Thank God for the Olympics!” must be the cry from most if not all Tory Ministers after the economic news at the end of last month. They will be more than a little relieved that the London Games have been hogging all the news and will continue to do so over the next few weeks at least. However, we all live in the real world and in that world we can see the consequences of the just over two years of this Coalition. We are now in the longest “double dip” recession for over 50 years.
The latest data from the Office of National Statistics could hardly have been more damming if they had tried. The economy shrunk by 0.7 percent between April and June of this year. The Independent newspaper of 26th July explained where this was rooted: “… the biggest quarterly fall for the beleaguered UK economy since early 2009… Britain’s manufacturers and builders saw their deepest slump for more than three years, with even the dominant services sector – accounting for more than three-quarters of the economy – slipping into decline as the eurozone’s debt crisis sapped confidence.”
Economists continue to be baffled by all this. Excuses have been pushed forward, including blaming the Jubilee and the bad weather. The Olympics will boost the figures during the current quarter but they finish shortly. The trouble with economists – from both right and left – is that they are obsessed with charts and spreadsheets and formulas. They are constantly trying to identify cycles and waves to show how the economy moves. According to their graphs and charts the recession had finished – the double-dip shouldn’t have happened. But it has. In fact, it could be argued that we never really left the first recession. This is just a double-dip in the sense that a roller coaster goes up and then down yet forms part of one long, long, ride. The talk is now of a triple-dip recession.
Marxists had been warning of this crisis for many years before it hit. We explained that madly using credit to the degree that they did, in order to extend the market for commodities, would sooner or later come back to bite them. Marx drew attention to the use of credit in capitalism in his writings on the economy, but even he would have been astonished at the madness of a class prepared to pump-prime an already booming economy in order to grab easy extra profits.
The bosses really believed “boom and slump” had been abolished but the system was ready to crack at its weakest points. This turned out to be the US housing market and the deeply corrupt finance houses. They had been living a dream of never-ending profits for little or no risk; reality did not exist for them. Standing on a house of rotting cards, the crisis hit them before they knew it. Although people have rightly poured scorn on the banks for their greed and stupidity, their crisis is just a reflection of the deeper and more fundamental crisis of world capitalism. (see http://www.marxist.com/the-crisis-of-european-capitalism-wp-app-1.htm for a more detailed analysis of this)
All crises of capitalism, whatever the main trigger or most visible symptoms turn out to be, can ultimately be reduced to a crisis of overproduction, not overproduction of stuff we need of course (that requirement wouldn’t enter the bosses’ minds) but overproduction of commodity goods produced for profit in the capitalist market. Once the markets were revealed as just illusions the crisis hit with a vengeance. Banking credit dried up, sales fell, warehouses remained full of unsold goods and capitalists were forced into feeding off each other to remain afloat. Firms went bust, people were pushed onto the dole, spending fell, more goods lay unsold and the deadly spiral continued. Such massive over-accumulation of goods, factories, loans, etc. cannot be quickly pared down to a level where things can start to return to normal, whatever that might be.
The Tories hoped – and were promised by the economists this would happen– that things would be picking up by now and the worst was well behind them. They were wrong. Sure, the regime of austerity would have to continue for a decade but at least the economy would be growing to compensate. Instead it looks like this crisis has more than a little life in it after all.
Panic has now started to grip the ruling class. Osborne is coming under increasing attack for being “useless”, “the most inept chancellor for 50 years” and so on. Tory MPs – seeing the huge lead for Labour in the opinion polls – are feeling the heat and baying for blood. The Lib-Dems have also broken ranks with a call for “plan A plus” to replace the current austerity plans. The right wing of the Tory party sees hitting Osborne as a way of getting at Cameron, who they have never forgiven for not winning the last election outright. If anything they want more cuts not less. This is in itself an indication of the dominance of finance capital within the echelons of the Conservative party.
However, all the talk of plan A (huge austerity cuts to reduce the state deficit) and plan B (slowing down the cuts – for now that is – to stimulate the economy by maintaining public spending) rather misses the point. Under capitalism neither option is a solution to their crisis. They solve one side of the crisis by making the other side worse. It is rather like pushing one end of a ship under water to keep the other end above the waves. In the end the ship still goes down.
In that sense the cuts flow not from a desire by the Tories to hammer the masses – although they are happy to do that – but from the logic of capital itself. In fact under different circumstances they would have been quite happy to have maintained public spending during this crisis in order to keep unemployment down and help protect their parliamentary seats at the next election. But the looming threat of Sovereign Debt will not go away. The Coalition’s masters in the world of finance capital have commanded them to slash the public debt deficit and thereby protect their interests. They do not like the look of what is happening in Spain, Italy and Greece. But they are wobbling under pressure and may lose their nerve and yet there is no way out for them. Osborne may be sacrificed but little will change.
One thing is certain: the working class will continue to be asked to kindly pay for this crisis come what may, unless we do something about it. The task for the movement is therefore to ramp up the fight for socialist policies and for an end to this capitalist system.