The axemen cometh - but we shall fight them off!

General election campaigning has begun in Britain with the establishment parties unveiling plans for deep public-sector cuts. The details may vary. But they all agree that workers and sections of the middle class should pay for the economic devastation wrought by the bankers and the failures of the capitalist system. only determined, militant action will be able to push back this offensive. One issue will override all others during the coming years: Who will pay for the economic crisis? Top bankers’ bonuses have returned to record levels, with £40 billion expected to be paid in the City in the first two months of the year. Meanwhile, youth unemployment has reached 18.4% according to official figures, with total unemployment at 7.9% and rising. The number of children living in dire poverty increased by 21,000 in the first eight months of last year. House repossessions have increased, and will increase further as the one million people who currently use their credit cards to pay rents or mortgages reach their credit limits. Capitalism is determined that the bill for the recession – triggered by the implosion of the banking system – is paid by the working class, the public sector in particular. However, it will not be possible for governments to carry out the brutal cuts in public spending demanded by the world’s capitalist classes without facing mass revolts and opposition. In the last year this has been shown across Europe – by the movements in Iceland, France, Spain, Greece and elsewhere, but also by militant strike action in Britain.

The huge state debts accumulated over the last two years, transferred from the private finance sector, were unavoidable for world capitalism if a great depression, worse even than the 1930s, was to be avoided. The representatives of capitalism have learnt something since then. When economic crisis hit this time, the neo-liberal orthodoxy of the previous three decades was jettisoned overnight in favour of massive state bailouts of the finance sector. As Robert Lucas, known as ‘the high priest’ of neo-liberalism, put it: "In a foxhole, we are all Keynesians". In Britain, the amount spent by the government in bailing out and underwriting the banks and finance sector is estimated at £1.2 trillion. This is equal to one week of world output! Combined with a dramatic fall in tax receipts, this has led to the government deficit spiralling upwards. In 2009, government borrowing reached £178 billion, taking total net public debt to £798 billion. Borrowing will exceed 12% of national income in 2009-10, Britain’s worst ever annual deficit in peacetime. The central theme of the general election campaign is the size of the deficit, with the Tories accusing New Labour of profligacy. However, had a Tory government been in power in 2008, when the country was within 48 hours of a complete collapse of the banking system, it would have been forced to take, in essence, the same measures.

Just as George W Bush had no choice but to empirically adopt Keynesian measures to bail out Wall Street, so Gordon Brown – who just weeks earlier had criticised other European governments for not taking financial deregulation far enough – had to do a 180-degree turn and intervene in the finance sector on a massive scale. Faced with further financial crises it cannot be ruled out that a Cameron-led government would have to carry out further Keynesian measures. Now, however, in a gigantic con trick, the blame for increased government debt is being laid at the feet of the working class and public-sector workers. There are no fundamental disagreements between the different wings of the capitalist class on this issue – although there are policy differences. This is true also for the major political parties. Many workers rightly fear the return of a Tory government, which would launch an all-out assault on the public sector. Brown, in an attempt to win the election, is emphasising that New Labour would wield the axe more gently than the Tories. For example, whereas New Labour is proposing a maximum 1% pay increase for all public-sector workers for two years or more from 2011, the Tories are proposing to freeze pay for 80% of public-sector workers.

For example, whereas New Labour is proposing a maximum 1% pay increase for all public-sector workers for two years or more from 2011, the Tories are proposing to freeze pay for 80% of public-sector workers. Both are pay cuts in real terms but the Tories’ are more severe. However, as a Financial Times editorial pointed out: "Despite heated rhetoric, the differences between Labour and Conservatives on this issue are rather slight". The Liberal Democrats have also joined the axe-wielding frenzy, ditching their policy of abolishing tuition fees along with other promises. In essence, all three parties put forward the same position: taxes will increase for the working class, and ‘the axeman cometh’ for public-sector pay and services. Vicious cuts to university funding – one third of the total budget – give a glimpse of what a fourth New Labour government would be like. Chancellor Alistair Darling has said that Britain faces the worst cuts in 20 years and has consistently refused to rule out cuts of 17% in ‘non-ring-fenced’ parts of the public sector. New Labour’s real position was clearly indicated in Darling’s pre-budget report, of which the Financial Times declared: "Not in the past 40 years has Britain experienced such a sustained squeeze on public spending than that planned by this government. The International Monetary Fund in the 1970s, Margaret Thatcher in the 1980s, and John Major in the 1990s, were mice compared with the lions of Gordon Brown and Alistair Darling in the desire to curtail the role of the state in the years ahead".

Incredibly, the majority of the cabinet seem to believe that the best chance of winning the election is to admit the scale of cuts they would carry out. This shows how far removed they are from reality. Brown appears to favour a different presentation, emphasising that New Labour cuts will not be as brutal as under a Tory government. However, there are no substantive differences between members of his cabinet, only an argument about how much sugar with which to coat the bitter pill. To suggest, as Larry Elliott has in The Guardian, that Brown is following a similar approach to the Alternative Economic Strategy (AES) of the Labour left of the 1970s is completely wrong. The AES, while very limited, did call for the permanent nationalisation of the finance institutions and defence of public services, whereas Brown has only nationalised banks under duress, in order to prop them up and sell them back to the private sector at the earliest opportunity, and is in favour of massive cuts in public spending. This is not to say that there are no real disagreements between New Labour and the Tories on these issues. But they are mainly on how fast the axe should fall. According to the Financial Times, at the 2009 conference of the Confederation of British Industry, there was no agreement on when cuts in public spending should begin: "Forty per cent thought the risk lay in tightening [ie cutting] too quickly, while 60% thought it lay in doing so too late".

Faced with an intractable crisis, the political representatives of capitalism are trying to decide whether the rock or the hard place is better. There are those, now wholehearted converts to a Keynesian approach, who believe that the government deficit should be allowed to grow for a considerable period. They rightly fear that short-term cuts in public spending would lead to a catastrophic double-dip recession. David Blanchflower, ex-member of the Bank of England Monetary Policy Committee, was correct when he said: "The Tories’ economic proposals have the potential to push the British economy into a death spiral of decline that would be almost impossible to reverse for a generation". (The Guardian, 10 October 2009) He and others recognise that it is only the intervention of the state that has so far prevented British – and world – capitalism falling into that ‘death spiral’. Figures from the Office for National Statistics have shown how, for example, the government was entirely responsible for the 2.2% increase in investment in the third quarter. Public investment was up 10.7%, private business investment was down by 0.6%. Bank lending remains at historically low levels. In other words, the private sector remains on a life-support machine, only functioning as a result of huge state sector blood transfusions.

From the point of view of capitalism, however, allowing state deficits to spiral unchecked is only viable if there is a prospect of healthy economic growth in the not-too-distant future. Econ Samuel Brittan wrote: "My own bottom line is that all this is in response to a largely imaginary budget crisis. If we have a normal economic recovery the red ink will diminish remarkably quickly". Brittan draws a comparison with the immediate post-war period when Britain’s total national debt was over 200% of GDP, compared to today when it is just under 60% and forecast to reach 100%. In the immediate aftermath of the war, public spending was cut severely. However, the fundamental reason that the size of the debt was reduced over the following decades was the unparalleled economic growth of the post-war upswing. By 1973, when the upswing ended, output in the advanced capitalist countries was almost three times that of 1950. More was produced in that quarter century than in the previous three quarters. In that situation, not only was the national debt reduced dramatically, but capitalism was prepared to buy social peace by accepting a steady increase in living standards for the working class in the advanced capitalist countries and a huge expansion of the ‘social wage’ – spending on pensions, the health service, unemployment benefits and so on.

Although these policies are associated with Keynesianism, they are not really classical Keynesian policies, which are designed to pump-prime the economy at times of crisis, rather than be applied during an upswing. In addition, the increased public spending during the boom was overwhelmingly financed by taxation, not by government borrowing. The exceptional ‘golden era’ could not be more different to what we face today. Following the end of the post-war upswing, capitalism set about restoring its profits, in large part by driving down the share of wealth taken by the working class in wages and the social wage. In Britain, the last 16 years of boom – driven by huge finance sector bubbles – masked the underlying problems of capitalism. They have now been laid bare. During the recent boom, inequality reached its highest levels since the 1930s, as globalisation was used to drive wages down. Inevitably, this exacerbated the underlying problems of overproduction and overcapacity as, in essence, workers were less able to buy back the goods produced. This was partially disguised by the expansion of consumer credit, but has turned dramatically into its opposite with the onset of recession. The consumer debt overhang in Britain is a vast £1.5 trillion.

It is likely that, as the economic stimuli are withdrawn, the world will enter the second dip of recession. We are faced with a protracted, drawn-out crisis, interspersed with periods of anaemic growth. Mass unemployment, and the accompanying, dramatic increases in poverty, homelessness and misery, will not go away even when economies stutter into growth. In a world of economics in intensive care, Britain, the last OECD country to crawl out of recession, is among the weaker patients. Government figures show that the cumulative output loss since the beginning of 2008 has been over 5%. This makes the problems of British capitalism intractable. As Larry Elliot writes: "The hope, of course, is that the willingness to slash interest rates, create electronic money and run up hefty record peacetime budget deficits has bought time for the private sector, so that when state intervention in the economy starts to diminish, consumers and businesses will be in a fit enough state to grab the baton. There is no guarantee that this will happen, particularly since it will prove mightily difficult – nigh-on impossible, perhaps – for policymakers to judge when and how to remove the stimulus".

Given this reality, from the point of view of capitalism, the seemingly insane policies of the Tories – to follow the ‘Irish road’ and proceed quickly to slash the public sector to the bone – have a certain brutal logic. This is reflected in the overwhelming switch of big business funding from New Labour to the Tories, as the party they believe can most effectively manage capitalism in the next period. Without doubt, the Tories’ plans would throw millions more workers onto the dole. In the end, however, the concern of capitalism is not about more or less misery for working- and middle-class people, but about restoring profitability. Given the overweening dominance of the finance sector in Britain, primarily, this means restoring the profits of the ‘banksters’. For the finance sector in particular, the real dangers that Britain’s debt will be downgraded and/or there will be a run on the pound, plus the danger of inflation further into the future, are threats to future profits.

Following the Armageddon that the City has wreaked, a section of Britain’s ruling class harbours the dream of moving Britain back towards a concentration on manufacturing. This is utopian given the sickly character of Britain’s manufacturing and the weight of the finance sector. The manufacturing sector of every advanced capitalist country has been hollowed out, but Britain leads the way with it making up just 16% of output before the recession. Productivity in Britain also lags behind – at eleventh place in the OECD league. In any case, those Keynesian commentators who suggest that a greater emphasise on manufacturing would mean a more equitable form of capitalism are mistaken. In reality, the manufacturing and financial sectors are intertwined. Even from the point of view of manufacturing capitalism, it is the restoration of profits that matters. British capitalism has spent 30 years positioning itself as a provider of cheap labour. A further dramatic increase in unemployment, which the Tories’ plans would lead to, would act as what Karl Marx called ‘a reserve army of labour’, a big stick with which to try and frighten workers into accepting lower wages. Driving down wages would, in turn, exacerbate the crisis of overproduction and overcapacity. However, individual capitalists are not driven by the medium- or long-term interests of capitalism as a whole, but by how best to maximise their own profits.

The arbiters of the logic of the market, such as Moody’s ratings agency, have declared that Britain’s "affordability is stretched to the limits of what is consistent with a top rating", and are threatening that Britain, like Greece, will face its debt being downgraded at some point if cuts are not made fast enough. As an editorial in The Guardian correctly explained, the ratings agencies have the attitude of money-lenders and are not interested in human misery, in "unemployment or long-term growth". Nor are they accurate. The agencies regularly commit huge blunders. At the beginning of 2008, there were about a dozen top-rated countries in the entire world, according to Moody’s and Co – but there were 64,000 Collateralised Debt Obligations securities, CLOs and the like that were at the same notch, much of which turned out to be rubbish. The agencies thought Enron was fine – until just four days before it went bust. They got southeast Asia wrong, and before that Latin America. The past couple of years should have finally given the lie to the notion that the City experts know best.

The majority of the population would agree wholeheartedly, but capitalist governments continue to dance to the tune of the rating agencies. But ‘the logic of the market’ will not seem logical to the working class. At a certain stage, the cuts being threatened by the next government will lead to massive social upheavals. Even Thatcher, the axe-woman par excellence – who, it has been revealed to no-one’s surprise, scrawled ‘not nearly tough enough’ and ‘too small’ on her ministers’ proposals to cut public spending – did not cut on anywhere near the scale of Darling’s pre-budget report, never mind those proposed by today’s Tory leader, David Cameron. Apart from the brief period at the end of the second world war, only once has Britain’s government implemented an absolute cut in public spending. The infamous Geddes Report attempted to cut public spending from £603 million to £428 million in the 1920s, and was one of the main factors behind the 1926 general strike. At this stage, the overwhelming propaganda laying the blame for the size of the deficit on public-sector workers has some effect. A YouGov poll on 13 September 2009 showed 60% of people in favour of public spending cuts. Many workers blame the City of London for the crisis, whilst believing that there is no option but to accept cuts as the banksters will never pay for the crisis.

However, the mood will change when cuts become concrete. A more recent poll showed that the majority of public-sector workers do not believe that they will suffer a pay freeze. It is one thing to acquiesce to cuts when you do not think that they will have any direct effect on you or your family, another when it is your pay that is being frozen, or your job, pension, school and hospital that it is facing cuts. Despite the attempts of the representatives of capitalism to divide public- and private-sector workers, once public-sector workers enter action, there will be enormous potential to win the support of other workers in a united struggle to defend public services. An indication of this was the public support for the postal workers’ strike, which remained at 2:1 despite the media onslaught against the Communication Workers Union. Even before the huge attacks begin, cuts have started and workers are having no choice but to resist. The Guardian explained: "Britain is ushering in the new year with the threat of widespread unrest as civil servants, tube drivers and rail workers are poised to ballot on strike action". (31 December 2009) In addition, the postal workers’ strike ballot is still live. Also on the agenda are movements of students against university cuts, alongside the fight back against youth unemployment led by Youth Fight for Jobs. These battles, looming in the first part of 2010, are preparation for the enormous struggles that will be necessary under the next government.

Philip Hammond, shadow treasury secretary, declared that there is no danger of a ‘winter of discontent’ after a Tory victory, as trade union leaders were only doing their job when they "came out and rattled their sabres" at the TUC conference. Behind the scenes, the shadow cabinet had established "cordial relations" with them, Hammond said. Unfortunately, it is all too likely that the majority of union leaders see that the best way of defending their members against a Tory government is by establishing ‘cordial’ – that is, supine – relations with it. This was the case when Thatcher came to power. Her government responded to their friendly overtures by launching an onslaught on the trade union movement and workers’ rights. Cameron would be no different. However, Hammond and the Tories the Tories are making a big mistake if they confuse the approach of the union leaders with that of the rank and file. Last year saw important struggles – from Lindsey oil refinery, the post, to the Leeds bin workers, etc. Faced with vicious attacks on pay and conditions, workers are prepared to fight, and can win victories. Flying pickets, unofficial and all-out strikes for weeks at a time were some of the militant methods of the 1970s and 1980s which were re-adopted in 2009. The shrinking size of the pot available – as a result of the crisis – is already sharpening the struggle between capital and labour enormously.

This process will accelerate in the coming years. The outrageous decision by the courts to ban the British Airways cabin crew strike is a declaration that any strike can be declared illegal and is a foretaste of the oppression to come. It is likely that a Tory government would add to the already formidable armoury of anti-trade union laws. It will take a concerted struggle to push aside these laws but, as the Lindsey workers demonstrated, it is possible to do so. Leaders of the general union, UNITE, correctly called the BA decision "disgraceful" but were not prepared to defy it. Socialists are not light-minded about the need to protect the trade union funds and resources built up by members over a long period. Ultimately, however, the only way to defeat the anti-union laws will be to defy them. In the case of the cabin crew, UNITE could have called on all its BA members to strike for at least a day and call a massive demonstration at Heathrow airport against the court ruling. If the courts had then come for the union’s funds, the whole of the trade union movement would have needed to mobilise in defence of democratic rights and the unions.

The anti-union laws are just one aspect, although a crucial one, of the struggles that are coming. Socialists have a vital role to play in politically arming the working class for those struggles. The starting point has to be that the working class will not pay for the capitalist crisis: it is not our bill and we will not pick it up. We will not accept a single cut in workers’ pay or public services. The logic of capitalism means that an assault on public services is inevitable, but not that its success is inevitable. If the working class meets the assault with a sufficiently militant and determined response, the representatives of capitalism can be forced back. The next government – whether New Labour, Tory, coalition or hung – will be fundamentally weak, with very shallow social support. This would be true even if the Tories win a large majority, which does not seem the most likely outcome. There is a possibility of a second general election within quite a short space of time if the government faces mass opposition to its policies.

The strategy of the ‘dented shield’ – that it is necessary to accept some cuts to show that the working class is ‘reasonable’ and prepared to make ‘sacrifices’ for the common good – would be a disaster. Weakness invites aggression and sacrifice does not sate the drive for profit. It only gives the capitalists confidence and allows workers to be divided over which sectors should accept cuts. In reality, without united struggle against all cuts, unimaginably vicious attacks will be made. For example, the IMF has used the economic crisis to renew its demands for ‘healthcare reforms’: "These reforms have basically to be confronted. The idea of [just] introducing these fiscal rules and not doing these reforms is a joke". This is the real position of world capitalism. The depth of public support for the National Health Service means that no government dares to openly agree with the IMF but, despite claims that the NHS is ring-fenced, cuts are already taking place. The NHS Confederation estimates that the health service will have to find £15-20 billion of ‘efficiency savings’ over the next five years. If the working class does not resist, the complete destruction of a publicly-owned health service will be on the agenda.

It is impossible possible to predict exact timescales, but it is certain that the working class will resist. Look at Iceland, with a population of 330,000, where the cuts being demanded to pay back the debts of Iceland’s bankers – costing £10,700 per person – have led to a powerful movement of opposition. Under the impact of the crisis, Iceland first elected a supposedly left government which accepted the demands of the European Union (EU) and IMF. But, under pressure from the movement, it was the right-wing president who called a referendum. No wonder. It was compared to the collapse of the Soviet Union and the accompanying catastrophic drop in life expectancy.This is recognition that, given the scale of the threatened revolt, it makes sense to retreat in this instance – particularly given the small sums involved on a global scale. This shows that state debt is not only an economic question but also a political one. Faced with a powerful enough movement, the capitalists can be forced to retreat to defend their system. Capitalist propaganda insists that major cuts are inevitable. In more private discussions, however, capitalist commentators admit a different reality. For example, discussion is taking place in the pages of the Financial Times on the question of Greece, with some arguing that it should leave the eurozone sooner rather than later. In essence, their reasoning is that working-class resistance to the scale of the cuts demanded by the EU will be too great and it is therefore utopian to try and force them through. Desmond Lachman drew a comparison with Argentina, which defaulted on its debt in 2002, after the IMF-proposed ‘adjustment plan’ led to "rioting in the streets" – in reality, a mass movement with revolutionary features. Today, the Argentinian ruling class is unable to enforce through brutal enough cuts to sdatisfy global capital; this may well cause it to default again.

Of course, as long as the capitalist profit system remains, the ruling class will attempt to defend its profits by whatever means necessary. Blocked in one direction it will try another. Faced with massive struggles to defend wages and public services, it could in the future consciously use inflation to undermine the size of the debt and workers’ wages. It is only by fighting back at each stage – in that situation, for wage increases in line with inflation – that the working class will be able to prevent capitalism driving it into the dirt. To be fully effective, however, those struggles will need a perspective for an alternative to capitalism. They will have to be linked to the socialist transformation of society. The majority of national trade union leaders have been completely bewildered by the economic crisis. Having largely accepted the ‘logic of the market’ they became used to decades of ‘concession bargaining’ trade unionism, and act as an enormous fetter on the ability of the working class to struggle. This does not mean that they will hold back struggle indefinitely. On the contrary, as was shown by the GMB and UNITE’s eventual official backing for the construction workers’ strikes last June, they can be forced into action by their members. Nonetheless, left-led trade unions, such as the PCS civil servants union and the Rail, Maritime and Transport workers’ union (RMT), will have an important role to play in putting forward a united strategy to defend jobs and public services. At the same time, the development of genuine militant ‘broad left’ organisations within the trade unions will be a crucial part of fighting to transform them into democratic, fighting bodies.

The importance of the Trade Unionist and Socialist Coalition standing in the general election is that it will begin to prepare the ground for the struggle beyond the election, and can begin to popularise the case for socialism amongst broader sections of the working class. That is why it is a step forward that it is standing on a socialist programme, including the call "for a democratic socialist society run in the interests of people not millionaires. For bringing into democratic public ownership the major companies and banks that dominate the economy, so that production and services can be planned to meet the needs of all and to protect the environment". The onset of the economic crisis in 2008 has already had a profound effect on the outlook of the working class. At this stage, however, this is not immediately obvious, as the majority still hope against hope that it will pass and life will return to normal. In the next two years, the hammer blows of events will demonstrate to millions that we face a new, far worse, version of normality. Mass struggles, unlike anything we have seen in the last 20 years, will be on the agenda. The potential to build mass support for socialist ideas will once again be posed.