Things are going from bad to worse as the British economy heads for another downgrade by the credit agency Fitch. This is a direct reflection of the continuing deterioration of the public finances as the economy stagnates, tax revenues fall and borrowing rises.
Budget of despair
Osborne’s “Plan A” has been blown completely off course and the Coalition’s credibility is in shreds. According to them, there will be many more years of cuts and austerity, as public sector debt alone rises to almost £25,500 per person by 2016-17.
The Office for Budget Responsibility has once again also revised down projected growth by half, from 1.2% to 0.6%. The growth forecast for 2014 has also been reduced. No doubt, as time goes by, these forecasts will also be further reduced. The British economy is in a deep hole. The economy will be another £50bn smaller in 2017-18 that the OBR expected three months ago! Today, it is still more than 3% below its peak in 2007.
Despite a 25% defacto devaluation of the pound in recent years, the forecast for export growth has been more than halved to 1.5% this year, as export markets continue to contract.
What Osborne has done in last month’s budget will do nothing to alter this picture of gloom. The cut in corporation tax to 20% will simply fill up the coffers of big business, who are already sitting on cash reserves of some £700bn.
A long downward cycle
What we are experiencing is not a “blip” but a deep crisis of British capitalism. This crisis was put off for a whole period by the use of credit. But this could not last indefinitely. It reached its limits and we experienced a “credit crunch” and the deepest slump since the 1930s. This has provoked the biggest attack on the working class for generations.
According to Money Week, a magazine for investors, “Our message right now is that we believe Britain is entering a long, downward cycle. One that is likely to be punctuated by a devastating financial, and even social collapse.” (The End of Britain, 27/2/13)
Pay cuts, job losses, cuts in terms and conditions, etc., have been on the order of the day. Capitalism can no longer afford the reforms of the past. This explains the onslaught on the NHS, where hospitals have been forced into bankruptcy, and the welfare state is being undermined. This is the age of austerity, which is set to last for years, if not decades.
Further pay cuts in the public sector together with a new squeeze on welfare will simply tighten the austerity screw even further for millions of ordinary people. The so-called “bedroom tax” will lead to the eviction of thousands of the poorest families.
Latest reports indicate that many local authorities are close to breaking point and will no longer be able to function. Cuts are already wiping funding for sport and the arts, and some councils are already warning that they can no longer fund even essential services and expect to be unable to carry out their statutory functions under law. Even some Tory councils have come out against the cuts such is the pressure they are now under.
The Tories and Lib Dems, the faithful representatives of big business, are busy sticking in the boot. They have been criticized for introducing “ideological cuts”, but the reality is they are following the dictates of capitalism in crisis. The austerity programme is happening everywhere, no matter the political complexion of the government. Capitalism is in deep crisis and can no longer afford reforms, only endless austerity.
The call by some for a return to Keysianism is no alternative. In the present context, with a budget deficit close to 8%, increased state borrowing will lead to further downgrades and a run on the pound. There is no solution on a capitalist basis. The system is bankrupt.
The need to fight back
In fighting the Tory regime of austerity, the leaders of the Labour movement should be offering a socialist alternative. The attempt to tinker with capitalism, as experience has shown, will only lead to disaster. Scandalously, the Labour Party leaders, in attempting to look tough against the unemployed, told their MPs to abstain on a Tory motion tightening up workfare. To their credit, more than 40 chose instead to vote against the government. The Labour Party was established to fight for working people, not ape the Tories.
While sections of workers, postal workers, teachers, and civil servants have taken industrial action in defence of terms and conditions, there needs to be a generalized response by the whole movement. Unfortunately, despite Congress resolutions, the TUC is dragging its feet.
Weakness invites aggression. The failure to wage a massive campaign to drive out the Coalition has emboldened the government. The trade union leaders must translate their criticisms into deeds. They need to take the struggle into the Labour Party, as UNITE is doing, to bring the party back under the control of the working class. However, the struggle for socialist policies is directly linked to this.
The challenge facing the Labour movement was posed point-blank recently by an unusual source: Michael Schuman, a capitalist strategist writing in Time magazine. “The political left, dragged rightward since the free-market onslaught of Margaret Thatcher and Ronald Reagan, has not devised a credible alternative course. ‘Virtually all progressive or leftist parties contributed at some point to the rise and reach of financial markets, and rolling back of welfare systems in order to prove they were capable of reform,’ Rancière notes. ‘I’d say the prospects of Labour or Socialist parties or governments anywhere significantly reconfiguring — much less turning over — current economic systems to be pretty faint.’”
Class struggle heightening
This damning criticism of Labour and Socialist governments, who capitulated to big business and the market economy, has created new dangers for capitalism by giving rise to massive discontent and heightened class struggle. Events are showing there is no way out on a capitalist basis. Those who fight for a fundamental transformation of society, such as the supporters of Socialist Appeal, will gain increasing ground, especially in the Labour movement. This has caused Time magazine to conclude alarmingly:
“That leaves open a scary possibility: that Marx not only diagnosed capitalism’s flaws but also the outcome of those flaws. If policymakers don’t discover new methods of ensuring fair economic opportunity, the workers of the world may just unite. Marx may yet have his revenge.” (Marx’s Revenge: How Class Struggle Is Shaping the World, Time Magazine, 25/3/13)
There can be no “fair economic opportunity” in a system based upon exploitation, especially when working people are under attack everywhere. Events in Greece and elsewhere have shown the increased radicalisation of the working class. The present capitalist crisis has clearly demonstrated the correctness of Marxism.
On the basis of events, the mass organisations will be transformed and retransformed. Under these conditions, the ideas of Marxism will become a majority and lay the basis for the socialist reconstruction of society.
Source: Slash and burn: economic crisis and Tory cuts push society to breaking point