Socialism - the only alternative to austerity

Reform or revolution? This has been the main ideological debate in the labour movement for the past century. Today, the crisis of capitalism poses the question sharply. Unlike in the past, however, the material basis for reformism has been eroded. The cupboard is bare. Austerity, heightened class struggle, and revolutionary upheaval are on the order of the day.

The mass organisations

jeff mcneill-capitalism isnt working at g20Out of the battles of the 19th Century, mighty organisations of the working class were created – trade unions, forged out of the intense heat of the class struggle. Such organisations were not founded merely thanks to the moral efforts and activity or enlightened individuals, but were born out of necessity – the necessity of mass collective action – as Marx and Engels explain in the Communist Manifesto:

“With the development of industry, the proletariat not only increases in number; it becomes concentrated in greater masses, its strength grows, and it feels that strength more. The various interests and conditions of life within the ranks of the proletariat are more and more equalised, in proportion as machinery obliterates all distinctions of labour, and nearly everywhere reduces wages to the same low level. The growing competition among the bourgeois, and the resulting commercial crises, make the wages of the workers ever more fluctuating. The increasing improvement of machinery, ever more rapidly developing, makes their livelihood more and more precarious; the collisions between individual workmen and individual bourgeois take more and more the character of collisions between two classes. Thereupon, the workers begin to form combinations (Trades’ Unions) against the bourgeois; they club together in order to keep up the rate of wages; they found permanent associations in order to make provision beforehand for these occasional revolts. Here and there, the contest breaks out into riots.”

Through organisation and struggle, the growing strength of the working class in society was reflected in a real improvement in living standards for ordinary people, and labour was able to benefit from the increasing wealth in society. According to figures presented in The Economist, although British capitalism was booming, “from 1770 to 1830, growth in British wages, adjusted for inflation, was imperceptible”, due to the relative weakness of the nascent proletariat. From the 1830s through to 1900, however, wages actually kept pace with the growth in productivity, as the working class grew in strength, both quantitatively and qualitatively, and was able to fight for its share of the economic pie. Between 1860 and 1900, the growth in real wages even outstripped increases in productivity.

But as the Communist Manifesto continues, however, “every class struggle is a political struggle.” The need, ultimately, for political change – for organisations that could give a political voice to the demands of the working class – led to the development of political parties. In Britain, the Labour Party was created by the trade unions in the wake of the famous Taff Vale case, when the courts – an arm of the bourgeois state – decided that the unions could be financial financially responsible for any damages occurred during a strike.

In Germany and elsewhere, mass Social Democratic parties were founded on the basis of a socialist programme. However, with the economic growth at the end of the 19th Century and the early 20th Century, the leaderships of these mass political organisations drifted to the right. Whilst paying lip service to socialism, these leaders – represented theoretically by those such as Eduard Berstein – in practice moved away from revolutionary ideas and embraced the ideology of “gradualism”: trying to reform capitalism gradually, rather than radically transforming society.

The culmination of this process was the betrayal of the Social Democratic leaders in 1914, who turned their back on revolutionary internationalism and voted “patriotically” in the interests of their national bourgeoisies, thus paving the way for the First World War.

The era of reforms

The events of World War One, however, shook society to its core, radicalising the masses in all countries. The effects of the war had a profound impact on the consciousness of workers, peasants, and youth – a process which found its most acute expression in the developments of the 1917 Russian Revolution: a marvellous episode in history, which saw ordinary men and women, for the first time, overthrowing their former masters and taking control of their own destinies.

The Russian Revolution, along with revolutionary movements across Europe, struck terror into the hearts of the ruling class. In fear of losing everything, as the capitalists in Russia had done, the ruling class elsewhere carried out reforms from above in order to avoid revolution from below. In Britain, many important reforms –such as the introduction of National Insurance, to ensure that employers contributed towards the cost of healthcare and welfare – were granted prior to 1914, as a result of the intense class struggles of the period known as “The Great Unrest”.

But the real “era of reform” was that which followed the Second World War. War had, once again, created radicalisation everywhere, resulting in Britain in an unexpected landslide victory for the Labour Party, which in turn introduced famous reforms such as the National Health Service, the cradle-to-grave welfare system, and the mass construction of council housing. The international authority of the Soviet Union, which came out of the war enormously strengthened, also contributed to the large scale programme of reforms in the West, enacted as a bulwark against revolution – funded in many cases thanks to Marshall Aid from the USA.

As the Marxists explained at the time, a unique concatenation of factors – including the destruction of industry during the war, the political role of the reformists and the Stalinists, the development of new technologies, and the American-backed expansion of world trade – allowed for the now senile capitalist system to experience a new, temporary lease of life.

This post-war boom – “the Golden Age of Capitalism” – provided the material basis for the ideas of reformism, which penetrated deep down into society. Even many so-called Marxists capitulated to Keynesian economic ideas and proclaimed that “we are all middle class now”. The class struggle was blunted and capitalism, it seemed, had overcome its contradictions.

“The End of History”

The return of crisis in the 1970s brought class struggle back to the fore. However, with a lack of revolutionary leadership and with an upturn in the world economy in the 1980s, the magnificent movements of this period were defeated. Attacks on the trade unions restored profitability to the capitalist system, whilst the collapse of the Soviet Union provided a huge demoralising blow to workers worldwide. The bourgeoisie were giddy with excitement, going so far as to proclaim “the end of history”. Socialism and Communism were dead; capitalism was triumphant.

The opening up of the former USSR and of China to the world market, along with increased exploitation, and above all the massive expansion of credit, provided the basis for another temporary boom in the world economy – albeit shorter and less impressive than that of the post-war boom.

Although real wages remained fairly stagnant in many countries, with labour capturing an ever-decreasing share of the wealth in society, living standards were artificially maintained – and even improved – thanks to the ubiquitous presence of credit. This, once again, blunted the class struggle for a temporary period and provided the material basis for the ideas of reformism to take hold amongst many in society.

The relative class peace in society was reflected by a shift to the right in the mass organisations, including – and especially – amongst the leaders of the labour movement, who bought into capitalism hook, line, and sinker. Tony Blair, and all sorts of other vile creatures, emerged at the top of the labour movement; leaders who looked down on the working class and turned their backs on any mention of socialism. The “Third Way” – in reality just a continuation of capitalist policies under a new name – was embraced; Thatcherite policies remained; reformism had won the day.

Clinging to the cadaver of Capitalism

Now, over five years into the crisis, we see an absurd contradiction: at the very time when the system is dying on its feet, the reformist leaders of the labour movement cling to this cadaver of capitalism. The left reformists grasp onto the right reformists, who in turn tie themselves to the capitalists. Neither the left nor the right reformists talk of socialism or revolution; none of them have any faith in the possibility of transforming society.

Such reformist leaders, who are lagging far behind events, reflect the past period – a period where reforms, albeit of a mild and temporary character, could be granted. Now, however, faced with the deepest crisis in the history of capitalism, the material conditions for reforms have disintegrated. Such leaders are now left stranded as reformists without any reforms to offer; worse, in fact: they are reformists who are forced to carry out counter-reforms.

Writing in The Guardian, Leo Panitch, Professor at York University in Canada and author of “The Making of Global Capitalism”, comments:

“For most of the 20th century, the word "reform" was commonly associated with securing state protections against the chaotic effects of capitalist market competition. Today, it is most commonly used to refer to the undoing of those protections.

“This is not merely a matter of the appropriation of the term by those in the EU and international lending agencies who are using it as code for demands that Greece, for instance, make further cuts in public sector jobs and services. It is also the way the word has become increasingly used by the parties of the centre left.”

Panitch highlights that it is not ideology, but the logic of capitalism itself, that has led to social democrats and reformists carrying out policies of austerity. In the search for greater profits, each capitalist is forced to cut costs, and that means attacking the wages and conditions of workers. Morals and ideology are not part of the equation; austerity and attacks are simply the result of private ownership, production for profit, and the chaotic and anarchic nature of capitalism.

In particular, the York University professor emphasises the role of international competition in two respects. Firstly is the truly global nature of competition as a result of globalisation. Capitalism searches across the planet for the greatest possible profits, playing workers in each country off against one-another in a race to the bottom. Secondly, we also see today how each nation attempts to export its way out of the crisis – i.e. export the crisis itself – by “improving competitiveness”; that is, by driving down the cost of labour, cheapening the price of commodities relative to those of other nations’ capitalists, and thus increasing the volume of exports.

It is in the combination of these two related processes that we can talk about the capitalists now trying to impose Chinese conditions onto European workers. This, and not ideology, is the real meaning behind the austerity policies of the Troika.

The “German miracle”

Behind the austerity programme of the EC/ECB/IMF lies Germany, the “strong man” of Europe; or more precisely – the German capitalists. But as Panitch comments, referring to an article in the New York Times about the dismantling (or “Americanization”) of labour laws in Europe, it was not so long ago that Germany was in fact considered the “sick man” of the EU, prompting the (then) social democratic government to enact a programme of “reform” to “improve competiveness”.

As the NYT article explains, however, it is not ordinary Germans who have benefitted from this process; indeed, German workers have seen stagnant wages and inequality has risen:

“The overhaul of the labour market started after German unification in the early 1990s, when factories in the less-productive Eastern part of the country found they could not compete at the pay scales provided in the West, and defected en masse from the sector agreements negotiated between industry associations and large unions. West German firms soon took up the strategy. The share of workers covered by collective labour agreements fell.

“In the early 2000s — when a hobbled Germany won the moniker “sick man of Europe” — efforts to improve competitiveness and employment further eroded worker protections, fuelling a boom in low-paid, short-term “mini-jobs” that today account for more than a fifth of German employment.

“Today, Germany is seen as a shining example of the virtues of such reform efforts. It is an exporting powerhouse with an unemployment rate, according to the European statistical agency Eurostat, of 5.2 percent: the envy of the Western world. But on closer inspection it becomes apparent that not all Germans have benefited from Germany’s success.

“In 1991, the richest 10 percent of Germans took in 26 percent of the nation’s income before taxes and transfers, according to a report by Kai Daniel Schmid and Ulrike Stein of the “Macroeconomic Policy Institute in Düsseldorf, which is closely linked to the German Confederation of Trade Unions. By 2010 they took in 31 percent.

“Over the same period, the slice of the nation’s income taken by the bottom half of the population fell to 17 percent, from 22 percent.”

Today the same process is seen in every country: the chaos and competition of capitalism, with its insatiable appetite for profits, means attacks on workers in one country after another. The result is growing inequality worldwide between rich and poor, both internationally and intra-nationally – a trend that is increasingly being commented on by mainstream sources and commentators, including the charity Oxfam, The Economist, and those at the recent World Economic Forum at Davos.

Such commentators understand what the Marxists understand: that this disparity of wealth is leading to a vast hatred amongst ordinary people towards the rich and is fuelling social tensions, with revolutionary implications.

The race to the bottom

This international competition to drive down the cost of labour brings with it its own contradictions. Whilst it may be possible for one country to export its way out of a crisis through “improving competitiveness”, when all countries enact the policy at the same time, the result is an overall collapse in demand, since the wages that are being cut by one capitalist are also the purchasing power for the commodities produced by the other capitalists.

Such a contradiction is merely a reflection on an international scale of the contradiction of overproduction inherent within the capitalist system – a system of private ownership and production for profit. What is rational for the individual capitalist or nation of capitalists – to cut wages and increase profits – becomes irrational when implemented by the capitalist class as a whole.

In their “beggar they neighbour” attempts to get out of the crisis, the capitalists are simply exacerbating the crisis, as the NYT comments:

“But there is another issue at play. Even if the strategy [of “improving competitiveness”] were to eventually increase employment, what else will it do to Europe?

“Andrew Watt, an economist who heads the Macroeconomic Policy Institute in Germany, worries that the push for labour market deregulation will cascade from one weak country to the next, as all engage in a futile race to create jobs by gaining market share from one another in a world of insufficient demand. “Whichever country is weakest at the time is forced into major cutbacks. First Germany, now Spain, next France.”” (our emphasis)

This race to the bottom means that, as long as capitalism is allowed to live, austerity is the only item on the menu. Even Francois Hollande, the French President who to “tax the rich” and implement “policies for growth”, has now been forced to backtrack and implement the programme of the capitalists. The leaders of the Labour Party in Britain, understanding what is in store for them after the 2015 General Election, make a few left noises but very few concrete promises; in fact, their only promise is that they will carry on with implementing the Tory cuts!

Reform or revolution?

Far from being able to offer any genuine reforms, capitalism today is attacking all the gains that workers have struggled for in the past. Free education; free healthcare; a decent pension: all of these are either under threat or already long gone. Demands for full employment, for a living wage, and for a home for all are not in the slightest bit unreasonable – and yet under capitalism, these remain a utopian pipe dream.

The fight for even basic reforms, therefore, is a fight for revolution – for the socialist transformation of society. As Panitch points out:

“Perhaps the greatest illusion of 20th-century social democrats was their belief that once reforms were won they would be won for good. In fact, we can now see how far the old reforms were subject to erosion by expanding capitalist competition on a global scale. They have been so undermined by the logic of competitiveness that it now seems very difficult to see how state protections against markets could be secured in our time without additional measures that would be seen as revolutionary.

“The idea that doing anything to undermine private investment is unacceptable has become incredibly powerful. It is precisely this that makes social democratic politicians so timid in our time. And there can be little doubt that to sustain reforms in the old progressive meaning of the word, today a government would need to implement extensive controls to prevent an outflow of capital, and probably have to socialise financial institutions in order to get the necessary room for manoeuvre.”

Panitch, however, then goes onto praise SYRIZA in Greece for its political programme of “radical reform”. Unfortunately for our learned professor, it seems that news takes some time to travel across the Atlantic, as the policies that Panitch praises are the very same ones that Alexis Tsipras, the leader of SYRIZA, now tries to distance himself from and sweep under the carpet. Tsipras, faced with the prospect of actually soon finding himself in power, has buckled under the pressure of the international ruling class and has turned to the right, disappointing many workers and youth in Greece who had looked to him and SYRIZA in the hope of an alternative to years of crisis and austerity.

Without a clear Marxist programme – to transform society along socialist lines, placing the banks and major monopolies under democratic and public ownership, and planning production in a rational manner in the interests of people and not profit – all attempts to escape the crisis will be doomed to failure. There is no middle ground. The choice is clear: not between “growth and austerity” or even “reform and revolution”, but between “socialism and barbarism”.