It has been an incredible year, especially for the Labour Party. Its fortunes have been turned around by Jeremy Corbyn as leader and the new left-wing direction of the Party.
The adoption of a left-wing manifesto at the last general election in June broke the mould. It destroyed the consensus of the last two decades by opposing austerity and offering important reforms, such as renationalisation of the railways, an end to tuition fees, a £10 minimum wage, improved workers’ rights, including free collective bargaining, as well as abolishing anti-union laws.
The Tories, who believed they would strengthen their mandate, were shattered by the result. Theresa May’s government is now on the rocks and her party is deeply divided. Given the political crisis, a general election may come at any time, an election that could easily propel Jeremy Corbyn and the Labour Party into government. For the working class, the sooner this happens, the better!
Jeremy Corbyn wrote an inspiring message in the introduction to Labour’s manifesto to all those struggling to get by on a daily basis in Tory Britain. “So let’s build a fairer Britain where no one is held back”, he wrote. “A country where everybody is able to get on in life, to have security at work and at home, to be decently paid for the work they do, and to live their lives with the dignity they deserve.”
The manifesto correctly stated: “Too many of us are in low-paid and insecure work. Too many of us fear our children will not enjoy the same opportunities that we have.” It went on: “Labour will turn this around. We will upgrade our economy, breaking down the barriers that hold too many of us back, and tackling the gender pay gap.”
This is the message that millions are desperate to hear. The big question is: how are we going to achieve it?
The crisis of capitalism
We have to be frank, British capitalism is in a parlous state. Economic growth has fallen sharply, with future projections of growth scaled back. In fact, the manufacturing sector contracted during the second quarter of 2017. Investment has fallen by nearly 20% since the EU referendum. Investment in the car industry fell by 75% in the first half of this year compared with 2015. Loans to manufacturing companies fell year-on-year in May by 5.9%.
The recent growth in profits at the UK’s largest companies has been largely due not to exports but to the fall in the value of the pound. They have simply pocketed the difference. But profits are expected to fall by more than half in 2018, according to the Swiss banking giant UBS. Despite devaluation, exports to the rest of the world, apart from Europe, are down. Only consumer borrowing has kept the economy afloat, as people try to rely on credit cards and increased debt. But consumer spending fell in July, as household spending slowed.
The fall in real wages has been the biggest for 150 years, much greater than even in the Depression of the 1930s. Of the 34 developed nations of the OECD, the only one that saw weaker wage growth than the UK between 2008 and 2015 was crisis-ridden Greece!
The austerity cuts have devastated basic services, closing down youth centres (600 have been shut), libraries, day centres and forcing the most vulnerable to pay for the crisis of capitalism.
Even with all the austerity cuts, Britain's public debt has risen inexorably since the Great Financial Crisis. Despite all the promises, today Britain's public debt stands at close to 90% of GDP, a further reflection of the deep-seated crisis affecting the British economy.
The blame for this dismal state of affairs lies with big business, which sits on a cash mountain of some £700 billion but refuses to invest as there is too much “excess capacity”. Meanwhile, the on-going crisis of capitalism has slashed living standards for the masses.
Nationalise the banks
So how is a future Labour government going to tackle this unparalleled situation? The manifesto promised to “rewrite the rules of a rigged system so that our economy really works for the many, and not only the few.”
It all sounds very grand but the “ground rules” for capitalism is the maximisation of profit. Capitalist investors are only interested in one thing and that is making money. The system is not “rigged” as such, but simply operates according to its own dog-eat-dog laws. It works for the super-rich because they are the owners of capital, which functions by squeezing the maximum unpaid labour (profit) out of the working class. This is the basis of the class struggle. It is impossible to eradicate this law unless you eradicate capitalism itself.
The manifesto promised to “stop our financial system being rigged for the few, turning the power of finance to work for the public good.” But private banks are there not for the common good but to make money. That is their function under capitalism. They only way this can be ended, is for the banks to be nationalised, so that resources can be directed to where they are needed most.
It is clear that the proposals put forward in the manifesto are an attempt to “regulate” or “manage” capitalism. It promised, for example, to set up a National Transformation Fund that “will deliver the investment that every part of Britain needs to meet its potential, overcoming years of neglect.” This fund was to borrow some £250 billion to invest over the next 10 years. But this is peanuts compared to the scale of the problem. In any case, the decline of British capitalism has been relentless and will not respond to this sort or any sort of tinkering around.
Britain's rentier economy
The facts are conclusive. Over the decades, British industry has been driven to the wall in one sector after another. Manufacturing has declined at the fastest pace of any of the G7 powers. Britain has fast become a rentier economy, resting on finances and services. This reflects a complete failure of big business to invest and modernise industry.
Since the slump of 2008, UK gross investment has averaged only 16.5% of gross domestic product. British infrastructure is rated second worst among G7 members. Moreover, the UK invests in total just 1.7% of GDP in private and public Research and Development (R&D.) This is well behind the average of the OECD countries, let alone the leaders, and where spending stands at over 3 per cent of GDP.
As a consequence, in 2015, output per hour worked in the UK was 27% lower than France, 30% lower than the US and 35% lower than Germany. It was 18% lower than the G7 countries. This is due to the fact that British workers do not have the same level of investment “at their elbow” as seen in other countries.
This is a graphic failure of British capitalism and a complete condemnation of the short-sightedness of British big business. They weren’t interested in “the country” but in their bank balances. They still are.
Capitalist anarchy vs economic planning
The Labour manifesto continues: “Our industrial strategy will support businesses to create new, high-skilled, high-paid and secure work across the country.” But the “years of neglect” mentioned are a product of the failure of the capitalist class to invest and modernise British industry and are totally reliant on a low-skilled, low-waged economy, as we have today.
It says that “the growth created by our national investment plan, underpinned by the responsible economic management embodied in our Fiscal Credibility Rule, will create good jobs, drive up living standards and improve the public finances.”
Well, to begin with, who decides how much will be invested in the British economy? We don’t decide. The government doesn’t decide. Investment is based on the individual decisions of capitalists. This is based on chasing profits, the only decisions that can be made in a capitalist economy. Such decisions are not based on the wider social interest but the interests of money-making.
In a planned economy, investment in R&D would make the economy grow significantly year on year. But capitalism as a national system is unplanned. Each individual capitalist is only concerned about what it means to them. So they resist spending on R&D, hoping to use the skills of someone else. Paying out dividends means less is spent on investment, resulting in things being run down.
The limits of Keynesianism
It is clear that the manifesto is based on Keynesian principles of “pump-priming” the economy. Following the example of Germany and the Nordic countries, they were to establish a National Investment Bank “that will bring in private capital finance to deliver £250 billion of lending power,” stated the Manifesto.
Where was the money going to come from? From closing tax loopholes, increasing corporation tax, taxing the wealthy a bit more and borrowing. We know from experience that every tax loophole closed, leads to another opening. The capitalists have a million ways to avoid tax.
There are only two ways of raising money. Governments can either tax big business, but this will result in the capitalists simply cutting back further on investment and laying off workers in the process. Or they can tax the workers, which cuts consumer demand and cuts the market. There are no free lunches.
So could borrowing do the trick, as Labour has advocated? After all, interest rates are historically low. This is a form of Keynesianism or deficit financing. Clearly, we would support a programme of useful public works. There is much work needed to be done on repairing our roads, rail and infrastructure. It would take workers off the dole and get them spending and paying tax instead.
This policy was tried in the USA with Roosevelt’s New Deal in the 1930s. However, it didn’t solve the problem. Unemployment remained high throughout Roosevelt’s two terms and never fell below eight million. It was the Second World War that mopped up the unemployed, not the New Deal.
According to the Left economist Ann Pettifor, governments can raise the level of borrowing as long as it does not scare off the capitalist investors! But investors will be scared of a Labour government promising to solve the problems of the working class!
We are reassured that such a policy “was designed in conjunction with world-leading economists.” But these are Keynesian economists, keen to reform and regulate capitalism. The problem is you cannot regulate capitalism to work for the common good. The profit motive decides everything.
The problem with Keynesianism is that it only sees one side of the problem, namely the lack of demand or markets. Keynes advocated deficit financing – spending money the state didn’t have. But it ignores the question of profitability. Any policy which raises wages, while temporarily increasing the market, would drive down profits. That is why capitalists resist wage rises! Firms will only expand and invest if they see scope for making greater profits.
Even the Manifesto admitted, “When shareholders are looking for quick short-term returns, they encourage companies to cut corners. That means they look to cut wages, instead of investing for the long term, or they spend longer inventing new tax avoidance schemes than they do inventing new products.”
But this is the driving force of capitalism. All capitalists are forced to take the same path or go under. Capitalism is not a logical system. Profits are the driving force, nothing more, and nothing less. Institutions invest huge reserves, but if the dividend is too low, they sell. They are foot loose and fancy free.
You can’t force a lion to become a vegetarian. You can’t force capitalism to become something it is not.
Learning from history
We must learn from the past, as there is no shortage of examples of governments that have attempted to manage capitalism and failed. Let us take the recent example of former president Hollande in France. He came to power promising to tax the rich and end unemployment, but he was quickly forced to abandon his programme and adopt austerity measures.
The same was true of Francois Mitterrand in 1981, when the socialists won a landslide victory on a very left-wing programme, much more radical that what Labour was proposing in the summer. It raised the minimum wage, reduced the retirement age and introduced a 35-hour week.
To implement these reforms, the French government nationalised 38 large financial corporations, which almost amounted to France’s entire financial sector. It also took over 12 large industrial corporations, which produced one-third of all manufacturing output and half its investment. This was much more ambitious than the Labour government of 1945.
And yet, the Mitterand government failed to tame the capitalist system. The main levers of economic power were still in the hands of big business. They still dictated policy. In reaction to the government’s measures, they pulled their capital out of the country, putting the Franc under pressure.
As the government tried to “reflate” the economy to provide jobs, Europe went into recession and imports flooded into France. Its industrial production exports fell and Mitterrand was forced to twice devalue the Franc and increase interest rates. He was then forced to devalue a third time and began to reverse his earlier policies and introduce spending cuts. The private sector cut back on investment and the economy went into recession. The government was brought to heel by big business – French and international.
It is important that Labour learns these lessons if it is not going to repeat them. As the old adage explains, “You can’t plan what you don’t control and you don’t control what you don’t own.” It is as simple as that.
A Labour government will have to take control of the economy or be undermined by big business. There is no middle road.
Telling the truth
The manifesto tried to convince the City of London that it was fiscally responsible. “Our Fiscal Credibility Rule is based on the simple principle that government should not be borrowing for day-today spending, but that future growth depends on investment.” But big business will not be fooled.
Again, rather than saying the financial blood suckers have had too much by far and that we will abolish the National Debt, the manifesto meekly stated “we are committed to ensuring that the national debt is lower at the end of the next Parliament than it is today.”
A Labour government will not be able to appease big business by being nice to it, while at the same time representing the interests of the working class. All Labour governments who have tried to do this have ended up disillusioning its working class base and preparing the way for a new vicious Tory government. This is not being alarmist. It is being truthful.
What the ruling class are afraid of in a Corbyn-led Labour government is the uncontrollable class forces that lies behind it that will be unleashed. A future Labour government will be under tremendous pressure from the working class to solve its problems. The strategists of capital believe that Labour is susceptible to such pressure and could shift much further to the Left.
As in the past, big business will seek to bend the Labour government to its will. They will rest on the Blairite MPs, demanding “moderation” and policies “in the national interest”, i.e. Tory policies in all but name. Capitalism will seek to sabotage the government with all the means at its disposal.
There will be a strike of capital. Investment will fall even further. They will provoke a run on the pound and create public panic through both the Tory-backing national media and “neutral” voices like the BBC. Everything will be thrown against the Labour government to discredit it and prepare for its demise.
They have made it clear that they favour some kind of new Centre Party, made up from a split in the Tory Party (the pro-European wing) and right-wing Labour MPs (the Blairites). When they will embark on this project is difficult to predict. What is true is that it is inevitable. It is a warning to Labour.
No solution under capitalism
The only viable road for a new Labour government to go along is to take full control over the economy. This cannot be done by half-measures, or Keynesian policies, or patching up capitalism. There is no piecemeal solution.
Capitalism in Britain is in deep crisis. Austerity is not a simple political choice, as some say, but arises from (and is a reflection of) the economic crisis itself. If Labour is to succeed, it will need to put an end to capitalism.
That is why the Labour Party in 1918 adopted Clause 4, “To secure for the workers, by hand and by brain, the full fruits of their labour, based upon the common ownership of the means of production, distribution and exchange.” This was Labour’s commitment to the socialist transformation of society, abolished by Tony Blair.
A Labour government would need to take emergency measures to nationalise the “commanding heights” of the economy, the 150 or giant monopolies that dominate the economy, the banks and insurance companies, under democratic workers’ control and management. We should not pay any compensation, they have bled us dry for far too long.
Then we could draw up a national plan of production involving all sections of the economy. With the full use of technology and robotics, we could slash the working week immediately to 30 or 20 hours, with increased living wages. This programme would abolish unemployment overnight. Production would leap ahead, as we built the houses, schools and hospitals we need. We could put an end to the duplication and waste of capitalism and boost living standards for everyone.
This would completely transform Britain. It would allow us to reach out to workers in Europe and internationally. No to a bosses’ Europe! For a socialist Europe as a stepping stone to a socialist world federation, where poverty, disease and war are a thing of the past!
This is the socialist future we are fighting for. We can make it happen.