Socialist Appeal - British section of the International Marxist Tendency

We publish here the first part of a discussion document, written by the editorial board of Socialist Appeal, which outlines the economic and political perspectives for Britain. In this first part, the document discusses the economic background to the situation in Britain - that is, the world crisis of capitalism, which has hit Britain particularly hard. The crisis has meant deep cuts and declining living standards for ordinary people.

We publish here the first part of a discussion document, written by the editorial board of Socialist Appeal, which outlines the economic and political perspectives for Britain. In this first part, the document discusses the economic background to the situation in Britain - that is, the world crisis of capitalism, which has hit Britain particularly hard. The crisis has meant deep cuts and declining living standards for ordinary people.

“To be sure, during a revolution, i.e., when events move swiftly, a weak party can quickly grow into a mighty one provided it lucidly understands the course of the revolution and possesses staunch cadres that do not become intoxicated with phrases and are not terrorised by persecution. But such a party must be available prior to the revolution inasmuch as the process of educating the cadres requires a considerable period of time and the revolution does not afford this time.” (Trotsky, The Class, the Party, and the Leadership, 1940)

World Background

In 2008, world capitalism experienced its biggest slump since the 1930s. In many ways, given its scope and breadth, the crisis has been even more serious. That was more than five years ago. Despite the talk of improved “confidence”, the crisis still continues to plague world capitalism.

The bourgeois economists have declared several false dawns of recovery since 2009. Even where there is a partial “recovery”, it has been the weakest for 100 years, or possibly in the history of capitalism. This tells us a lot about the depth and character of the current crisis, which is not cyclical, but organic in character, as in the 1930s. Most bourgeois strategists are completely blind to this state of affairs.

Even with a deep crisis of the system, recoveries, however partial, are not excluded. Even a dying organism occasionally shows some signs of life. This happened in the 1930s, but did not alter the fundamental situation.

“The economic revival of the past year has, it is true, somewhat dampened theoretical and social criticism”, explained Trotsky. “Hopes arose that the process of economic growth interrupted by the crisis would again be re-established. But sooner than one could have expected, the hour of a new crisis struck. It started from a lower level than the crisis of 1929 and is developing at a more rapid tempo. This demonstrates that it is not an accidental recession nor even a conjectural depression but an organic crisis of the whole capitalist system.” (Trotsky, 29 November 1937)

Five years after the collapse of Lehman Brothers, the world capitalist system remains in a blind alley. It is not capable of developing the productive forces (industry, technique, science) in any meaningful way. As Marx explained long ago, no social system ever leaves the scene of history until it has exhausted itself and proves incapable of developing the productive forces. Then society enters into a period of social revolution. This is precisely the situation that exists today on a world scale. Capitalism has exhausted its historic role and has become a gigantic fetter on human advance.

Following the collapse of Stalinism in 1991, the world capitalist economy experienced steady growth, driven by the massive expansion of credit, the intensification of world trade, opening up of China and South East Asia, financial deregulation, and the increased exploitation of the working class. This increased relative and absolute surplus value and drove up the rate of profit. It was a period of wild speculation, which accompanies every boom. But this time it reached new heights. This in turn gave rise to colossal illusions and euphoria comparable to that of the “Roaring Twenties” in the United States. The Financial Times, the organ of British finance capital, ran an editorial in the middle of 1995 entitled “Dreaming of Golden Ages”, which epitomised the euphoria.

“Could it be a golden age? It could be. A great deal has been learned since 1970. With luck and effort, this could be something better than another recovery. It could be the start of a long secular expansion.” (20/5/95)

According to the dictionary, the word “secular” means lasting an indefinitely long time or even a century. The bourgeois were looking to a new epoch of growth without recessions or crises. Today, Lawrence Summers, the former Treasury Secretary under Clinton, talked at the IMF’s research conference not about expansion but about “secular stagnation”, namely a new epoch of stagnation. This is simply another term for a new depression. Amongst the strategists of Capital, optimism has been replaced with the deepest pessimism. This was reflected in a comment by Martin Wolf, the chief economist of the Financial Times, who pondered how it was possible to return to the 1930s. “I did not know. Now I do.” With the weakest “recovery” on record, the seriousness of the situation (the new “normality”) has finally dawned on the most serious bourgeois representatives. They have been compelled to accept that they are in a crisis of the system very similar to the crisis in the ‘30s. The system has reached its limits, with huge amounts of over-production of capital and commodities. “The real barrier of capitalist production is capital itself”, explained Marx. This “barrier” of excess capacity and weak markets explains the collapse in productive investment, which, in turn, can be the only basis for a recovery.

Many European countries are in recession or on the verge of recession, some five years after the slump. Bourgeois economists have been predicting every year since 2010 that the economy of the United States was about to accelerate, but without much success. Growth was a meagre 2.5% in 2010, 1.8% in 2011, 2.8% in 2012 and something near 2% in 2013. Japan’s recovery has also faltered. With the near stagnation in the western economies, the capitalists looked to the BRICs to pull them out of the crisis. But these too are facing a slowdown. According to the IMF the: “projected shortfall in Brazil, India and China is similar to the hits to output rates that advanced economies have suffered in the post-crisis period.” (FT, 9/10/13) With all avenues blocked, the system is trapped in long term stagnation, with a devastating and lasting impact on gross domestic product.

According to Professor Eswar Prasad, senior fellow at the Washington-based Brookings Institution, “the recovery is still tenuous and just a shock or two away from turning into another slump.” (FT, 7/10/13) The US government shut-down in October, when Congress failed to agree to continue servicing US debt (growing by $2.7bn a day) which risked a default and a new debt crisis greater than 2008, is an example of such a shock. Neal Soss, an economist at Credit Suisse, put it: “We are moving out of crisis mode, and the long tail of it is just a reminder of how intense the crisis was. It may be a very long time before we put that behind us.” (FT, 20/12/13) While Wolfgang Munchau in the FT explained: “Economically, this is 1990s Japan all over again, probably worse given the periphery’s dire economic state.” (FT, 23/12/13) Clearly, none of these economists knows what is really happening, or why, but they know it is serious and long-lasting. They are blinded by their class outlook and their role as apologists for capitalism. Nevertheless, even they are extremely disturbed by what is unfolding on a world scale.

The austerity policies have served to make the crisis worse by cutting the market. But they have no alternative but to cut and slash. In reality, given the contradictions, whatever they do will be wrong. They are trapped. Neither deflationary nor inflationary (Keynesianism) policies will resolve anything.

Before the war, Trotsky described the epoch as the “death agony of capitalism”. He went on to explain, “Conjunctural crises under conditions of the social crisis of the whole capitalist system inflict ever heavier deprivations and sufferings upon the masses. Growing unemployment, in its turn, deepens the financial crisis of the state and undermines the unstable monetary systems.” This is precisely the situation today, as we can witness clearly in Europe and elsewhere. While the Thirties’ Depression was ended by the Second World War, today’s depression is set to continue for years and even decades, for as long as capitalism is allowed to continue. Unlike in 1914 and 1939, there can be no world war under current conditions, given the existence of nuclear weapons and the balance of class forces. This means that the contradictions will multiply and become internalised, which will result in social explosions and increased class conflict.

As mentioned earlier, there can be certain “recoveries” and economic fluctuations as in the 1930s. For example, from 1934 to 1937 in the US we saw the Roosevelt “prosperity”, a temporary stabilisation which gave way to a new slump in August 1937. But the general feature of the epoch, as in the 1930s, is one of stagnation, crisis and austerity. There will be falls in living standards and continuing attacks on the working class. The basis of reforms has been undermined by the crisis of capitalism. The system can no longer afford reforms, and counter-reforms are on the order of the day. There has been a massive rise in anti-capitalist feeling everywhere, especially at the billions made by the banks and monopolies. At the same time, in the US and elsewhere, the share of National Income going to wages is the lowest level since records began. On this basis, the working class will repeatedly seek a way out of the crisis, as it has no alternative. The middle class will also be hard hit and also seek a way forward, swinging to the left and the right.

“The current struggles will be protracted, not only due to the relative strength of the workers over the ruling class (which prevents the ruling class from imposing its own solution), but because in this context the leadership of the working class acts as a brake and so prevents the workers from imposing their own solution, resulting in deadlock.”

Today, we are witnessing the on-going revolution in Egypt, where 17 million took to the streets to oust the Morsi regime. In Turkey, the revolutionary developments surrounding the occupation of the central park in Istanbul are symptomatic of the situation. This was quickly followed by millions taking to the streets of Brazil, provoked by increased transport prices. There has been a general collapse in support for bourgeois governments and institutions everywhere. “A decline in public confidence in Europe’s governing classes is wider, and it relates to technocrats as well as politicians”, states the Financial Times. “According to a Eurobarometer poll, trust in the EU had slumped from 57% in 2007 to 31% last May… Trust in national governments, meanwhile, was at 25%, down from 41%.” (FT, 3/1/14) This is a direct reflection of the crisis, mass unemployment and falling living standards. The ruling class dread that what has happened in Egypt, Turkey and Brazil, could easily happen in Europe. We are facing the perspective of world revolution, if we take the process over the next 5, 10 or 15 years. This is a situation that we predicted long ago would emerge, but for certain reasons, was delayed for a whole period. The contradictions have now burst through to the surface.

For an understanding of the processes unfolding on a world scale, we recommend reading the World Perspectives by the International Marxist Tendency, which can go into far more detail. They provide a background to events that will unfold in Britain in the coming period.

British Capitalism

British capitalism, once “the workshop of the world”, has been reduced to a second rate power. In many ways, the “workshop” has now become a centre for international finance and speculation, which served to partially mask Britain’s decline. The British ruling class, given its short-sightedness, has presided over a near collapse of its industrial base. This was due to the special crisis of British capitalism and the failure of the British ruling class to invest in productive industry. The decline of British capitalism, in turn, has been reflected in the degeneration of its ruling class and, above all, its political representatives. This was particularly the case under Thatcher, who wanted to “rebuild” Britain on financial services and international banking, while allowing industry to go to the wall. Thatcher represented the dominance of finance capital, the most short-sighted sector, which increasingly rested on speculative short-term investments. While Britain suffered industrial decline, the financial sector boomed during the 1980s, especially after its de-regulation. By 2010, UK manufacturing accounted for 8.2% of the workforce and 12% of the national output.

In order to raise the declining rate of profit, the capitalists launched an offensive to squeeze increased amounts of unpaid labour from the working class through absolute and relative surplus value, namely to increase hours and the intensity of exploitation. Over the past 30 years, the working class was faced with an unprecedented onslaught on its terms and conditions, especially following the defeat of the year-long miners’ strike of 1984-5. The failure of the trade union leaders to support the miners led to a series of heavy defeats and contributed to widespread demoralisation. This, in turn, resulted in the emptying out of the workers’ organisations and prepared the way for a sharp turn to the right in the leadership of the labour movement. This shift was reinforced by the world boom for most of the Eighties and Nineties, in fact right up until the crash of 2008. This boom served to intensify the pressures of capitalism on the tops of the movement, and resulted in a turn to “moderation” and class collaboration. This was the objective basis for the success of Blairism, which saw the complete domination of the Labour Party by the right wing and the collapse of left reformism.

The trade unions, especially the tops, were also affected by this process of mild reaction. These organisations do not exist in a vacuum, but are affected by their capitalist environment and influenced by the pressure of alien classes. The leadership, which is largely divorced from the shop floor, came under the direct pressure of the ruling class and bourgeois ideology. As a result, a considerable portion was transformed into a bulwark of capitalism. The right wing trade union leaders are directly corrupted and act more or less as conscious agents of the bourgeoisie. The left wing, while subject to the same pressures, is also under the pressure of the rank and file, and therefore tend to vacillate. They have no perspective and are buffeted by events. Dominated by a feeling for “realism”, they also tend to capitulate for lack of any alternative to capitalism.

Following the revolutionary struggles of the early 1970s, the defeats of the 1980s transformed the situation. The class struggle suffered a prolonged ebb. As a consequence, the working class remained largely passive during these years, despite the increase in discontent, and attempted to find a way out of their problems through individual solutions, personal sacrifice and increasing debt. Many activists became affected by the prevailing moods. Lacking a Marxist perspective, many of these layers became sceptical and pessimistic and dropped out of activity. The fall of the Soviet Union seemed to seal the fate of this generation. These were the years of mild reaction, dominated by the ideology of Thatcher and Reagan, and then continued under Tony Blair. All the most degenerate elements came to the fore. The bourgeoisie were euphoric, especially after the fall of Stalinism. For them, it was the end of history. There was now “officially” no alternative to capitalism.

As time went on, and the squeeze on the working class intensified, the right wing domination of the unions eventually began to break down and gave rise to a partial shift to the left and the rise of the so-called awkward squad. However, this “left” was a pale reflection of even the lefts of the 1970s, let alone the 1920s. The number of strikes remained historically low. Trade union membership shrank to half its 1979 level, mainly as a result of the de-industrialisation, which affected trade union density. This was compounded by the defeats of the 1980s and the economic boom of the 1990s. The new “left” leaders had little confidence in the workers or in themselves and proved powerless to prevent the continuing onslaught against the working class.

New Labour

Blocked on the industrial front, the growing opposition to the Tories pushed the working class onto the political front. This reflected itself in the crushing defeat of the Tory Party in the general election in 1997, after being in power for 18 years, and the coming to power of a Labour government with a massive majority. The Labour leader, Tony Blair, who was the candidate of the bourgeoisie, had used this dominant position to shift the party further to the right. He began where Hugh Gaitskell left off. He represented the new generation of degenerate bourgeois careerists who had captured the Labour Party and elbowed the working class elements aside. Clause 4, the party’s commitment to socialism, was abandoned and the party leadership fully embraced capitalism and the market. The “left” collapsed and many of them simply shifted over to Blairism, which proved as simple as moving between carriages on a train. Labour was reinvented as “New Labour” by Blair. The attempt, however, to break the Labour-trade union link, and transform the party into an openly bourgeois party, failed. The party, despite the extreme rightward shift, was still based on the unions and, in the final analysis, on the working class.

Given the electoral shattering of the Tory Party in 1997, the bourgeoisie were forced to lean for support on the Labour Party. Blair was extremely fortunate. He came to power when capitalism was experiencing a relative boom. As a result, despite the continued squeeze on the working class, the Labour government was able to give certain concessions, such as the minimum wage and tax credits. This carried Labour on to victory in 2001 and 2005, but with reduced majorities and growing discontent. Blair’s support for Bush and the wars in Iraq and Afghanistan created widespread disillusionment. In policy terms, there was very little difference between the Tories and Labour. It was like during the 1950s, where this process was referred to as the “Butskellite” consensus (a combination of the name of Rab Butler, the Tory Grandee, and Hugh Gaitskell, the Labour leader).

This left some on the fringes of the movement to draw the wrong conclusions, namely, that Blair had destroyed the Labour Party as a vehicle for working class representation. Typical of such fringe groups, they lost all sense of proportion. They do not have a dialectical approach, but an empirical one. Furthermore, they fail to recognise that the Labour Party has very deep roots in the working class going back over 100 years. Without doubt, the Labour Party had certainly moved far to the right. But this was not a unique phenomenon, but had occurred at different times in the past, especially in face of prolonged ebb in the class struggle. In fact, for most of the history of the Labour Party, the right wing has dominated the leadership, mainly with the support of the right-wing trade union leaders. It was this 20-year ebb in the class struggle from the mid-1980s that had produced “New Realism” (class collaboration) and the dominant bourgeois trend, Blairism. Only on the basis of a radicalisation of the working class would this be changed, which was part of our perspective. There is no other alternative. There is no short cut to history, as some imagine. Despite some delay, this remains the perspective.

The 1997 general election defeat was the worst defeat for the Tory Party since 1832. It was a shattering blow. In an attempt to regroup and restore its position, the party went through a series of failed leaders. The Thatcher years had created an indelible stain on the Tory Party. They were regarded by most as the “Nasty Party”, and reduced to a rump of electoral support in the South East of England and the Shire counties. The Party was shattered in the North, Scotland and Wales. The election of David Cameron as Tory leaderer was an attempt to discard the “Nasty” image. Cameron’s task was to reinvent the party and give it a broader electoral appeal. The party had been plagued with disputes over Europe with the domination of the Euro-sceptics, aptly described by John Major as the “bastards”. The pro-European wing had become more and more isolated. Cameron attempted to change the agenda and image, which he managed to do, at least temporarily. The problem was that the party rested on the wild middle class reactionary elements in its rural constituencies, who resented the newcomers and their “modern” ideas. They still clung to unadulterated Thatcherism. The Cameron leadership was tolerated as long as they could win elections. If not, they would be out.

The Tory Party

In its heyday, the British Conservative Party was held up as a model of stability, as compared to the quarrelling bourgeois parties on the Continent. British Conservatism had traditionally rested on “One Nation” Toryism, based upon moderation, consensus and a shrewd understanding of strategy and tactics. This pragmatism was epitomised by the Tory Prime Minister Harold Macmillan, who stated that “if capitalism had been conducted all along as if the theory of private enterprise were a matter of principle”, and all state intervention had been resisted, “we should have had civil war long ago.” The post-war upswing of capitalism provided the basis for “class peace” and a softening of class relations. Capitalism could afford to make concessions, while resting on the trade union leaders to maintain order. This was the heyday of reformism. The forces of genuine Marxism worldwide were reduced to a tiny handful. This situation lasted for more than two decades until the early 1970s, and in particular the world slump of 1974, which finally served to break-down the social consensus.

With inflation, Keynesianism was soon abandoned in favour of “monetarism” and balanced budgets. This period was epitomised by the emergence of Thatcherism. With the introduction of “democracy” into the Tory Party, much regretted by the Tory Grandees who once ruled the party, the backward, reactionary ranks sought to influence policy and leadership. “Today”, wrote Ian Gilmour, the former Conservative Minister and theoretician, “the increase of ‘democracy’ in the Tory Party as in all other parties could threaten to make the party more responsive to the needs and wishes of its active partisans, at the expense of making it less responsive to the needs and wishes of the nation as a whole.” The term “partisans” refers to the blue-rinse hang ‘em, flog ‘em brigade of the Tory backwoodsmen and women, who have increasingly pushed the Tory party to the right. They were passionately anti-European and forced the party to become euro-sceptic. Ideas about gay marriage and the green environment fostered by Cameron were an anathema to them. Dissatisfied with the Coalition, they are tending to either drop away or look towards UKIP which appeals more to their prejudices. To regain some support and hold UKIP at bay, Cameron has been forced to drop his modernisation plans and shift towards the right on asylum, immigration and Europe. He is caught between a rock and a hard place. The 2015 general election will decide his fate.

In the future, as the crisis intensifies, deep splits will open up in the Tory Party. It is always a symptom of crisis in a social system when the ruling class itself splits in different directions. It is an indication of the impasse of capitalism. The more backward reactionary elements of the Tory Party will form the basis of a Bonapartist-monarchist wing, standing demagogically for the Nation, Queen and Country, and Law and Order. On the basis of events, this wing could split away to form a new reactionary party with growing support in the most reactionary and backward layers of society. As we have explained before, reaction in Britain will not be built around the likes of the BNP or the National Front, which have no social base. These organisations have split and have largely disappeared. The residue of support they once had has moved to UKIP. The forces of British reaction will not be based on supporters of Hitler, but will be a British-based middle class phenomenon, sporting the Monarchy and the Union Jack. This is not an immediate perspective, but a future one, based on the polarisation of society to the left and right, and the desperation of a ruined middle class. It will be linked to military conspiracies, as in the 1970s, especially with the advent of a future left Labour government. It is the music of the future, but nevertheless represents a warning to the Labour movement.

We should emphasise that the perspective of fascism in the near future is completely ruled out. At this stage, the social basis for reaction is very small. In the inter-war period, those layers that looked to the fascists, such as the students, professional workers, and civil servants now look to the left and the trade unions. Many have taken militant strike action for the first time in their history, such as the recent “strike” by the barristers. At the same time, the working class has never been as strong numerically. Some on the fringes of the movement, who lack a sense of proportion, become hysterical about the dangers of “fascism” every time the BNP or any other racist sect gets an increased vote for a council seat, running around like headless chickens. Then they set about organising a “struggle”, not led by the working class, but by a popular front alliance on a milk-and-water programme.

With the growing unpopularity of the Coalition, Cameron has tried to turn things around by attempting to engage in overseas military ventures, firstly in Libya, then more recently in Syria. However, the most recent fiasco blew up in Cameron’s face within the space of 24 hours. Cameron went from banging the drum for military strikes against Syria to a humiliating parliamentary defeat. So confident, Cameron recalled Parliament to rubber stamp the vote for intervention. The parliamentary defeat was unprecedented, and simply served to undermine Cameron’s political authority. After defeating the Labour amendment, the government thought they were home and dry, paving the way for a second vote on the timing. But with 30 Tory MPs rebelling, the government lost the vote by 272 votes to 285. This was the first time in history that a British government was defeated in Parliament on a foreign policy issue. Cameron was fuming with Ed Miliband for failing to support the government. But it demonstrated that Cameron was out of touch with public opinion, which firmly opposed action. Following this set back, the French and Americans, outmanoeuvred by the Russians, were forced to an ignominious retreat.

2008 Crisis and 2010 Election

The replacement of Blair in favour of Gordon Brown did not make any fundamental difference, as the “Iron Chancellor” simply continued where Blair had left off. The financial crisis in 2007 and the economic collapse of 2008, did however force the government to intervene reluctantly, unlike in the past, to nationalise failing banks and bailout the system. The “light touch” was replaced with state intervention not to put an end to capitalism but to prop up a failing system. Brown then put off even the talk of austerity as long as he could, fearing the electoral consequences.

In the 2010 general election, the ruling class were looking for a strong government to impose austerity. The Labour government had exhausted itself and was no longer of any use. The bourgeoisie looked to a rejuvenated Tory Party, with a big majority, to wield the axe and carry out the job.

Despite Labour’s lack of popularity under Blair and Brown, the fear of a new Tory government, still marked by Thatcherism, served to rally Labour’s core working class support. While not enough for Labour to win a majority in 2010, it was enough to keep the Tories out of office. The only way Cameron could gain power was in a coalition with the Liberal Democrats, who were desperate to take part in ministerial office, whatever concessions they needed to make. The Coalition agreement signed the death warrant for the Liberal Democrats, who were seen as betraying their principles for thirty pieces of silver. Clegg went from “hero” to “zero”. All he was interested in was in becoming deputy prime minister, no matter the cost. If the Tories did not share his “principles”, he would exchange them for theirs, including support for tuition fees. They all agreed on one thing: the working class must pay for the capitalist crisis, the deficit would be slashed, and austerity would be the central programme of the coalition government.

This act of “treachery” by the Liberal Democrats was to destroy their traditional role as a safety net for discontented Tory voters, who were in danger of voting Labour. The Liberal Democrats are the junior party of British capitalism, which was forced to give way to the Tory Party after the rise of the Labour Party. The Lib Dems retained their “radical” aura against the two “Establishment” parties, except where they have controlled local government and acted in the same brutal manner as the Tories. Their entry into the Tory Coalition has far reaching consequences in the coming election.

The slump of 2008-9 hit Britain particularly hard. Ironically, there were those who said Britain would not be affected by the slump because it rested on financial services! The opposite, of course, was true. In Britain, the slump was deeper than 1929-1931. Even now, despite the numerous false dawns, the British economy is still smaller than before the crash, lagging behind most of its rivals. Industrial production is still 10% below its pre-crisis peak. Construction is also 10% down on pre-crisis levels. Investment has fallen by 25% since 2008, and fell by a massive 5.5% alone in 2013. In 2012, the economy was 12% below the 1950-2007 trend, which reflected the deep slump in production followed by the weakest recovery on record.

Recovery or austerity?

Despite this, the capitalist apologists still talk of “recovery”. They say that 2013 started with fears of a “triple-dip recession” but ended with one of the fastest growing economies in the developed world. Firstly, growth in the developed world is anaemic. Secondly, the “spectacular” growth in Britain in 2013 is estimated at 1.9%, hardly a “boom”. Until then, it was amongst the worst performers of the Group of Seven economies. The British “recovery”, as such, is built on sand. As Spencer Dale, the Bank of England’s chief economist, asked: “Why after throwing everything bar the kitchen sink at the economy over the past few years, has the economy started to grow only now? Even more importantly, will the recovery last?” For a major bourgeois economist to raise such questions is an indication of the fragility of the situation.

While exports and trade are not growing and the trade deficit is as wide as ever, the only stimulus has been the Help to Buy scheme – and the resultant housing bubble in London and the south-east - and a temporary increase in consumption due to a fall in savings. In the third quarter of 2013, households spent 1.7% more than in the previous quarter, while wages rose by only 0.2%. With real wages falling, savings will run out at a certain point. This situation is completely unsustainable. The idea that the British economy can grow in a sustained manner in 2014 whilst Europe is mired in crisis and the rest of the world is slowing down is fanciful in the extreme. Without real productive investment, which has fallen, there can be no real recovery. The general flat-lining of the British economy is set to continue, but with inevitable fluctuations caused by particular short-term circumstances. With continuing deep austerity, falling investment, both private and public, the general feature of the economy in the next period will be one of stagnation and decline. Any partial recovery will be short-lived as the economy continues to bump along the bottom.

The Coalition demanded that the budget deficit, which had grown enormously due to the crisis, be drastically reduced. Government debt, which had also grown massively, had to be cut down. They had managed to save capitalism by a colossal bailout, now they wanted the workers to pay for it. All of this meant austerity and the biggest cut in living standards in over a century. Social spending is continually being slashed; money for local government is being butchered; hundreds of thousands of public sector jobs have been cut and more is to follow, in an austerity programme that keeps on extending. The cuts programme was supposed to end in 2015, then 2017, now in 2020. The Office of Budgetary Responsibility has noted that the government’s plans for the next parliament “will take government consumption of goods and services … to its smallest share of national income at least since 1948”. This admission means the destruction of the welfare state as we know it. The austerity is clearly set to last years, according to Osborne, if not decades. All the government’s projections have been based on unrealistic growth figures, which have to be continually revised downwards, the latest economic blip notwithstanding.

Today, according to the Institute for Fiscal Studies, only 30% of cuts have been carried through, with a further 70% in the pipeline. Local authorities have slashed services and made redundancies as budgets are drastically cut. In Birmingham, the largest local authority in the country, some 7,000 jobs have already been axed, with at least a further 1,000 jobs to go. By 2017, some two-thirds of its income would have been cut, provoking the council leader to say that the authority would not be able to meet its statutory obligations. Councils up and down the country are in a similar boat. Voluntary redundancies are followed by compulsory ones. So-called front-line services have also been affected. The cuts have affected the most needy and vulnerable sections of society, the sick, the elderly, the infirm. Benefits have been cut while people have been forced off housing benefit and disability allowances by private companies guided by draconian targets. We are witnessing the return of Victorian conditions as past reforms, seen as the basis of a civilised society, are destroyed. In London, for example, the ambulance service, in order to save money, are hiring taxis to deal with 999 emergency calls. Central London boroughs are shipping out homeless people to other local authorities to deal with, which, in turn, are making cuts. The bedroom tax is forcing people out of their homes, placing greater hardships on disabled people. Young people are especially suffering greatly under this austerity regime.

The capitalist system is forced to cut away the branch upon which it is resting and undermine its social reserves. The welfare state was introduced in the post-war period under the pressure of the working class to provide a safety net for the most needy in society. Despite its limitations, it served to provide some kind of civilised existence. As the Financial Times explained recently, the welfare state “was the core element of the European social contract that blunted political extremism and solidified support for capitalism and democracy.” The destruction of the welfare state, which capitalism can now no longer afford, will therefore mean the destruction of this “social contract”, undermine support for capitalism and increase political “extremism”, i.e. revolutionary politics.

Fighting the cuts

The crisis of capitalism puts all parties and tendencies to the test. Today, Labour councils have capitulated in the face of Tory austerity and are shamefully carrying through the cuts around the country. Rather than make a principled stand, they have become the agents of the Coalition’s austerity. There is no dented shield, as in the past; there is no shield at all. Only in a few places have Labour councillors voted against cuts, most notably in Hull. These comrades have taken a principled stand, in the face of disciplinary action from the Labour Party bureaucracy. Unfortunately, the anti-cuts movement, led by the trade unions, has failed to mobilise the latent opposition which exists in the area.

At the end of the day, it is down to the trade unions, whose members are facing job losses and attacks, to take coordinated industrial action. Only in this way can an effective anti-cuts campaign be built up. This is the only way that mass pressure can be exerted on the Labour councillors to back away from making the cuts. Without this pressure, many councillors will reluctantly accept the cuts for lack of an alternative. The introduction of payments for councillors has also served to create a gravy-train, encouraging many to “tow the line”. Only mass pressure can break this obstacle.

Again, a local campaign needs to be linked to a national campaign of resistance. However, the trade union leaders have abdicated this role. Instead of national action, they have left workers fight local authority by local authority. Clearly, the Labour Party leaders are against such a fight, but simply shed crocodile tears. They refuse to break the law and instead direct Labour councils to administer the cuts “responsibly”. If that means breaking the poor, rather than breaking the law, then so be it. Of course, they will offer bucketfuls of sympathy to the workers and blame the Tories. But they fully understand it will be the task of a new Labour government to implement the cuts when it comes to power. Such is the logic of capitalism and the bankruptcy of reformism.

Under the Coalition, living standards have plummeted and we have witnessed the biggest assault on the working class for generations. The cuts in living standards have been the deepest and most sustained since records began in the 1860s, more than 150 years ago. Energy bills have tripled since 2004, with huge price hikes in the pipe-line. Those living in fuel poverty have reached record levels of 4.5 million households. Food and transport has shot up in price and many families are feeling the squeeze. A sizable proportion are living on the edge, deciding whether to spend their meagre earnings on food or heating. Some 14 million are living on or below the poverty line, and this is set to increase. More than a million people rely on food banks. A million people have used payday loans to cover the cost of Christmas, being forced deeper into debt. Meanwhile, there are more millionaires and billionaires than ever before.

“Greece, Ireland, Portugal, Spain and the UK – countries that have pursued budget cuts most aggressively – are soon reaching the rank of the most unequal countries in the world,” states a recent Oxfam report (September 2013). According to Natalia Alonso, the head of Oxfam’s EU office: “The gap between rich and poor in the UK and Spain could soon become the same as in South Sudan or Paraguay.”

Part two -->>