<%@LANGUAGE="JAVASCRIPT" CODEPAGE="1252"%> British Crisis
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Labour, Neoliberalism and the British Crisis

Phil Hearse

In the space of six months Britain – along with the rest of the advanced capitalist world – has been thrown into a gigantic economic crisis, one that spells a massive attack on working class living standards in the next period. At the same time the Labour government has experienced a catastrophic slump in popular support, suffering successive by-election and local government election humiliations at the hands of the Conservatives in England and the Scottish Nationalists north of the border. Gordon Brown is now almost certainly finished as Labour leader.

A Conservative government by 2010 now seems highly likely, one that will come into power with a very reactionary social agenda. New Labour as a political project is finished and the whole future of the Labour Party could be thrown into question. At the general election Labour could be reduced to a pathetic parliamentary rump (although it is unlikely to be as low as the 25 seats predicted by the opinion polls), something that could spell and end to the two-party system and even install the Liberal Democrats as the second, or joint-second, parliamentary party. Outside the main parties it is the fascist BNP that is best placed to capitalise on anti-establishment discontent.

The New Labour mainstream is utterly incapable of comprehending what is going on and has zero political resources to defend itself. That is why Labour MPs are desperately thrashing around trying to find alternatives to Gordon Brown, as if the problem were purely presentational. In this febrile atmosphere, David Miliband has intervened to promote himself as a possible replacement for Brown, arguing Labour must be a force for ‘change’; his ‘change’ however turns out to be nothing more than a deepening of the pro-privatisation neoliberal policies that have got Labour into this mess in the first place. Really he has nothing new politically (1) and his real appeal to Labour MPs is simply that he is not Gordon Brown and could present a more user-friendly and younger ‘image’.

The Labour crisis is not something presentational but obviously one of economic and social substance; the economic crisis and New Labour’s dismal collapse stem directly from policies that have flattered the ultra-rich while doing nothing for huge groups of lower paid and marginalised workers. Only a huge turn-round in policies towards aiding the poor and penalising the tax-evading super-rich would stand any chance of renewing support. Such an outcome is impossible because it would imply a self-criticism of the basic New Labour tenets.

Even if Labour eventually brings in a one-off ‘windfall’ tax on oil companies and energy providers, this will do nothing to change the systemic problem – that Labour is now presiding over a massive shift of wealth from the poor and the middle class to the ultra-rich. The proof of the pudding is on every front page – British Gas owner Centrica announces its intention to put up prices another 35% one day and the very next announces profits of nearly £1bn in the last quarter, £144 million of which are immediately going into shareholders’ pockets as dividend!

So far however the response of the Left to the Labour crisis has been muted, reflecting the lack of social and political weight that the left-of-Labour forces have, of which more below.

Sources and effects of the economic crisis

New Labour likes to point to the world economic crisis as something God-given and unavoidable, as if New Labour under Blair and Brown had not been 100% paid-up champions of the very neo-liberalism that has caused this crisis. Despite specific aspects of the crisis concerning oil and food prices (mainly it should be said hoarding and speculation), fundamentally this is a crisis of finance capital and over-accumulation. Huge amounts of fictitious capital have been created in an orgy of speculative investment – particularly in real estate and financial services – that have no equivalent in real production and the generation of real surplus value. As non-performing loans in the ‘sub-prime’ US mortgage sector accumulated to unsustainable levels, several US banks and mortgage companies went bankrupt, saved only by the intervention of the US government. For this orgy of speculative profiteering, now the whole proletariat and poor world wide have to pay – in terms of harsher terms for loans and gigantic price rises.

The Northern Rock mortgage bank in the UK is a classic example. It made huge profits by the simple device of lending money that it did not actually have; so it borrowed from other banks, lent out the money and waited for the interest and profits to come back. Which is fine until the interest doesn’t come back and until no one is prepared to lend you any more money. Of course the British government intervened by lending Northern Rock a trifling £24 billion; state intervention is fine with the financial capitalists when they’ve got their backs to the wall!

Britain and the US are the countries so far hit hardest by the financial crisis because they are the centres of world finance capital and because the British economy in particular has been swivelled since the 1980s towards dependence on the financial sector.

This crisis has now led to reduced tax income as production slows, and thus a terrible fiscal crisis of the state that inevitably means massive cutbacks in public services, major cutbacks in public sector employment, a general increase in unemployment that is likely to hit 3m in two years, a harsh pay freeze - and all this on top of astronomical price increases in basics that will hit the poorest hardest.

Recession is not something that everyone in Britain will suffer equally. Class inequality in Britain is as wide as it was in Victorian times. For the rich everything is cheap, especially when they can hide their money in offshore bank accounts or secret accounts in Switzerland and Lichtenstein. The middle classes will struggle, but the poor and especially the unemployed will be savagely hit by fuel domestic energy price increases up to 200% in a year! As panicked New Labour tries to deepen privatisation, class divides in access to health care and education will also massively deepen. Britain of course is the least socially mobile society in Europe; that’s the result of decades or neoliberalism and 10 years of New Labour.

The social effects of all this will be terrible. More children will grow up in poverty; more single parents will be pushed to get a second or even a third job, often in the informal sector at below minimum wage rates; unemployment among youth and the over-50s will skyrocket. Crime and anti-social behaviour will increase as the marginalised become more desperate. The working class now is very differentiated by region, age and employment. In ‘traditional’ working class areas where nothing has replaced manufacturing except the odd warehouse or call sector, whole streets and even estates have 80%-plus unemployment and it’s here in particular that Labour’s support has collapsed: and that’s why there are nine BNP councillors in a place like Stoke.

War adds another twist

The wars in Iraq and Afghanistan are of course not something going on off-stage from the crisis, with no major effect one way or another. Historically the invasion of Iraq started the third major oil-shock in world prices since 1973-4. And the wars are consuming huge levels of resources, with Britain pumping billions of wasted tax revenue into the unwinnable war in Afghanistan. The speculative bubble driving the world economy would have burst sooner or later, but the Bush-Blair decision to attack Iraq made it sooner and more severe. Stopping Britain’s involvement in these pointless wars would immediately relive the pressure on state spending.

Consequences of Labour meltdown

Politically the Labour Party resembles startled rabbits caught in car headlights – frozen, paralysed, and incapable of any significant thought or movement except perhaps the desire to move even further to the right. The defeat at the next election will be crushing. The Labour left is small and isolated and will not be able to mount any significant challenge in the short term. A crucial dimension of what happens next will depend on the trade union leaders and the extent to which a fightback is organised in the unions to defend pay, employment and working conditions.

The Conservatives are not simply interchangeable with New Labour because they have waiting in the wings a hugely reactionary social agenda. They themselves say they want to complete Margaret Thatcher’s economic counter-revolution with their own social counter-revolution. This revolves around authority and the family. The Tory solution to crime and poor educational standards is to demand a re-knitting of families and a return to family values. Married couples would benefit financially from tax changes and more and more responsibility for social and health care would be turned back into the families. Single parents would face economic disadvantage and social stigma. Abortion rights would be curtailed with time limits pushed back – if the Tories have their way – to either 18 or 16 weeks.

If nothing changes there is likely to be an upsurge of racism and anti-immigrant hostility, with the BNP challenging the Greens to become the fourth party in terms of size and votes.

Challenges for the Left

Some sections of the ruling class, specifically those involved in the oil and energy industries, are doing very nicely thank you, with huge mega-profits showing the skewed outcome of crisis. Massive amounts of fictitious capital are being destroyed, but elsewhere super-profits are being piled up. But the resources are there to prevent huge distress and misery being imposed on the working class.

There are two basic questions to be now addressed – first the organisation of basic self defence of the working class and second the building of a significant political alternative to New Labour to its Left.

On the first issue the signals are mixed. The victory over wages for Shell tanker drivers in May was a good sign as was the agreement at the Drax power station. But these are small groups of workers. Key will be the local government, civil servants and teachers’ unions determination to resist pay awards below the level of inflation and eventually – as will inevitably come – over major waves of redundancy and service cutbacks. Without a significant development of defensive struggles, the ground for growing political alternatives to the left will be very stony. The mainstream union leaders of course want concessions from New Labour but – as ever- will be concerned not to “rock the boat”.

As for the building of a political alternative to the left, there are many complications and difficulties along the way. The first is simply that the splits in the Scottish Socialist Party and Respect mean – obviously – building a united forcer to the left of Labour is damaged. Since it seems the SWP is withdrawing from the electoral terrain, Respect Renewal is left as the remaining significant electoral alternative.

What’s happening now is a massive event in British society and politics. Its effects will reverberate in the coming years and are likely to be very nasty indeed unless a revived Left can raise its head in the struggles and in elections.

There is no hope at all in the short run of a united political project to the left of Labour. But even with different orientations different sections of the Left can campaign jointly around a programme of demands which amount to a workers’ way out of the crisis.

The SWP have produced a list of 10 demands for which they are getting signatures. This kind of activity is essential and the SWP proposal should be supported, as far as they go. Their demands are:

“*Wage increases no lower than the rate of inflation as given by the Retail Price Index. No to the government’s 2 percent pay limit.
*Increase tax on big companies. Introduce a windfall tax on corporation superprofits, especially those of the oil companies.
*Repeal the Tory anti-union laws. Support the Trade Union Freedom Bill.
*Unsold houses and flats should be taken over by local councils to ease the housing crisis. No house repossessions. For an emergency programme of council house building.
*Stop the privatisation of public services. Free and equal health and education services available to all.
*End the occupations of Iraq and Afghanistan and use the money to expand public services. Stop the erosion of civil liberties.
*Abolish tax on fuel and energy for old people and the poor. Re-establish the link between wages and pensions.
*No to racism. No to the British National Party. No scapegoating of immigrants.
Reintroduce grants and abolish tuition fees for students.
Increase the minimum wage to £8.00 an hour.”

But to these should be added something a bit more qualitative, distinctively socialist and….transitional. Like nationalisation of banks and finance houses, like major controls on capital, like a 100% tax on all incomes over £100,000 a year, like renationalisation of the major utilities and the rail network.

A minimum programme can be good for getting support, but anti-capitalist demands have to become basic part of the Left’s propaganda.

The strongest part of the right’s ideological armoury – Tories, Liberals and New Labour – is the idea that “there is no alternative”. But there is - at least politically if not yet organisationally. It is an alternative that, in its pro-public service and socially egalitarian essence, has massive support.

The Left has to wake up to the scale of the crisis now. The Manchester Convention of the Left comes at an ideal time to debate out these issues as does the Respect Renewal Conference in October.

The end of a 60-year long wave of capitalist expansion?

Finance billionaire George Soros claims the present slowdown is the end of a long wave of capitalist expansion that has lasted since the Korean War. In this framework (one compatible with Mandel’s theory of Kondratiev waves), the recessions of 1974-5, 1979-81, 2001-01, have been downturns within a broader long wave with an undertone of expansion. This recession is however the real thing and will lead a prolonged period with an undertone of recession. Whatever one’s opinion about that, it seems likely now that this really is a terminal crisis of the current neoliberal model – which doesn’t mean that it’s impossible that something even worse will replace it.

Sincde the Second World War we’ve had the phase welfare state mixed economy Keynesianism that went into crisis in the early 1970s, and after the mid-1970s crisis was replaced by monetarist austerity,  that itself gradually morphed into neoliberalism as the privatisation offensive got under way in the 1980s.

The problem is that neoliberalism – privatisation plus ‘financialisation’ – has now run up against its inherent limits. The complete domination of finance capital means a vast apparatus of parasitism – parasitic on labour and industrial capital alike. At a certain point in the economic cycle higher rates of short term return on finance capital can only be gouged out by financial institutions inventing fake capital and starting to consume one another. And there are limits to the number of times you can privatise anything, there are limits to the productivity gains that can be made through further crushing labour outside the advanced capitalist countries.

Among serious bourgeois opinion formers the limits and instability of the present system are becoming evident. Haltingly and very unevenly, some calls for controls on capital are beginning to be made. But generally there is little thought about how a new regime of accumulation might be achieved. But the trends are obvious. To restore or at least even defends profit levels as a new equilibrium is thrashed out, it requires attacks on working class living standards of a type that is bound to create the danger of major social disorder and may become incompatible with bourgeois democracy, at least in the form we have known it since the second world war. There are some ill straws in the wind, notably the de facto acceptance of torture in many advanced capitalist countries and the election of an even more right wing Berlusconi government in Italy and the attack on Romanis in that country, something with nasty historical precedents. Generally liberals content themselves with comforting thoughts about such things – “It’s nasty, unfair but not very serious”, “It won’t go as far as pogroms”, “Nobody will be actually killed” – to deny the very real and urgent dangers implied. This is exactly what people did in the 1930s – “What the Communists say about Germany is exaggerated”.

Well we are not at Kristelnacht nor January 1933, but the atmosphere of social and police authoritarianism is obvious and very dangerous. It can be attenuated by protest movements and campaigns, but only fundamentally flattened by a resurgence of working class struggle and the building of a significant leftwing force to chalenge whatever parties – social democratic, liberal, whatever – have traditionally held sway on most working class voters.

End Note

(1) The New Labour position on deepening privatisation of the public services is based on a verbal trick. Instead of saying ‘more privatisation’ you say ‘modernising’, ‘reforming’, ‘improving’ or ‘giving consumers more choice’ (but only if they have the money).