This document is a statement on Britain, an analysis which was agreed unanimously at the national conference of Socialist Appeal in April. The statement constitutes an analysis of the deepening social, political and economic crisis of British capitalism. This perspective applies the method of Marxism to these developments, seeking to uncover the trends and processes within, and serves as a guide to action for all those workers and youth who want to struggle for a socialist transformation of society.
Events in Britain have had a protracted character since the coming to power of Blair in 1997. However, it would be a grave mistake to believe that things will simply trundle along in a similar fashion in the next period. The contradictions have deepened everywhere and the pressures are piling up.
The world market is more dominant today than at any other time in history. More than in any other period, we live in an epoch of world economy, world history and world politics. This is of profound significance. If we are to understand what is likely to unfold in Britain, we have to understand British perspectives in its world context. The processes affecting every country are determined in the final analysis by the world situation. This must be kept firmly in mind.
As we have explained fully in our 2006 World Perspectives document, we have entered the most turbulent period in world history. Upheavals in the past have tended to affect one or more continents, whereas today every sector of the world is affected by shocks and instability. One shock after another - economic, political, military, etc - is shaking the system to its foundations. The world situation is characterized by extreme instability, which is a reflection of the impasse of the capitalist system on a world scale. The world has been plunged into a maelstrom of conflicts, wars and terrorism.
Beneath the surface, revolutionary conditions are maturing. Revolutionary developments are implicit in the whole world situation. Everywhere we look we see an enormous ferment. At different rates, and in different ways, this will find its expression in the consciousness of the masses and be manifested in all kinds of social and political crises and explosions.
Since 1974, we have entered a new phase of capitalist development, where booms do not, as in the past, lead to a general rise in living standards, but are now increasingly achieved at the expense of the working class. Social inequality has become a chasm everywhere, with obscene riches at one end and extreme and increasing poverty at the other. In all countries the share of profits in the national income has increased to record levels while the portion dedicated to wages has fallen.
The process of concentration of capital predicted by Marx has increased to unheard of levels through continual mergers and asset stripping. Today, some 500 international monopolies account for 45% of world output.
The present boom has a sickly character, with most of the advanced economies limping along. There is modest growth in America, but it is based on huge deficits. Only in China has there been large-scale growth for fifteen years, but even here there is the growing threat from overproduction, protectionism and chronic pollution. A recession in China, which is being predicted by bourgeois economists, will have serious implications for the world economy, especially when the US economy is running out of steam.
Today, capitalism, as a world system of production, is incapable of developing the productive forces as it did in the past. The nation state and private ownership of the means of production have become enormous fetters on industry, technique and science. Despite the current boom, living standards are under attack in all the advanced countries, while in the underdeveloped world living standards are falling.
The serious strategists of capital are increasingly concerned about what the future holds. Despite the record profits being made, economic development is largely based on credit, speculation and asset stripping. Much activity is based on fictitious capital. This reflects the parasitic nature of present-day capitalism. This, in turn, prepares the basis for new and severe crises on world stock markets, which, given the fragile nature of the boom and the warnings of a recession in the USA and China, can tip the whole world onto a recession.
An article in the Financial Times showed the real mood on the boards of directors of the big banks and monopolies: "‘Our thesis is that excess liquidity in the global economy has allowed banks to create more and more derivative products from a stock of debt and equity. This is banking alchemy, the ability to turn a given asset into new money-making opportunities several times over,' says Simon Maughan, an analyst at Blue Oak Capital. ‘The current boom in banking revenues is thus a liquidity bubble, like many others throughout history, and the major question is when it will end. That is, if it hasn't already'."
Another recent article in the FT entitled "The world must prepare for America's recession", was warning of the dangers in the US economy, the biggest and most powerful economy in the world. This article explained that growth was weak, consumption was falling, sales were falling and investment in equipment was on the decline. "As consumer demand is slowing, profit-rich companies are not finding good investment opportunities to increase capacity, and are thus returning such profits to shareholders in an unprecedented buy-back bonanza... Indeed, the recent housing bubble has led to a glut of housing stock, consumer durables and lingering excess capacity in the rest of the economy."
The enormous trade and budget deficits of the US economy are reaching untenable proportions. Bush has now demanded from Congress increased spending on defence, as a consequence of the financially draining wars in Iraq and Afghanistan, which will send the deficits up even higher. As elsewhere, due to cheap credit, corporate and personal debt has reached astronomical levels. But the increase in interest rates over the past year is beginning to affect the housing market and consumer spending generally. The whole of the US economy is in a fragile state. How long foreign capitalists will continue to pay for these deficits is not possible to predict, but this situation cannot be sustained indefinitely. The boom may last another year or two longer, but a collapse is inevitable at some point. The contradictions are piling up, one upon another. It will have a much greater impact than the bursting of the dot.com bubble.
Even without a world economic crisis, the world situation has never been so precarious and volatile. The wars in Iraq and Afghanistan have simply added to the instability, and not only in the Middle East. If it takes place, US aggression against Iran will only serve to intensify this instability worldwide.
Imperialism
In Iraq the imperialists are staring defeat in the face. Already more than 3,000 US troops have died in Iraq, greater than the number killed in 9/11, together with countless Iraqi deaths and injuries. Bush has now announced "the Surge", the dispatch of a further 21,500 American troops to Iraq. But no matter how many troops they pour in, they cannot win.
On the ground the situation has gone from bad to worse. "Iraq has reached advanced social breakdown, with ethnic cleansing on a regional, neighbourhood and even street-by-street basis", explains the Financial Times. "...the number of killed in the capital alone has rocketed to more than 100 a day, while on average an attack occurs against Anglo-American forces every 10 minutes..."
Even in the White House, there is growing awareness that the coalition forces have been defeated in Iraq. However, to withdraw now would have grave consequences for US imperialism. Whatever they do now will be wrong. There is huge and growing opposition in the United States to the Iraq war with only 25% supporting the Bush's decision to send in more troops.
The war has caused splits in the Republican Party and led to a sharp fall in their popularity. As a consequence, the Republicans are facing defeat at the next Presidential elections. However, the Democrats will behave no differently. Hilary Clinton, who is the favourite to succeed Bush, voted for the war and will act in the interests of US imperialism.
The worldwide impasse of capitalism has reflected itself not only in imperialist aggression in the Middle East, but in the unfolding revolutionary crisis in Latin America. The chain of world capitalism is tending to break at its weakest link. The epicentre of this Latin American revolutionary wave is in Venezuela. It is a further confirmation of Trotsky's Permanent Revolution that the national-democratic revolution in the modern epoch crashes up against the barriers of capitalism.
The Presidential victory in December and the measures announced by Chavez for the nationalization of certain strategic industries represent a further step forward. It will provoke even greater resistance from the oligarchy and the imperialists. But there is enormous and growing pressure from the masses to go much further and complete the revolution. We must be alert to sharp and sudden changes in the situation.
British imperialism's role in supporting the adventures of US imperialism in Iraq and elsewhere is having far reaching consequences inside Britain. The huge demonstration at the beginning of the Iraq war of 2 million people in London, the biggest demonstration in British history, was a reflection of the profound discontent in British society. The impact of the invasion and occupation is far from over. To date, over 100 British soldiers have been killed. Blair, nor the New Labour government, can escape the stench from the lies and deceit used to justify the invasion of Iraq. It will be Blair's everlasting legacy.
Blair has faithfully served his master in the White House. He has stated that Bush's new surge into Iraq "made sense". This grovelling support for US imperialism simply reflects the abject dependency of enfeebled British capitalism, incapable of playing any independent role on a world scale. The decision to maintain Trident, at a cost of over £20 billion (plus nearly £2 billion a year in running costs), is again part of this dependency. Britain's "independent" defence system is dependent upon US technology. Blair's military interventions in Iraq and Afghanistan are an attempt to boost Britain's role and prestige as a world player and faithful ally of US imperialism. However, this prestige is simply an enormous drain on the weakened British economy, imposing further cuts on social spending. The reduction in British troops in Iraq is in order to place more troops in Afghanistan. It is to jump from the frying pan into the fire. Nobody in history, including the British in the past, has ever succeeded in conquering Afghanistan. This Nato/British/US attempt will fair no better, creating greater opposition at home. Already the families of dead British soldiers are speaking out more boldly about British foreign policy.
British capitalism is now too weak and feeble to play this world role. The days of the British Empire have long gone. The British armed forces are completely overstretched. They haven't got the forces to fight in two medium wars on two fronts. General Sir Richard Dannatt, the new army chief, has urged the government not to "break" the army over its twin engagements in Iraq and Afghanistan. He is simply facing up to realities on the ground. According to Anthony Cordesman, the experienced US military analyst: "The British have essentially been defeated in Basra." They are being forced to withdraw from street patrols. It wasn't so long ago that the British were patrolling with soft hats and boasting how well received they were compared to the Americans. How times change. With intensified fighting in Afghanistan, any additional military adventures will only serve to break the dispirited British army.
These imperialist conflicts have had a considerable impact in Britain. The failure to find weapons of mass destruction, the continuing presence in Iraq and Afghanistan, Blair's fawning over Bush, the rising death toll, the daily pictures on our TV screens, has produced, as in the US, a massive anti-war feeling. Some 100,000 people participated in the recent anti-war demos in London and Glasgow. The Iraq war is a major reason why there has been a fall in popularity for Blair and the government. If Brown succeeds him, despite the rumours of his initial whispered "opposition" to the intervention, he will continue with Blair's foreign policy. The continued occupation of Iraq will further erode support for the Labour government and has major implications for the outcome of the next general election with Cameron, in opportunist fashion, taking a critical stance against the war. In power, the Tories would act no differently to Blair.
Apart from the war, developments in Britain appear to be unfolding rather slowly. The Labour leadership has continued to move further to the right. Trade union membership has continued to dwindle, with just over six million affiliated to the TUC. Over this time, there have been no major class battles. In fact, days lost in strike action last year are the lowest since records began in 1891, although this does not tell the full picture. At times, it has seemed as if events have been unfolding in slow motion.
However, the apparent successes of New Labour are beginning to unravel. The removal of Blair will open the floodgates of criticism and discontent in the rank and file, which has been building up for years. Gordon Brown, whose politics are not fundamentally different from those of Blair, will not be so lucky as was his rival. He will be faced with a world economic downturn in which the weakness of British capitalism will stand cruelly exposed. He will have to make deep cuts in public spending that will provoke outrage in the ranks of the Party and resistance form the unions.
Decline in industry
The key question is the relative decline of British capitalism over a long period. The extreme short-sightedness and parasitism of the degenerate British ruling class has led to the collapse of Britain's industrial base. The "workshop of the world" has been reduced to a shadow of its former self, outclassed in nearly every field by its foreign rivals. Large swathes of manufacturing industry were closed under Thatcher. Coal, steel, shipbuilding, the car industry were all reduced to a frail skeleton of their former strength.
Manufacturing is now in terminal decline. As a proportion of the total economy, manufacturing has shrunk from 23% in 1990 to 14% in 2005. The number of manufacturing jobs has collapsed from 5.2 million in 1986, to 3.3 million last year. Almost 8,000 jobs were lost in manufacturing in January this year alone, as the bosses shipped their companies abroad in pursuit of cheap labour.
The takeover of British Steel by the Indian company Tata speaks volumes about the state of British capitalism, undermined by decades of under-investment and shortsightedness. Rover, the last British-owned mass carmaker, was finally dismantled by Chinese creditors in 2005. Britain now exports 1.3m cars a year under American, French and Japanese brand names.
Side by side with the destruction of British industry, the parasitic finance sector has grown and achieved an absolute dominance. From the 1980s onwards, the City of London became increasingly the hub of international financial trading. The service sector also grew rapidly. Large numbers of state-owned industries were privatised at knockdown prices. British capitalism has become more and more converted into a parasitic rentier economy, like France before the Second World War, an economy based on banking, insurance and service industries.
Despite this, Blair and Brown have boasted of Britain's alleged economic successes. In reality, this is a hollow boast. Average annual economic growth since 1997, at 2.8%, has been slightly above its post-war trend, despite slowdowns in 2002 and 2005. If the world economy holds up, this year the British economy is likely to grow by 2.5%, hardly the "economic miracle" that Blair and Brown talk about. It is not a reflection of a robust British economy, but the huge growth in a sea of personal and corporate debt, which we will return to later. Given the strength of sterling, last year Britain was second only to America as a destination for foreign direct investment, lured by the prospect of making easy money.
To be continued...