The gravity of the present world economic crisis comes in part from the spectacular imbalances and crazy capital flows that occurred in the years of the boom that finally juddered to a halt last year. Martin Wolf, an eminent spokesperson for big capital, warns in the Financial Times (02.12.08), “The world has run out of willing and creditworthy private borrowers. The spectacular collapse of the western financial system is a symptom of this big fact... In the long run, the global economy will have to rebalance.” If it doesn’t work out, “The open world economy may even break down. As in the 1930s, this is now a real danger.”

He goes on, “In 2008, according to forecasts from the International Monetary Fund, the aggregate excess of savings over investment in surplus countries will be just over $2,000bn...In 2008 the big deficit countries are, in order, the US, Spain, the UK, France, Italy and Australia. The US is far and away the biggest borrower of them all. These six countries are expected to run almost 70 per cent of the world’s deficits.”

The Institute for Fiscal Studies has estimated that government finances are out of control, and New Labour will have to make cuts of £37bn to balance the budget over the longer term. These cuts amount to 2½% of Britain’s GDP. As right wing Labour MP Frank Field tartly points out, “The government’s forecasts of debt levels have a terrible habit of being way out. This year’s borrowing is 40% up on its estimate last year, standing at a staggering £118bn.” (Guardian 08.12.08) As borrowing rises faster than income from taxes and other receipts, the mass of government debt is likely to hit £1 trillion for the first time ever by the end of 2009. The Financial Times commented, “Mr Darling’s projections look gloomy. The worry is that they may not be gloomy enough.”

Graham Turner has published The Credit Crunch.  (The credit crunch by Graham Turner, published by Pluto Press) Turner is an independent consultant who worked in the City of London for many years.  What singles out this book is that it claims to approach the problem from a socialist perspective, or at least it has been adopted by the left.  Turner has spoken at many left forums in recent months.

What is Graham Turner’s message?  He outlines his aim in the preface: “the roots of this crisis must be understood to ensure there is no repeat of the flawed economic policies that have created the biggest credit bust since the 1930s.  If we understand the causes, the damage can be mitigated”.

The Report, and the accompanying package of measures, has been greeted in the Financial Times as, “Say goodbye to New Labour.” Philip Stevens goes on, “After a decade when it dared not offend the wealthy, Gordon Brown’s government intends that the most affluent bear the brunt of post-election tax increases. It is not quite socialism but neither is it New Labour.” (25.11.08)

This was the headline thrown up by a BBC File on 4 investigation into CDC, formerly the Commonwealth Development Corporation. This was a government body set up in 1946 as part of Britain’s overseas aid programme. In 1998 CDC had over 400 different projects in 50 countries. Crucially more than 40% of its funding went into agriculture – helping to feed the world’s poor. But CDC had a problem. New Labour was determined to privatise it

US Democratic Congressman Dennis Kucinich described the $700bn bail-out of the US banks by the Bush administration as: “The largest single act of class warfare in the modern history of this country” In Britain £50bn is being doled out in a similar scheme. That’s approximately £833 for every man, woman and child in the country, or £1,500 for every taxpayer. If someone was to help themselves to £1,500 of your money and spend it wouldn’t you at least want to know how and why? Yet the language saturating the media is full of panic and obfuscation.

Martin Wolf in the Financial Times today: “…this would be a recipe… for xenophobia, nationalism and revolution… Everything must be done to prevent the inescapable recession from turning into something worse… Deflation is a real danger… At stake could be the legitimacy of the open market economy itself… the danger remains huge and time is short.”