Britain: Through what stage are we passing?

The working class is facing enormous challenges both in Britain and internationally. We are facing conditions not seen for generations. The days when not much seemed to be happening have gone and we have now entered a period of very sharp and sudden changes, a period of renewed struggle in the labour movement.

Without doubt, world capitalist crisis has returned with a vengeance. What has been astounding is the sheer scale and speed of the economic collapse. This has resulted in absolute panic in the ranks of the capitalists internationally. They are, to use Trotsky's words, tobogganing to catastrophe with their eyes closed. All their proposed celebrations to welcome the 20^th anniversary of the fall of the Berlin Wall have been completely overshadowed by a new turn of events: the biggest crisis of capitalism since the 1930s and the Great Depression.

Some five months ago the bourgeois economists were hoping for a different scenario. Last October, the Financial Times, the main mouthpiece of finance capital in Britain, produced its own World Perspectives document. In it, it outlined two frank options:

“At best, it [the capitalist system] can return to a healthy upward trajectory once the immediate crisis abates and excesses have been worked out of the system. At worst, a vicious and unbreakable circle of financial crisis, recession and further pain for banks could cause the worst depression in generations.

“Prominent European economists, organised by the VoxEU.org website, last week likened the possibility, both economic and political, to the dark years of the 1930s. It is not an exaggeration to say that it could happen again if governments fail to act.”

So what has happened in the time between then and today? Last month the Financial Times again reviewed the situation. “The decline of global trade, peak to trough, during the Great Depression [was] a little over 25%... we are not there yet, but on present performance are getting there fast. What took the global economy 3 years to achieve between 1929 and 1932 might take us less than a year... the speed at which global trade has been collapsing is nevertheless breath-taking. What is frightening is that we do not really understand what is going on.” (9/2/09)

At least they are being honest. They have no idea what is taking place. Despite all the resources at their disposal they are blind to the workings of capitalism.

“We are not going to have a recession”, stated Lorenzo Bernaldo de Quiros, chief economist and chairman of Freemarket International Consulting. “We're going to have a depression like in the 1930s. This is the perfect framework, together with a financial crisis, for a depression.” (FT, 1/2/09) More recently, Nariman Behrevesh, chief economist at IHS Global Insight explained, “We are in the midst of the worst economic storm of the last half century and it keeps getting worse.” (FT, 1/3/09)

The world economy is crashing and the strategists of capital offer no solutions. Drawing by Latuff.

These are not throwaway remarks. For the last 25 years, the capitalist class has engaged in an orgy of speculation, based upon the biggest expansion of credit in history. Profits boomed and there was an intensification and expansion of world trade. This allowed capitalism to go beyond its natural limits. However, there reaches a point when a further limit is reached and we experience a period of sharp contraction. This was the credit crunch, which precipitated a collapse in demand, collapse in the market, the closure of factories, increasing unemployment, further falls in demand, in a downward spiral. The result is a slump and a crisis of overproduction.

The sheer scale of the speculation, accompanied by the biggest debt/credit bubble in history resulted in a massive slump. As the saying goes, the bigger you are, the harder you fall. Last autumn, the world financial system was brought to its knees and the banking system was on the verge of collapse. Now we are experiencing the wholesale collapse of the productive forces: industry, technique, science, etc.

The fall in the Gross Domestic Product (GDP) over the last period has been staggering. In the last quarter of 2008 (on an annualised basis), the fall in GDP was:
S. Korea - 20.8%
Japan - 12.7%
Germany - 8.2%
USA - 6.2%
Britain - 5.9%

The decline in industrial production over the same period was:
Japan - 21%
Spain - 20%
S. Korea - 19%
Germany - 12%
USA - 10%
Britain - 10%

For the first time since the Second World War, world GDP is going to fall. However, more frightening, and more worrying, is the collapse in world trade. This is very important for what is going to happen in the future. Our tendency explained many times that the world upswing in the post-war period was chiefly due to the development of world trade, which was expanding at a rate of over 12% per year during the 1950s. This was the main stimulus for the huge rise in world production and the increase in living standards.

The development of world trade partially allowed capitalism to overcome its fundamental limitations for a whole period, namely the constriction of the productive forces by the restraints of the nation state and private ownership of the means of production. Capitalism was in fact able to temporarily transcend its limits.

Now, however, world trade is collapsing. In the last quarter of 2008, US exports (in volume) fell by 33.6%. US imports in the same period fell by 21.1%. Japan's exports in January (2009) fell by 44%, the biggest fall on record. Those who looked to China to maintain world growth have been sorely disappointed. Chinese exports in January fell by 17.5%. Imports fell by 21.3% in December (2008) and a further 43.1% in January.

“In a world of contracting demand China, the world's leading exporter of over-capacity, is actually adding to global over-capacity”, states the FT. “It will be hard to convince China's trading partners that this is fair...”

This is a gross understatement. The slump is producing protectionist tendencies everywhere, threatening to drag the world economy down even further. We have already had the “Buy American” stricture written into Obama's stimulus package. The French President Sarkozy has berated French car manufacturers for locating their plants in the Czech Republic, to the Czechs' annoyance. The British were prepared to use anti-terrorist legislation to bring the Icelandic government to heel. National governments are busy subsidising their industries and bailing out their banks to safeguard their own national interests.

Protectionism is returning as different governments are attempting to save their own economies at the expense of others. Photo by Jannie Jan.

World capitalist leaders are looking to the G20 summit next month to offer a way forward. But this could easily go the same way as the economic summit held in London in 1933 which ended in disarray. The last G20 meeting was held in November and pledged to maintain free trade. The pledge didn’t last very long! “The solemn pledge intended to bind signatories for a year lasted less than 36 hours before Russia said it would go ahead with planned increases in car tariffs”, explained the FT. “Moscow's violation of the pledge was followed by several other G20 countries – India, Brazil, Indonesia and Argentina – all pushing for increased protection.” (28/1/09)

The strategists of capital are terrified that this rise in protectionism will lead to a depression as in the 1930s or a deflationary crisis similar to the one that affected Japan for the best part of a decade. The Japanese attempted to solve the crisis with fiscal packages and zero interest rates, but to no avail. Roosevelt also attempted to use the New Deal to rescue capitalism but mass unemployment continued throughout the 1930s. Unemployment did not return to pre-1929 levels until 1943 thanks to the advent of war production.

Now every government around the world is introducing its own fiscal stimulus package. Literally trillions of dollars are being poured into the economy in a desperate attempt to save capitalism. This will have no significant impact save pushing up government budget deficits to astronomical levels. The US budget deficit is set to rise to $2.5 trillion. These deficits will be unsustainable. Obama has already promised to cut the US deficit by half in four years, which will simply mean a massive rise in taxes and huge cuts in public spending, basically a programme of permanent austerity. The same goes for all governments as a new era of austerity opens up.

The crisis has already had a major impact on the lives of ordinary working people. In the USA, some 2 million people have had their houses repossessed. Car parks have been opened to store cars used as homes for the homeless. A further 8 million are at risk of foreclosure. California, the richest state, has plans to cut its $46billion deficit, with some 10,000 jobs being axed.

Not only have banks collapsed and been nationalised around the world, but whole countries are at risk of bankruptcy. The whole of Eastern Europe is in dire straits. Iceland is an example of what can happen even in the “wealthy” countries. Iceland had one of the highest living standards in the world. Now the crisis has brought the country to its knees with the currency losing 70% of its value, mortgages doubling and people losing their jobs. One third of the population now wants to emigrate.

The economic crisis gave rise to redicalisation in Iceland, where thousands of protesters successfully demanded the resignation of the government. Photo by Scarndp on Flick.

The crisis has given rise to a political radicalisation. Huge demonstrations surrounded the parliament on a daily basis. The Financial Times reporter was astonished when he heard them singing the Internationale. One businessman who had become bankrupt said he now favoured what the Bolsheviks did as well as those French revolutionaries who brought in the guillotine!

The crisis has served to transform people's consciousness. There is a hatred for the bankers and the market economy that have brought everything tumbling down. There have already been demonstrations in Vladivostok and the Baltic States. In France more than two million went on strike and demonstrated against the crisis. Workers on the TV were complaining, “Why bail out the bankers? What about the workers?” In Greece, we have witnessed big movements of the youth and a general strike. In Ireland, the workers are being asked to pay a levy on their pensions at a time when the bankers are being bailed-out. This has resulted in a big civil servants' strike and a demonstration of 200,000 in Dublin. Even in the Caribbean, there has been a prolonged general strike in Guadeloupe. The fear was that it would spread to the other islands and even to France.

As one French banker explained: “This is not just another boom and bust cycle. This is the failure of a system. It is the collapse of the Berlin Wall.” (23/12/08)

The unfolding world crisis is the background to events which are unfolding in Britain. Already British capitalism is facing a very deep crisis. According to the International Monetary Fund, because of its reliance on finance and the City, Britain will be one of the countries worst affected by the crisis.

30,000 workers lost their jobs when Woolworths went bankrupt earlier this year. Photo by pilotito on Flickr.

Already in the final quarter of 2008 the British economy shrank by 5.9%, a bigger contraction than occurred in 1931. Industrial production has fallen by more than 10%, with further falls to come. Unemployment stands at 2 million, with 3 million being predicted for next year. The British Chambers of Commerce are saying it could go even higher, to more than 10% of the workforce. This at a time when the government are attempting to force another million off incapacity benefit as well as forcing single mothers back to work.

There has been an avalanche of redundancies from Woolworths to Nissan. Over the next 3 months, some 320,000 are expected to lose their jobs. 20,000 job losses hang over the Royal Bank of Scotland. There is a threat to 50,000 offshore oil and gas workers. Some 140,000 shops are due to close. Already 100,000 building workers are out of work. The car industry is in acute crisis with a closure threat to GM plants in Britain, namely Vauxhall in Elmsmere Port and Luton. Hundreds of thousands face short-term working and wage freezes.

Under capitalism workers are facing a bleak future. A capitalist was recently interviewed in the Metro. His name was James B Rogers Jr, a co-founder with George Soros of the Quantum Fund. When asked if the car industry should be allowed to fail, he answered: “Yes. Anybody who fails should be allowed to fail. Capitalism without bankruptcy is like Christianity without Hell. It doesn't work otherwise.”

When asked about what people should do in this crisis, his reply was: “Worry! You need to hunker down because your government is making plenty of mistakes. Figure out a way to save yourself. It depends on your skills set. If you speak Chinese, go to China. Or try farming.” (Metro, 26/1/09)

We can wonder how many of the 30,000 workers who lost their jobs at Woolworth’s can “save themselves” or, even better, speak Chinese? It simply demonstrates how out of touch the bourgeois really are, cocooned in their ivory towers.

With the collapse of the housing bubble some 40,000 houses were repossessed last year. This year the figure is likely to rise to 75,000. Many families find themselves in negative equity as house prices continue to fall. It has been estimated that half of all mortgages on the books of Northern Rock will be in negative equity this year. Thatcher's idea of a property-owning democracy has turned into a nightmare. The idea that it would bind workers to the system and provide social stability has turned into its opposite.

Fred Goodwin - the 'scumbag millionaire' is being targeted by the press for his £16 million pension. Photo by takomabibelot on Flick.

Four out of five workers are feeling totally stressed at the situation. “Employees are really feeling the strain from the recession and are finding it too hard to cope”, says Peter Done of the employment law firm Peninsula. “The increase in the workload of workers is another contributing factor with the soaring levels of unemployment we are experiencing, it is plain to see those still in work are expected to take on more responsibility.” (The Herald, 23/2/09)

Millions are going without sleep due to economic worries. A total of 49% are sleeping badly, according to a poll carried out for the Body Shop. Those aged between 25 and 34 were the most anxious about making ends meet with 61% of this age group being kept awake by fears over money. When asked about the details, 32% said they were worried about paying heating bills, while 26% fretted about food bills. 20% were worried about their jobs and 15% about their credit card bills. Among women, 43% were worried about their families while 5% of men admitted to being awake thinking about Gordon Brown!

The working class has reacted with shock and fear at what is happening. This is mixed with a large dose of anger. This anger is being directed at the bankers who have received billion-pound bail-outs. An estimated £1.3 trillion – equal to the entire year's GDP of Britain – has been placed at the feet of bankers in Britain. No wonder bankers have been the villains in Christmas pantomimes and the butt of popular jokes. The most hated figure nationally is Sir Freddie Goodwin, the ex-chief executive of the Royal Bank of Scotland. Sir Freddie, after being relieved from his employment, has netted a £16 million pension pot which pays out a pension of over £700,000 a year! At the same time tens of thousands of RBS workers are threatened with the sack. The press, seeking to cash in on his unpopularity, described him as the “Scum-bag Millionaire”.

This hatred of bankers has boiled over into a hatred of capitalism. Even John Prescott has chimed in against “greed” and “capitalism in the raw”, despite the fact that he was in a government pushing the free market idea.

We are in a very explosive situation in Britain. The scenes at the BMW plant in Cowley were an example of this when workers were confronted with losing their jobs. The anger was apparent when the union convener attempted to justify the sackings. “What the hell is the union for?” demanded the workers, who received a week's pay and their P45s. If there was ever a time when militant unions were needed it was now. In the Fiat tractor plant in Basildon, when the workers overwhelmingly rejected a wage freeze and voted for strike action, the union convener and shop stewards’ committee prevaricated, not giving a firm lead. This shows how even at rank and file the local leadership, elected in the past in different conditions, can become a brake on the growing militancy of the workers instead of articulating their anger. This is even more the case with the national trade union leaderships who in several cases have scandalously encouraged the workers to accept sacrifices at this time.

However, the struggle at the Lindsey Oil Refinery shows how this anger can break to the surface in a militant fashion. The fact that this was unofficial action from below was a marvellous testimony to the workers involved who said enough was enough. The attempt by the bosses to undercut terms and conditions provoked these workers to take action.

The ruling class are worried by rising militancy and are attempting to divide workers by putting forward the reactionary slogan 'british jobs for british workers'. The union bureaucracy, far from attempting to combat this, are happily posing with Daily Star's posters.

The ruling class were alarmed by this dispute. The government feared power cuts, but it also feared that this example of militant struggle could affect other layers of the working class, who could take up strike action. As a result a deliberate attempt was launched to divide the strikers by advancing the demand “British jobs for British workers”. At every occasion the press and TV attempted to divert attention away from the real causes of the dispute: for all workers to come under the “blue book”, a defence of national agreements on terms and conditions.

The scenes at Lindsey were reminiscent of the struggles in the 1970s and also the miners' strike. Workers' solidarity and workers' democracy through the mass meetings characterised the entire movement. The mass picketing revealed the underlying strength of the struggle.

Given the level of anger in the working class the question of factory occupations can also assume great importance in the next period. Many years ago a factory occupation at Timex in Dundee was an example to all workers. Today, workers in a packaging plant in Dundee, who were threatened with the sack, again gave an example by occupying their workplace. In the current climate this could become generalised as workers realise that wage cuts and short-time working are no solution in this capitalist crisis. The question of nationalisation will also find an echo amongst workers fighting redundancies.

The stormy period opening up in Britain was hinted at in the recent police report of a new summer of discontent. The report explained that given the numbers losing their jobs and homes, anger would spill over into violent street protests and riots. It compared the situation to what happened in 1981 with the Brixton/Toxteth riots, as well as to the stormy scenes during the miners' strike.

The Labour government appears to be heading for the electoral rocks. After being buoyed up by the world boom over the last 12 years, the government is now facing a dire economic situation. The capitalists are keen for Brown to clear up the economic mess and shoulder the blame for the crisis. In the press, Brown went from Zero to Hero as he strutted about the international arena. But that has very quickly come to an end.

The Labour government has pumped in billions to bail out the banking system, including the nationalisation of Northern Rock. It is desperate to rescue the capitalist system, throwing some £20 billion into the economy in the November Budget. They have forced the Bank of England to cut interest rates to an historic low and increased government debt to levels not seen since World War Two. Despite this, the crisis continues to deepen. Unemployment is rising and tax revenues are falling. According to Will Hutton, the public debt could grow to 250% of national income – or £3,750bn – in the coming months, an astronomical level. In 1976, the government was forced to turn to the IMF for a loan with lower levels of debt than this. That situation could return again.

According to the Institute of Fiscal Studies, in order to restore credibility to the public finances, public expenditure will need to be cut by an extra £20 billion EVERY YEAR until the end of the next parliament. These are truly draconian measures! Even with these cuts, public sector debt may not return to pre-crisis levels for more than 20 years. Public spending cuts and tax rises would remain until the 2030s. This makes the £8 billion cuts of the Callaghan government look like chicken feed.

In other words, the British working class are facing 20 years of austerity, not seen since the inter-war period. Whoever wins the next general election – whether it be Labour or Tory – it will be a government of crisis.

Although the most likely result is a Tory government, given the opinion poll leads of the Tories of between 10% and 20%, there is little enthusiasm for Cameron's policies. A recent poll asked which party was more suited to deal with the crisis. The majority replied “Neither”. A COMRES survey revealed that 83% disagreed that the Tories has the right ideas to deal with the situation. Even the Financial Times sharply criticised the Tories for not coming up with policies that will deal with the immediate economic crisis.

The Labour Government, led by Peter Mandelson, is attempting to push through a privatisation of the Brish postal service, Royal Mail, causing 'civil war' in the Labour Party. Photo by World Economic Forum.

However, a new Labour government under Brown would not be able to hold the line for the ruling class. It has exhausted its role of keeping the workers in check. There is growing industrial unrest which the government will be unable to control. “The Moor has done his duty and must leave.” Divisions are already opening up in the party. This can be illustrated by the episode over the proposed privatisation of Royal Mail. This scandalous act which Lord Mandelson is pushing through the House of Lords is causing “civil war” in the Labour Party and unions. There are already some 130 Labour MPs who have come out against the privatisation which could mark the biggest backbench revolt against the government since it came to power 12 years ago.

This has stirred up opposition from the trade unions who are threatening to withhold money from the party. There is the possibility of industrial action. The right wing in the Labour Party are screaming that the unions are attempting to hold the government to ransom! For them, doing the bidding of Big Business is normal but when the unions flex their muscles they cry blue murder.

The ruling class will be looking for a strong government to carry out is austerity programme. A hung parliament would be of no use, and would be open to crisis from the beginning. Labour can no longer hold the line. The only alternative will be to bring back the Tories to power with a big majority. All the forces of the Establishment will be brought to bear to see this comes about – despite the shallow leadership and policies of the Tories.

It such a government comes into office, it will dramatically change the whole situation in Britain. The Tories will attempt to unload the burden of the crisis fully onto the shoulders of the working class and this will cause a huge workers’ backlash.

There are parallels here with 1970 and the coming to power of the Heath government. Within six months we witnessed the biggest movement of the working class since the 1926 general strike. There was a dramatic increase in the class struggle that resulted in the TUC threatening to call a general strike in 1972. Eventually the Tory government was brought down by the miners’ strike in 1974. Once the workers in Britain are defeated or blocked on the political front they tend to swing to the industrial front, and vice versa.

In the 1970s, a radicalisation among the working class pushed Labour right-winger Tony Benn to become the head of an emerging left-wing. Photo by adotjdotsmith on Flickr.

At the same time, the huge wave of militancy resulted also in a radicalisation within the Labour Party. The 1970 defeat shook up the party, with the mass strikes and generalised militancy having the effect of pushing it to the left. Tony Benn, who was a right-wing minister in the Wilson government, shifted rapidly to the left. He then became the standard-bearer for the left wing which dominated the Labour Party.

The sectarian left in Britain was completely blind to this process then, and are blind to the potential that exists for a similar development in the coming years. They have attempted to build an alternative to Labour for decades, but have failed miserably. They have never understood that when the working class begins to move, it always moves through its traditional organisations. In Britain, this means the trade unions and the Labour Party.

Even now there are rumblings within the Labour Party. As a result of the crisis, nationalisation and socialism have appeared back on the agenda. Even the right-winger Austin Mitchell MP has called for the nationalisation of the building industry to mop up the unemployed and build houses. Jon Cruddas MP has also been making left noises, especially when he has addressed trade union conferences. Even Harriet Harman has been increasingly trying to distance herself from New Labour. This represents the first stirrings, the wind blowing the tops of the trees. The wind will turn into a hurricane, and these hairline splits will become a chasm if Labour is defeated.

The Blairites will be sidelined after such a defeat. In such conditions the party will have no alternative but to move to the left to rebuild its support. The unions will also be demanding action and a rejection of the failed policies of the past.

Under the hammer blows of events, a new left wing will be formed, first inside the trade unions and later the Labour Party. The capitalist crisis will force the ranks of the movement to re-think everything and seek a new orientation. The reason why John McDonnell was deliberately kept off the ballot for Labour leader when Blair resigned was the fear that he could have attracted a groundswell of support. This discontent that has built up for years will come to the surface and push the situation to the left. A left figure emerging under these conditions would become a catalyst for this shift to the left.

This new situation will see a revival of the workers' movement in Britain. New, fresh layers of workers and youth will come into the trade unions as they see the need to struggle, filling out the local branches and renewing the shop stewards committees in the process, and from their experience in the trade union struggles they will start to draw political conclusions with many gravitating towards their local Labour Parties. Thus, all the organisations of the working class will be revived and transformed.

The battles with the Tory government will serve to intensify this process. As we can see from the example of Ireland, when the working class is attacked, they respond. Ireland faces a general strike after mass demonstrations against the cuts. The Irish Labour Party – which is in opposition – has seen its support rocket in the opinion polls from 10% to 24%, despite being written off by the sectarians.

All this is an inevitable outcome of the impasse facing the capitalist system as a whole. In the past the capitalist system “resolved” its crises through world wars. Now, and for the foreseeable future, that option is ruled out. No power can challenge the might of American imperialism in open warfare. However, that does not mean that there will not be plenty of local, “small” wars such as the war in Iraq or Afghanistan. The crisis will also manifest itself in trade wars, currency wars, but more importantly in war between the classes.

The period we have entered will witness convulsions as the ruling class tries to make the workers pay for the crisis of capitalism. This is the perspective which confronts us.

Of course, this process will not be in a straight line. There will be periods of setback, apathy and indifference. However, these will give way to periods of greater radicalisation. Millions will be drawn into the arena of struggle. This in turn will serve to transform and re-transform the mass organisations. A mass left wing will be created under these conditions, in which the Marxist tendency will participate and fertilise with the ideas of Marxism. This is the reason for our long-term work in the mass organisations.

Clearly, the bigger the Marxist tendency becomes, the greater impact it will make within this mass left wing. If we work correctly, explaining our ideas patiently and intervening boldly, on the basis of events, we could win a majority of those leftward moving workers and youth. This would eventually provide Marxism with a mass base through which its ideas could be taken to the working class as a whole. We must seize every opportunity to build up our forces in order to be able to intervene in this process. In the words of Shakespeare: “There is a tide in the affairs of men which, taken at the flood, leads on to fortune... We must take the current when it serves, Or lose our ventures.”

Capitalism has entered a new phase in its long term decline. The reforms of the past are no longer possible. Capitalism in its senility means cuts in living standards and austerity. The working class will be propelled into action to prevent it being thrust back into destitution. On the basis of the mighty events which impend, the ideas of Marxism will become a point of attraction. A mass Marxist force within the British labour movement would finally lay the basis for the overthrow of capitalism in this country and with the coming to power of the working class we would prepare the ground for the socialist transformation of society in Britain, and uniting with our brothers in Europe and internationally, we would begin the process of building a socialist world.

See also:

• Support the occupation of the Prisme Packaging Plant in Dundee! by Nathan Morrison (March 13, 2009)
• Class battles on the order of the day by Socialist Appeal (March 3, 2009)
• Preparing for a summer of rage by Fred Weston (February 25, 2009)
• The Ridley Report by Anthony Healy (February 25, 2009)
• Build on the success of Lindsey by Des Heemskirk (February 12, 2009)
• Banks in meltdown. Take them over. by Mick Brooks (January 21, 2009)
• The Hero of the Hour by Alan Woods (November 23, 2008)
• Now for the economic fall out by Socialist Appeal (November 3, 2008)
• The tension rises by Terry McPartland (October 17, 2008)