Economy in crisis & politics in flux
New Labour – Losing its hold on power
Temporary blips aside, the popularity of Britain’s Prime Minister, Gordon Brown, and his government, is on the slide. New Labour MPs are beginning to squeal, sensing that before long they could lose their lucrative seats, pulling their noses out of the generous parliamentary trough. Economic recession and rising working-class anger are fuelling this political crisis.
Gordon Brown is the first ‘Labour’ prime minister in history to have actually been saved by an economic crisis, albeit perhaps temporarily. In the weeks and particularly the days prior to New Labour’s conference in Manchester, the plot to remove Brown – orchestrated by the Blairite ‘Taliban’ – was out in the open. It made Brutus and the conspirators against Julius Caesar look like participants in a kindergarten game.
David Miliband was first with his naked grab for power in July. We then had the drip-drip of totally obscure Labour junior ministers criticising and resigning from the government. Despite denials to the contrary, this was a well-organised campaign of the ‘ABB’ (anybody but Brown) tendency. He was to be replaced by anyone from a panel of candidates, including Miliband, the hapless Jack Straw, Alan Johnson, renegade from the Communication Workers’ Union, and even John Cruddas, formerly a stalwart of Blair’s cabinet office but now busily polishing his ‘left’ credentials and pro-union stance. Yet, as Alistair Darling admitted in his speech to the conference, there are no fundamental disagreements between Brown and those who seek to replace him: “If you look at it ideologically, if you look at it in terms of what we are trying to do, our government is quite remarkably unified”.
What motivates the plotters is the prospect of electoral nemesis, which has led to an obscene scramble to save their own political skins, rather than any high political motives. On the eve of the conference, an Observer poll predicted an electoral wipe-out for New Labour with a Tory majority of 146, with several cabinet ministers losing their seats if Brown remained in place. These particular ‘turkeys’ are therefore not about to vote for Christmas.
On the basis of its present 20% deficit in the opinion polls, an election to be held no later than the spring of 2010 would see more Labour seats since 1918 falling to the Tory opposition. The party would be virtually extinguished in southern England and only elected in its hardcore redoubts of northern England, the Welsh valleys and deprived inner-city areas. One minister declared to the Guardian in late July: “We have moved from a one-nation to a no-nation party, thanks to Gordon… we are unelectable everywhere and that is untenable. By and large, when something is untenable in politics something happens, yet I do not know what it will be”. Charles Clarke, unreconstructed Blairite, claimed that Brown is leading Labour to “utter destruction” at the next general election. Even Labour’s performance in the 1983 general election under Michael Foot – excoriated and attacked by the right then and since – would look like a triumph compared to what looms.
Yet, in poll after poll, not one of the ‘alternatives’ to Brown offers much salvation for New Labour. All of them, including the right’s ‘novice’, Miliband, have the same or even less support than Brown. The fundamental reason for this is the economic and social situation collectively presided over by New Labour. Brown’s claim to have abolished the ‘boom and bust’ cycle came back to haunt him as the British economy was seen to be more exposed than most to the economic tsunami, expressed first in the financial sector, that was sweeping world capitalism. But, irony of ironies, it was the very scale of this crisis which threatened to bring down the whole ramshackle house of cards that has stayed the hands of the plotters. Before the ‘five days that shook the world’ in September, Brown “could walk into your local high street handing out fivers, and people would refuse them”. (Paul Routledge, Daily Mirror) But now, the discrediting of the very policies which eleven years of New Labour government enshrined – free-market, unregulated capitalism – has gone down with Lehman Brothers, Fannie Mae and Freddie Mac, and AIG.
Darling and Brown, who refused to intervene to save the jobs of Rover car workers and countless others – and following their US counterparts Ben Bernanke, Hank Paulson and George Bush – raid the storerooms of history in order to deck themselves out in the discarded clothes of John Maynard Keynes. True, Brown and Darling have difficulties in making these clothes fit. But, like former Tory prime minister Harold Macmillan – “we are all planners now” – they and the strategists of world capitalism, without a blush, can claim “we are all interventionists now”. So much so that Larry Elliott, economics editor of the Guardian, claimed: “Ben Bernanke, the chairman of the Federal Reserve and Hank Paulson, the Goldman Sachs tycoon who became US Treasury secretary, have done more for socialism in the past seven days than anybody since Marx and Engels”. Business guru, Jim Rogers, also fumes in Fortune magazine that "America is more communist than China right now".
This is a measure of how the tectonic plates of the world capitalist economy have shifted and has affected Britain, more exposed alongside the US itself than any other capitalist economy in this crisis. But, as other articles in this issue of Socialism Today demonstrate, the underlying world economic crisis has not been solved, nor has it in Britain. Indeed, the very quasi-Keynesian mini-measures undertaken could aggravate the problems of the British economy, impact negatively on already precarious living standards and electorally seal the fate of a government led by Brown or any other New Labour luminary.
A slight whiff of anger
The New Labour conference is a pale echo of the tumultuous, energetic, pulsating ones which characterised Labour conferences in the 1970s and 1980s. Then passionate debates between different ideas, even ideologies, were the norm. Now, it is a ‘fan club’, and a diminishing one at that, where older ‘stalwarts’ cling to the wreckage of the party through sheer inertia. They are joined by timeservers – local councillors and trade union leaders. Yet, even in this zombie-like atmosphere, in this stage-managed conference, a slight whiff of the angry mood that exists in working-class people was reflected in some of the speeches and resolutions. For the first time in 20 years, trade union leaders like Tony Woodley of Unite suggested that the renationalisation of utilities should be ‘considered’. A resolution was passed calling for a windfall tax to be imposed on the vicious energy companies.
Does this signify a charge towards the left within the Labour Party and the resurgence of the Labour left itself? Richard Lambert, director general of the bosses’ organisation, the CBI, gave the game away when he claimed in the Guardian that “he had been given assurances by the party leaders yesterday that the left were ‘whistling in the dark’ if they thought an ideological sea change towards City regulation was taking place at the top”. Yet Darling’s attack on the rich ‘bonus culture’ of the City of London is, in reality, directed against him and Brown, who not only tolerated but encouraged this – as did the now-Blairite Ken Livingstone as mayor of London. This was done to attract a massive influx of international capital into London and everything that goes with it. The political commentator of the Financial Times, Philip Stephens, jeered at Darling and Brown chastising the City financial sharks: “Surely Labour can read the last rites over global capitalism? Not really, of course. The market economy may have taken a severe knock, but you cannot rebuild the Berlin wall”.
Yet, if New Labour was serious and the radical rhetoric meant anything, it would introduce a wall against the irresponsible spivs and speculators who threaten the British economy and with it the lives and future of millions. This would involve the nationalisation of the entire, now severely shrunken, banking system, with minimum compensation, with a guarantee to maintain the savings of small depositors. It would go together with a state monopoly of foreign trade, without which this government, in fact any government, becomes the plaything of international capital.
Such is the hostility at the damage wreaked by finance capital amongst wide layers, including the middle class, that there is a mood that ‘something must be done’. But as Karl Marx pointed out, the credit system is a necessary lubricant for capitalism in extending the market beyond its limits for a time. It also brings in its wake “the pleasant character of swindlers and prophets”. In every crisis such as this there are speculators who become the target of anger – formerly called the ‘gnomes of Zurich’, perhaps now of London. Action is demanded, some have their wrists slapped. But once the upswing develops, they crawl out of the crevices of capitalism and the merry-go-round resumes.
It is estimated that in this crisis, bonuses of the moguls of the City of London will drop from £8 billion to only £5 billion! Compare this to the plight of the millions of poor, summed up by a letter to the Guardian in July. It read: “Up to three years ago I was a member of the working class… We are now three adults living on £23 a day. Admittedly we have our rent and rates paid. As heart patients, we have been instructed to stay warm in the winter as the cold thickens the blood. To this end I contacted my gas and electricity supplier in a bid to have the repayment meters taken out of my home as the target was too high and my income was too low. I was told it would cost £200… The television is our only window on the life we once led. We sit destroyed by poverty and watch the world go by as if we were dead and yet to fall over. While watching the TV we see MPs and MEPs who spend more on taxis than we get to live on and they are telling the country they are going to get tough on us and people like us because we live on benefits”.
The unspeakable James Purnell had people like this in his sights as he outlined measures to drive them “back into work”. What work? There has been an inexorable rise in unemployment, even before the axe fell on Lehman Brothers workers, 4-5,000 of whom could go down the road. Ford is seeking to scale back production at its transit van plant in Southampton, which could see a thousand workers made redundant. Barrett’s, the builders, has announced it will cut a quarter of its workforce, and Persimmon said it would lay off 2,000 staff. Up to now, 50,000 construction workers have lost their jobs. In total, half a million job losses, according to Karen Ward, chief economist at HSBC, can take place over the next two years. There could be at least two million unemployed by Christmas, with an expected 60,000 workers losing their jobs every month.
Trying to save the system
After 16 years of quarter by quarter uninterrupted growth, many workers are posing the question: why? At the Labour Party conference, the only answer from Chancellor Darling and Brown was to lamely find excuses in the ‘world economic storm’. But Marxists – particularly Socialism Today in a series of articles – predicted that this crisis would take place, the only unknown being the timing and its scale. This is a product of a system based upon production for profit and not need. Even without the aggravation of the situation caused by the colossal ‘financialisation’ of world capitalism, the system was bound to stall, go into crisis, at a certain stage. The extension of the market through a massive injection of liquidity and credit kept this cycle going longer than otherwise would have been justified, particularly in Britain.
This country did not suffer a downturn in the crisis of 2001, as Brown and Darling consistently point out. That crisis was mainly in the ‘real economy’ which struck worse those countries with a manufacturing base. Like a junkie, however, the system needed further and further injections of liquidity to keep it going. This produced the ‘excesses’ of the subprime crisis in the US, the trigger for this particular crisis, but also massive indebtedness in the US and Britain, where household debt is even greater than in the US at 177% of disposable income compared to 141%.
Before this crisis, the Brown government had little room for manoeuvre. But during the crisis, as the FT bluntly put it: “Saving the system is of the utmost priority”. As the fervent free marketeer Samuel Brittan also admitted in the same journal: “There will be no ‘glad confident morning’ for free-market principles for a long time to come”. Deregulation, extolled and praised by the economic witch-doctors of capitalism for more than two decades, was unceremoniously thrown out of the window. The so-called ‘nanny state’ was back in vogue: when it hurts, go back to nurse. Wimpey, Persimmon and a host of other firms have queued up for the once vilified state to bail them out, even before the September meltdown. With no room for manoeuvre, because of increases in public expenditure in the 2001 crisis and a ballooning budget deficit, the Brown government was under siege. But what is good for the US – colossal bailouts – is now suitable for Brown’s Britain. Faced with an underlying economic catastrophe, both Brown and Darling have promised to boost state borrowing during this crisis.
Will this do the trick and bail out the British economy? No more than Bernanke and Paulson’s measures will rescue completely US capitalism will Brown show a way out of this economic impasse. Most of the economic indicators are on red with the rest on amber. House prices continue to tumble, with David Blanchflower, member of the Monetary Policy Committee of the Bank of England, predicting they will drop by at least 30%. Consumption this year is at a 16-year low. House building is virtually non-existent and house repossessions are spiralling to a 16-year high.
This represents a massive rejection of Thatcher’s idea of a ‘property-owning democracy’, continued by Blair and Brown in the indiscriminate showering of money on prospective buyers. Northern Rock, for instance, as is well known, seduced homeowners to take out mortgages worth 125% of the price of their houses. Four, five and sometimes six times the annual salary of mortgage payers became the norm to lend. Now, so out of reach is home ownership that five million people in Britain see their only hope of accommodation in ‘social housing’. This at a time when the number of council houses built in Britain in the social sector is less than even under Thatcher’s government.
Rising costs & poverty pay
It is the economy – particularly if there is an economic decline, jobs vanish and living standards are cut – which is the ultimate ‘decider’, as Bush put it, of economic and political events. Even before this crisis, the Organisation for Economic Co-operation and Development (OECD) had said that the British economy, already in recession, was the worst-placed of the G7 countries to withstand the economic storm. Brown is tempted to mollify the growing discontent with ‘emergency’ proposals, rather than previous measures which have fallen flat. He launched an ‘initiative’ for ‘special help’ to those who could not get mortgages for houses. But the total package was worth £1 billion while house prices are falling at £1 billion a day! At the same time, the Local Government Association predicts that council housing waiting lists, now 1.67 million households, will rise to two million (five million people) by 2010. One quarter of British children will experience “living in overcrowded accommodation and in poor states of repair”. On top of this, Britain now has the smallest space per person in new housing than any country in Western Europe.
An added impost is the rise in the cost of living, particularly of food and fuel, which bears down most markedly on the poor. This is the conclusion of Price Waterhouse Coopers, which pointed out that households in the lowest income decile actually saw inflation rise to 5.7% in August, compared to the national average of 4.7%. While the deflationary aspect of the downturn in the economy will act to depress prices, the present increase in inflation will, in all probability, continue into 2009.
At the same time, Brown and his government intend to continue to bear down on public-sector pay. The reaction of workers is shown by the number of work stoppages, which have increased markedly this year compared to last. More than one million working days were lost to strike action in 2007, almost a quarter of a million more than 2006. The main reasons for this increase were disputes over pay (67%) and rows over hours (30%). There is enormous discontent with the poverty wages of public-sector workers (even those on a selected BBC panel of ‘voters’ discussing Brown’s speech expressed support for an increase in pay for nurses, doctors and teachers). In 2008, there was a two-day strike of local government workers plus big strikes of PCS members, teachers, Scottish council workers and a myriad of smaller strikes.
Don’t rock the boat
However, the head of steam building up over pay is in danger of being derailed by the shameful decision of union leaders to row back in the public-sector pay battle. Representing 700,000 local government workers, Unison, the largest public-sector union, Unite and the GMB have decided to refer their dispute with the employers to the conciliation service ACAS. This means postponing the struggle for two to three months. This has been clearly done in order to assist the besieged Brown government. This will be presented by the trade union leaders as a quid pro quo for perceived ‘concessions’ by the government on public expenditure, the slap on the wrist for speculators made at the New Labour conference.
But the promise of an increase in public expenditure will run into serious obstacles. It is likely to push public borrowing in the financial year 2010-11 to a minimum of £60 billion but some economists have estimated it could reach £90 billion, £95 billion or even £100 billion! This will be against the background of falling tax receipts because of the slowdown in the economy. This level of deficit is unprecedented and is likely to be the worst in the advanced industrial countries. It will almost certainly lead to a further run on the pound, which has already dropped precipitately against other currencies, fuelling a rise in prices of goods imported into Britain.
This decision of the local government union chiefs is designed to help out Labour at the expense of their members. It emphasises once more the crucial importance of the need for a new mass workers’ alternative to discredited New Labour. Both Brown and Darling have publicly admitted that they are no longer socialists: “He doesn’t call himself a socialist”. (Guardian, 30 August 2008) Yet the trade unions provide £9 out of every £10 of income for New Labour, now that big business has deserted it and crossed over decisively to the Tories. What does this union support earn for working people? At the recent meeting between the unions and Labour leaders – Warwick mark 2 – they came away with a ‘bag of sweets’.
The membership of the unions will be looking for their organisations to defend them against the gale force economic winds that impend. The very scale of redundancies will push the question of job protection to the fore, where it will probably now rank alongside pay as the major issue in workers’ minds. An indication of the employers’ offensive was shown by the sacking by Marks and Spencer’s management of a worker who leaked company proposals to make sacking employees easier and reduce redundancy terms. There are seven million workers in Britain involved in the retail and leisure industries. The phenomenal vote – 40% of those who turned out – in support of Robbie Segal for general secretary of the retail union, Usdaw, is itself a symptom of what is developing in the depths of some of the most exploited sections of the British working class.
The Brown and Blair governments claimed that they struck a blow for low-paid workers by introducing the minimum wage. Yet this is totally inadequate for workers to live on against the background of the big increases in prices in Britain. Moreover, Ian McCartney, former Labour Party chairperson, has revealed that there was a gap in the minimum wage legislation when it was first introduced. Devised in a secret deal with restaurateurs, this deal allowed the ‘hospitality trade’ to pay its staff less than the minimum wage rate. How? By using the customers’ service charge to top up the shortfall.
This shows that only the independent power of the working class is capable of effectively defending working people, especially in the stormy economic period ahead. For this, it needs fighters and leaders who are prepared to fight the bosses and not run away at the ‘first whiff of grapeshot’, as the leaders of the three big local government unions have done. Bending the knee to the bosses, these leaders, like Dave Prentis of Unison, are at the same time pursuing a vicious witch-hunt against militants in the unions, including the ‘famous four’ members of the Socialist Party – who face expulsion for ludicrous charges relating to use of ‘the three monkeys’ cartoon – and others. (See: Defend the 4, Defend Democracy, by Jane James, The Socialist No.528, 10-16 April 2008)
Morbid symptoms
The same expectation, and it is growing, exists on the issue of the need for a new mass party. The right-wing union leaders are attempting to bury this idea by emphasising the prospect of a Tory victory at the next election. This means the trade union leaders must still cling to Brown’s trouser leg as he continues to kick them. The situation in Britain towards a new mass alternative to New Labour is similar to what Antonio Gramsci explained in a different situation: “The old is dying and the new cannot be born; in this interregnum, there arises a great diversity of morbid symptoms”.
New Labour is dying on its feet. Even a Labour loyalist like Jackie Ashley, political correspondent of the Guardian, believes that before the election, “the Labour Party could be on the verge of destruction”. Hoping against hope, however, some, amongst whom are the majority of union leaders, believe that ‘the dying’ can still be revived. Events, and big events loom, will speed up the new, mass workers’ alternative. This is shown by the letter writer quoted above: “Those who represent us are completely oblivious to our needs. I can speak, but have no voice, and those claming to represent me have failed me”.
What is certain, notwithstanding the outstanding ‘success’ of New Labour’s conference, is that Brown’s chances of lasting till the next election look as though they will founder on the rocks of the continuing economic crisis. The coming Glenrothes by-election is likely to be won by the Scottish National Party, as was the Glasgow East by-election. That will resurrect all the doubts about Brown, despite the hosannas at the conference. Thatcher was greeted with “ten more years” at the 1990 Tory party conference and was out a month later, ejected by Tory MPs fighting for their political lives. A similar fate could be waiting for Brown.
On the other hand, the lack of an alternative, the refusal of the ‘soft centre’ to pluck up courage to politically assassinate Brown, could lead to a repetition of James Callaghan’s last days. A recent biographer painted a picture of Callaghan aimlessly shuffling pieces of paper in his 10 Downing Street flat, while the bottom fell out of Labour.
The fate of this or that New Labour leader is of little consequence compared to what the working class faces. Workers today do not hold them in the same high regard as in the past. This was illustrated in a letter to the Guardian on the death of Militant MP, Terry Fields: “I belong to a generation that can only remember the tail end of the vicious Thatcher government. However, reading Francis Beckett’s obituary reminded even those of us who have the misfortune of being Thatcher’s children that there were, and still are, politicians of courage, passion and humanity. The Thatcher government created real poverty – the effects of which politicians like Terry Fields were prepared to see and experience first-hand”.
Irrespective of the outcome of developments at the top of New Labour, it is most likely now that a Tory government will be returned. The best that Brown can hope for is a hung parliament, with the Liberal Democrats holding the balance of power. Tory leader, David Cameron – like Barak Obama in the US – will inherit a poisoned chalice if he comes to power. Far more than the case of Thatcher in 1979, his government would face invidious choices. He is, undoubtedly, trying to cultivate, like Bush before him, the image of a ‘compassionate conservative’. Something similar to what happened to Thatcher before she came to power is also at work in Britain amongst intellectuals, which in turn reflects a movement towards the Tories amongst sections of the middle class. As with the likes of Paul Johnson, former left and editor of the journal New Statesman, who moved over to Thatcher in the 1970s, a similar shift, even amongst those who supported Blair, is now under way. However, Cameron’s real intentions are shown by his recent statement that he intends to be “as radical as Thatcher herself”. Both he and shadow chancellor, George Osborne, have declared that they will not stick to Brown’s public-sector guidelines but attempt big reductions in state spending.
As we see, Brown, under the pressure of the economic situation, has clearly broken his ‘golden rule’, with public expenditure likely to increase. Osborne and Cameron intend to cut public expenditure. Boris Johnson, the right-wing Tory mayor of London, despite his fluffy image, is itching to take on the transport unions, particularly the Rail Maritime Transport trade union (RMT). Equally, the Liberal Democrats have shifted towards the right, demonstrated by Nick Clegg’s ‘tax-cutting’ credo, supported by Vincent Cable at their recent conference. Cable went on record to demand £20 billion in public expenditure cuts as the price of Lib Dem support, probably for a Tory government, after the next election.
Effects on the workers
The British economy is therefore in crisis, politics are in flux and the main burden in this situation will be carried on the shoulders of working-class people if the ruling class and its political representatives are allowed to get away with it. This crisis can have a two-fold effect on the working class and the labour movement. Coming after a long, seemingly unstoppable economic upswing, many workers could be stunned by the effects of the crisis, even before its full effects strike home in terms of redundancies and falling living standards. Another section of young people and workers are being radicalised and looking for an alternative. Previously, the bourgeois were in denial – they did not want to believe that their economic system was heading for the rocks. Now, there could be workers in denial, wishing that the current turmoil is merely a blip which will soon be over, and that ‘normality’ will resume.
However, the bourgeois are now deadly serious about what has happened to their system. Like Keynes, who declared, “when circumstances change, I change; what do you do?” they have unceremoniously abandoned one way of organising their system for another. But the purpose is to maintain the system intact. They have, however, suffered a colossal ideological blow to the idea that capitalism is the best system for delivering goods and services to the peoples of the world. Capitalist state intervention has raised the idea in workers’ minds of similar intervention, through mass pressure, for their demands and to ensure their interests. This means a return of labour movement ‘Keynesianism’ – reformism, partial and incremental increases in living standards – the outline of which we have seen partially at the TUC and Labour Party conferences.
This does not mean that within the confines of New Labour a revival of the left can take place. Never in the history of Labour since it was set up has the left – founded by stalwarts such as Michael Foot, Tony Benn and a phalanx of MPs – been so weak. Even the accepted journal of the ‘Labour left’, Tribune, is down to a circulation of just 4,000, heavily dependent for its future existence on Unite, the trade union. The real left is developing outside the Labour Party, in the unions and around the campaign – supported by Mark Serwotka (PCS), Bob Crow (RMT) and Matt Wrack (FBU) – for a new mass workers’ party.
The Manchester conference of the Labour Party represents not a new beginning, a resurgence that could ensure a fourth term, but another staging post in the degeneration of a party which no longer represents working-class people. The way to prepare working-class people for the bumpy road that Darling spoke of is not by reconciling ourselves to this, the chaos of capitalism, but by mobilising to defend past gains and to go on to new conquests, only fully possible on the basis of a democratic, socialist planned economy.
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