000 of the lowest earners from paying tax. But this will be more than offset by the increase to 20% in VAT from next January. With housing benefit capped and child benefit frozen, it will hit the poorest hardest.

Further assaults on living standards are already planned. In a calculated move towards a national government the Con-Lib coalition is to be extended to include New Labour’s former work and pensions secretary John Hutton who will prepare the ground for an assault on state and public sector pensions. And then, in October, Osborne will announce his review of public spending which will detail the cuts to be made, department by department.

The Coalition has embarked on a high risk, “kill or cure” programme based on figures for growth that are already under challenge and that are not possible in the context of the global crisis of capitalism. Eurozone economies are diving deeper into recession, while many German and French banks are reckoned to have solvency problems. They hold piles of Greek and Spanish government debt now worth far less than it was bought for.

This is not a government of strength but one thrown together in an emergency and which has no mandate for the unparalleled cuts it is making. The general election was a fraud because none of the major parties would come clean on what was being planned. So the electorate has every right to fight the Coalition.

Protest campaigns are already underway around the country. Trade unionists, pensioners and community groups are meeting to plan their actions to protect jobs and services. They should begin to create People’s Assemblies to co-ordinate their struggles and to plan for political and economic alternatives to a capitalist system now in profound economic and political crisis.

Unions who are opposed to the cuts will have to step up to the plate in the absence of any resistance from the Trades Union Congress. Brendan Barber, the TUC general secretary, could only say the budget was “economically dangerous and socially divisive”. He offered no challenge to the Coalition or its unacceptable budget whatsoever.

Bob Crow, general secretary of the rail union RMT, was more forthright, declaring: “There is no question that there will be widespread industrial and community resistance to the cuts agenda and RMT will be in the front line wherever people are making a stand.” This is good as far as it goes.

The RMT is part of an alliance called the Trade Union Coordinating Group, along with firefighters, civil servants, university and college teachers and other sections. The TUCG should start a campaign within the TUC to make preparations for an indefinite General Strike against the Coalition government, which is assuming the role of a dictatorship over the working population.

Resistance is not enough. The aim must be to bring down the Coalition and create a revolutionary government in its place. This is the road we have to take to prevent a social catastrophe far worse than that of the 1930s.

A World to Win
23 June 2010

Britain - a failed state

A system that produces a government intent on forcing people to cut their own throats is a failed state and we ought to find a democratic replacement for it as soon as possible.

The Conservative-led coalition of public school-educated ministers wants to make the whole of the British electorate party to decisions that will “change our way of life” over the next few years.

Cameron and Clegg’s already damaged coalition – together with the entire media circus – are engaged on a campaign of attempted mass hypnosis. If they had their way, they’d draw the entire population into a self-inflicted tsunami of devastating cuts in wages, jobs, pensions and public services on a scale never seen before. This is change for the very worst.

As the government’s new “independent” Office for Budget Responsibility will reveal, the economy is on much shakier ground than previously thought. Treasury growth forecasts which, if true, would have cut the budget deficit, are pure invention by the outgoing New Labour government. The OBR, by the way, is headed by Sir Alan Budd, who, in 2005 became a director of IG Group, which trades in financial derivatives and spread betting. Very “independent” then!

Attempts to restart economic growth through the printing of money inevitably came to nothing, both in Britain and in the United States. The crisis of the capitalist system has not gone away. Far from it, as John Authers writes in his new book for the Financial Times, "The fearful rise of markets”:

“The financial disaster of 2007 to 2009 … has not cured any of the underlying factors that led markets to become intertwined and overinflated and to endanger the world economy. This does not mean that another synchronised bubble followed by a crash is inevitable, but it does mean that such an event remains a distinct possibility.”

The global capitalist system has failed – economically and politically. So what follows is a short list of the changes to the social relations that define “our way of life” we think are worth considering.

First to go should be the profit-based financial system and all the associated wasteful, absurd activities that turn reasonable, well-educated, clever, potentially socially-useful people into crazed traders and wild-eyed speculators. They have gambled with everyone else’s pensions, savings and futures, and now hold governments around the world to ransom. Sure we’ll need a system of credit and money, but why not run it as a not-for-profit community service?

Then there’s the system of land and property ownership. This has survived more or less intact in Britain since the Middle Ages. It ties millions of people into paying the major part of their income as rent or interest in exchange for temporary occupation and use or the mirage of security as a house owner. It’ll be better, much better when all property is held in common. Socially-owned land and housing for all!

And that also applies to the ownership of capital – factories, offices, machines, tools, knowledge – all the durable things we’ve created that help us to produce what we need to live. As Marx explained, capital is value accumulated from many workers’ labour. For little more than 350 years the ownership of capital has given employers control over their employees.

Life will be better when private ownership, production for profit and the wages-for-labour employment contract is ended, and capital is under the control of the people who do the work that produces it.

We’ll need a new democratic process to make this happen. When Cameron’s campaign of persuasion meets popular opposition, he’ll either resort to force or the coalition will be driven out of power. Let’s build a real, much more democratic system of Peoples Assemblies that can make this new “way of life” a reality.

Gerry Gold
Economics editor

Beyond resistance

As the coalition government lines up massive spending cuts that even prime minister David Cameron acknowledges will shake society, a strategy that goes beyond resistance is needed if we are to defeat the Lib-Tory government’s plans.

Because make no mistake – that is what is involved. Throughout Europe, governments are impervious to protests and one-day strikes against cuts in pensions, pay and services. They can ride out storms that are only temporary.

Resistance isn’t futile, however, but to succeed it has to be part of a wider strategy that addresses the root cause of enormous budget deficits, namely the crisis of capitalism itself. If not, there is a real danger that protests could burn themselves out.

The coalition has seized the ideological high ground by presenting its plans as if “There is No Alternative” when it comes to saving the country from financial disaster. Inviting the public (and trade unions) to suggest where the axe should fall is part of this seductive approach.

Britain’s budget deficit in particular is the result of the dramatic plunge in capacity that followed hard on the heels of the 2008 global banking crash. The independent Institute for Fiscal Studies believes that the fall in the annual value of goods and services could be as high as 10% from pre-meltdown levels.

Government revenues of all kinds have dropped as production and consumption has plummeted. Tax takes from the financial sector, which propped up New Labour’s spending, have declined sharply, for example. With the housing market frozen, revenue from stamp duty has faded. Meanwhile, spending on unemployment and social security benefits has risen. And then there’s the cost of financing the banking bailouts.

In sum, the budget deficit expresses the crazy nature of an economic system driven by mammoth amounts of debt – personal, corporate and state. By the time of the 2008 meltdown, it was estimated that global debt was four times higher than the value of goods and services. Something had to give. And it did.

The destruction of capacity in the private sector is now to be followed by a similar massacre in the public sector. That is how capitalism traditionally “solves” its crisis.

So what kind of strategy do we need?

Firstly, it has to be a combined political and economic approach backed by mass mobilisation of people and their communities. As pressure on the government makes no difference – the demands of the financial markets carry far greater weight – the political aim is to bring the government down.

Obviously there’s no point in replacing the coalition with a rebranded version of New Labour, which in 13 years turned Britain into a playground for financial markets and speculators. As there is truly no alternative in this case, we should build
support for People’s Assemblies to challenge the existing political system.

Secondly, we have to demonstrate that the heart of the matter is capitalism itself. We have to terminate an economic system where artificially-induced booms are followed by slump on a regular basis. Democratically-owned and controlled sustainable production and finance is not only possible but absolutely necessary. Some ideas along these lines are outlined in our Manifesto of Revolutionary Solutions.

Opportunities exist to change the debate, to reject the capitalist state’s version of events. The anti-cuts committees that are already springing up around Britain should consider how to bring these essential political and economic questions into the heart of their campaigns. We must move beyond protest to prevent a calamitous reduction in living standards that the coalition and the bankers are preparing to impose on society.

Paul Feldman
Communications editor

Let the battle commence

The £6.2 billion cuts package announced by chancellor George Osborne and his Lib Dem partner in crime David Laws will cost jobs and hit services, and are just the opening round in plans for savage reductions in public spending. The big issue is how workers and communities can defeat these plans.

Osborne claimed that the first tranche of cuts were aimed at eliminating “wasteful expenditure”. But the freeze on job recruitment in the civil service and the axing of a series of semi-government agencies can only result in fewer jobs and more intensive conditions for those who remain. The cancellation of private sector contracts will inevitably result in closure of medium-sized firms and send more people to the dole queue, which is already at its highest level since the early 1990s.

The immediate cuts will be followed by an emergency budget next month and a major programme of reductions lasting years will be announced in the autumn. These are certain to include effective pay cuts for hundreds of thousands of public sector workers.

To plan how to defeat the coalition and its plans, we have to be clear what the cuts aimed at reducing the state’s £150 billion plus budget deficit are about. The deficit is a result of the meltdown of the financial system in 2008, the bank bail-outs and the consequent recession.

The economic globalisation that began in the 1980s was driven by debt – the debt of individual households, corporations and governments. There is a reason for that and it’s called capitalism. As we explain in our Manifesto of Revolutionary Solutions:

“Competition on price demands increases in the productivity of labour which reduces the hours needed for the production of a commodity. So the value, which is determined by the quantity of labour it contains, and hence the price of, and profit from each commodity tend to decline as a result. To offset the reducing profit derived from each ever-cheaper computer or car, more units of each type of commodity must be manufactured and sold.”

Because people’s income through wages can never be sufficient to buy all the goods produced globally, the financial system developed new ways to provide credit. This in turn got completely out of hand, as the Manifesto notes:

“The global cloud of credit expanded way beyond the value of productive capacity, goods and services it supposedly represented, engulfing the world in debt. By 2006, around 90% of the world’s credit was effectively worthless, sustained by and sustaining the fiction of endless growth ... The consumer boom gave way to a downward spiral that ended the dream of continuous credit-and-debt fuelled growth.”

The globalisation train is now running in reverse as global capitalism heads for an unparalleled slump. Countries with massive state debts are the weakest links in the chain. These include not just Greece and Spain but the United States and Britain.

The cuts are the expression of the destruction of capacity and assets by capitalism when it is in crisis and, of course, they only deepen the problems of the economy as more people become unemployed. The British coalition government has to make the cuts because that’s what the system demands, just as British Airways has to slash staff costs and benefits to survive.

So when Osborne says “we are in this together” and that today’s cuts are a first step to “improve the quality of people’s lives and build a better future” we know that he is simply lying. The immediate future is one of building an all-out struggle against the government, telling the trade union leaders that if they are at all serious, they will have to defy anti-union laws and lead immediate walk-outs.

Actions in Spain and Greece have already provided a significant lesson. Strikes, rallies and resistance must be part of a vision of a different society, one based on co-operation and co-ownership not competition and profit or they will not succeed. People’s Assemblies that take up the issue of power and an alternative to capitalist rule have a decisive role to play in the coming struggles.

Paul Feldman

Communications editor

It's all about power

The political crisis that has erupted in Britain following the general election provides a window of opportunity to bring the most basic of questions – who rules the country and in whose interests – right to the top of the agenda.

That is the focus of our ‘Taking the Revolutionary Road’ conference on May 22, which couldn’t be happening at a more opportune moment.

It is all too easy to be sucked into the drama around the frantic efforts being made to put together a coalition government of one variety or another. But behind the to-and-fro in Westminster, as the major capitalist parties jockey for power, is a profound political and economic crisis.

The political system is broken in a deeply significant way. A new system of weighing and distributing votes in the shape of proportional representation wouldn’t even begin to address the heart of the matter.

Many voted reluctantly last week. And a large proportion of those who dragged themselves to a polling station last week have no faith or trust in the parliamentary system. And for sound reasons that go way beyond the expenses scandal of the last parliament or the inadequacies of the first-past-the-post voting system.

As our Manifesto of Revolutionary Solutions points out: “Full-on globalisation has resulted in an unholy alliance between the state, political parties, corporate and financial power in all the major capitalist countries. From London to Washington, from Berlin to Rome, from Tokyo to Seoul, the reality is essentially the same.

“Democracy is reduced to a sham, a façade behind which real decisions are made and power exercised over ordinary people. The right to vote counts for little and the aspirations of ordinary people are denied by state systems that primarily function in the interests of big business.”

This analysis is borne out by the events since it became clear that the election had produced deadlock. The tell-tale phrase is how all parties at Westminster have pledged to rule in the “national interest”. What this means is all to clear once the patriotic rhetoric is stripped away.

The “interest” in question here is not that of ordinary working people struggling in their daily lives to make ends meet. What Brown, Cameron, Clegg and others are prattling on about is something quite different. The “interest” they will protect at all costs is vested in the financial markets and corporate boardrooms.

So irrespective of the make-up of the next government, it will come down on the interests of ordinary people like a ton of bricks, imposing savage cuts in living standards and services to satisfy the money markets who fund the British state’s massive deficit. The answer to the question about who rules Britain and in whose interests suddenly is made clearer as a result.

The financial and economic crisis can only worsen. At the weekend, the eurozone countries and the International Monetary Fund pledged €750 billion in rescue plans to try and reassure the markets that debts will be honoured. It merely serves to postpone the inevitable.

Whatever government emerges in Britain is certain to provoke large-scale resistance by trade unionists and communities as the full horror of the cuts becomes apparent. One of the immediate lessons from Greece, however, is that strikes and protests have not prevented the government from voting the cuts through the country’s parliament.

To fight to win means actually defeating and removing the government of the day, and in the process creating alternative structures to those of the capitalist state such as People’s Assemblies. In this way, ordinary people would get to rule in their own interests, replacing those of the money markets and boardrooms. By registering for the May 22 conference you would give this strategy a real boost.

Paul Feldman

Communications editor

Election crisis: markets call the shots

The hung parliament that has resulted from Britain’s inconclusive general election is certain to lead to a prolonged period of political instability slap bang in the middle of the gravest economic and financial crisis since the 1930s.

Now the horse-trading begins – behind the voters’ backs – to put together a government that is unlikely to see the year out. The Tories, New Labour and the Lib Dems don’t have much time, as the markets made clear while the last votes were being counted.

Sterling fell on the foreign exchange markets, while the cost of borrowing to fund the huge budget deficit rose as dealers in British bonds began to take evasive action. Shares on the FTSE 250 – which more closely reflects the British economy - fell by over 270 points. “They have got until the markets open on Monday to sort this out,” one dealer said.

Paralysis at Westminster comes amidst turmoil coursing through global markets in the wake of Greece’s bail-out by the International Monetary Fund and other eurozone countries. Few think the £100 billion rescue package will be sufficient and the resistance by Greek workers has further unnerved the markets.

“The election is shaping up to create the worst possible outcome at the worst possible time,” warned David Morrison, strategist at GFT. “Investors’ nerves are already jangling and this added uncertainty will undermine UK equities further. The sell-off in gilts [bonds] and sterling is a clear indication of how unimpressed the City is by the lack of a clear winner.”

If the City was unimpressed, so too were the electorate. Their refusal to give any party a clear mandate could be seen to express a fear that such an outcome would make massive cuts in services and living standards more certain. While the turnout was up slightly on 2005, in many inner-city areas it was below 60%. More than one in three registered voters did not participate, despite intense pressure to do so.

Clearly the TV debates did nothing to enable voters to distinguish one party from another, apart from the style of the respective leaders. Many undecided voters failed to work out a choice in time while thousands of those who made up their minds late in the day found themselves locked out because polling stations were understaffed.

All the major parties have now pledged to act “in the national interest”, which is tantamount to saying that the markets must be mollified by a cross-party agreement to make the cuts they hinted at but shied away from spelling out in any detail during the election campaign. Ruling in the people’s interest is not an option for any of them.

One thing is clear. New Labour spent 13 years in office promoting a market capitalist economy that ultimately crashed and in doing so created the political space for the hated Tories to make a comeback from the dead. In 1997, New Labour got 43% of the vote and more than 12 million votes. Now they are down to a 29% share and 8 million votes.

A majority New Labour government is now no longer a practical possibility in British politics. Any pact with the Lib Dems would simply confirm a new political alignment that is not so much “progressive” as anti-socialist, anti-trade union and pro-business.

The election result shows that the Parliamentary system is in melt-down, one that reflects the real chaos in global economics and finance. An anti-people regime without any mandate will set about clobbering the electorate very shortly. On that basis, we have an absolute right to oppose and reject whatever government and policies emerges this weekend. More than that, we should set out creating the framework for a real democracy in the shape of a network of People’s Assemblies. The old system is broken and can’t be fixed.

Paul Feldman

Communications editor