The least expected beneficiary of the September-October 2008 financial crisis was Gordon Brown. The whole media, and at least half the cabinet, regarded him as one of the living dead in the run-up to the Labour Party conference. Within weeks he had been transformed into the conquering hero who knew how to deal with economic crisis not only in Britain but globally. Brown and chancellor Alistair Darling had the advantage over the Tories David Cameron and George Osborne that they knew about the classic Keynesian response to growing recession, even if it was one they had consciously rejected while neoliberal ideology rode high. They knew how to make the 180 degree turn faultlessly, as if it was a dance routine they had learnt in their youth. They also knew how to do it with a sufficient veer to the left to win applause from those in the party and the media nostalgic for “old Labour”.
The actual moves to the left were very limited. The temporary cut in VAT will provide most extra spending power to the rich, even if the some of the poor will gain proportionately a little more. The extra £60 on the pensioners’ miserly £10 Christmas bonus and the annual pension increase in April of £4.55 a week will not even compensate for the increase in heating bills this winter. Nor will bringing forward to January an increase in child benefit of £1.20 a week for the first child and a massive 55p a week for the others. As for the increase of 5 percent on the top rate of tax, which will bring in at most £1.6 billion1—compared to the tens of billions handed out to the banks, and is a flea bite compared to the £100 billion or so that goes to the highest earning 1 percent.
But most of the liberal left, their journalistic fellow travellers and the union leaderships do not require much in the way of gestures from the government to keep them happy. Ken Livingstone has declared that the “economic assumptions of New Labour’s thinking…have been abandoned”. Polly Toynbee has proclaimed, “At last, the party of social justice has woken up… The New Labour era is over.” Derek Simpson, joint general secretary of the biggest union, Unite, saw the pre-budget report as “a welcome warm up exercise after 30 years of inaction and neoliberal economics”. Simpson’s fellow (and rival) joint general secretary, Tony Woodley, who is a little further to the left, was nearly as ecstatic: “The government has shown that it is listening to people’s fears and is helping the people of this country weather the economic storm. The government has shown that it is willing to embrace progressive politics but it must stay courageous.”
Such talk has provided a perfect excuse for union leaders who do not want to organise any resistance. They point to the Tories, who retain a lead in the opinion polls, and argue, in effect, that keeping the Brown boat afloat is more important than worrying about those left behind in its slipstream.
There are those on the left who do not wholly buy this message. But they are succumbing to another argument—that workers will not strike during a recession. The left leaning executives of the teachers’ NUT and the civil service workers’ PCS called off action over pay—action narrowly supported by the membership. Only a handful of members of the two executives dissented (all bar one of whom were in the Socialist Workers Party). The pessimism of the union left inadvertently played the same role in dampening down potential struggle as did the gutless, bureaucratic centre and the pro-system right. This can make the claim that there cannot be struggle a self-fulfilling prophecy—at least for time being.
The claim is, in general, wrong. Deep recessions have contradictory effects on workers’ consciousness. They create bitterness and fear at the same time. The bitterness can erupt into sudden struggles that are more militant than in the past. The fear can lead people to avoid struggle lest they lose their jobs. Which of these factors predominates is not preordained in advance. It depends upon concrete circumstances—the way the crisis hits particular industries, past traditions of struggle, the general political mood and the degree to which there is some sort of fighting leadership. There were bitter defensive struggles even at the deepest moments of the slump of the 1930s (in Britain, strikes by textile workers in Lancashire, clothing workers in London and miners in Fife) and there were huge offensive struggles the moment there was some partial economic recovery (the unprecedented waves of strikes in the US and France, the growth of trade union organisation in the car plants in Britain). What was particularly disastrous about calling off the teachers’ and civil service strikes was that, far from fear dominating, there had been majority votes for action. But instead of examples of resistance that could inspire other sections of the class, there was a retreat from struggle, which can all too easily encourage the notion that resistance is either unnecessary (because Labour is “moving left”) or impossible (because workers “will not fight”).
The future Labour offers
To see how limited Labour’s turn to the left is it suffices to consult its widely publicised plans for public expenditure. According to the Guardian:
Labour is to slash its public spending plans by £37 billion after the next general election… The new era of austerity for public services after ten years of growth will require voluntary redundancies, limited pay rises and efficiency drives… Labour’s public spending cuts will fall disproportionately on capital investment. Health spending looks set to be especially badly hit… It is possible that the squeeze on public spending could be even tighter if David Cameron is elected. Shadow cabinet members admitted they faced a tough public spending agenda and will have to pick battles.2
Martin Wolf points out that “spending is forecast to fall from 44.2 percent of GDP next year to 41.5 percent in 2013-14. Misery lies ahead for years”.3 He adds that such government calculations assume the recession will only cut GDP by 1 percent—an estimate that now looks wildly optimistic. If the recession is deeper than that, the pressure on the government will be to make much bigger cuts.
Those such as Livingstone and Toynbee simply do not understand what recent converts to mainstream Keynesianism (as opposed to the more radical interpretations of some academics and left wing journalists) offer in the present crisis. They want a short-term stimulus to revive markets and restore profitability. So the Confederation of British Industry, the Engineering Employers Federation and the Institute of Directors are all keen on a short-term stimulus and on forcing banks to cut interest rates, and even accept temporary measures to limit home repossessions. But they want to ensure that other measures prepare for massive medium-term cuts in government spending and workers’ living standards to prevent any erosion of enhanced profitability. The government is responding to such pressures by bringing some public investment projects forward and making limited handouts to increase consumption in the short term, while also proceeding with—and even accelerating—cutbacks in other areas.
Symbolic of its approach are its proposals to force disabled people and single parents with children aged seven or over to seek work—and to consider applying the measure to those with children as young as one.4 Its aim is to ensure that if and when the economy does recover from the recession there is a “natural rate of unemployment” (or, as Marx would have put it, a “reserve army of labour”). This must be large enough to hold down wages to the degree necessary to pay for what the bankers have lost, while at the same time scapegoating “benefit scroungers” as an excuse to push cuts through.
One area where an onslaught seems inevitable is that of public sector pensions. The message pushed insidiously by much of the media in recent months is that workers in the public sector are “privileged” because their pensions have not been hit by the crisis like those in the private sector. The message is openly accepted by the Tories’ Cameron, Liberal Democrat Vince Cable, and Adair Turner, chairman of the government’s pensions commission, who insists, “It is important for the public sector to realise that it is going to have to reform salary related pensions in the public sector to make them more affordable.”
Nothing is more dangerous than to assume that because neoliberalism has taken a hammering and Keynesianism is back that somehow Labour’s course is inexorably to the left. Seumas Milne is seriously mistaken in his claim that “Ministers have made some welcome political leaps, but they have still been able to face both ways, nationalising while continuing to privatise, redistributing while prioritising the interests of the wealthy. That is going to become much more difficult as the recession deepens. The government has started a journey from which there is no way back”.5
In fact, the government is trying to rescue capitalism from a deep crisis, whose roots lie in problems of profitability that stretch back 30 years. And the only way it can do this, whether it uses a Keynesian, state capitalist approach or a neoliberal free market approach, is by attacks on the working and living conditions of those whose labour provides profit. A little bit of sugar in the short term is going to be followed by very bitter medicine in the medium term—even if not until after an election some time in the next 15 months.
Even this scenario may well prove to be too complacent. There is no guarantee that Labour’s short-term measures will not blow up in its face. For Britain is especially exposed to the impact of the global crisis. The financial sector plays a disproportionately large role in the economy, absorbing half of all investment in recent years and, with business services, employing twice as many people as manufacturing. Britain has the same high levels of personal debt and dependence on funds from abroad as the US, without having anything like that country’s global clout when it comes to getting others to help it get out of difficulties. This means that there are much tighter limits to the capacity of the government to borrow. The very big fall in the value of the pound indicates this weakness. A number of mainstream economists are now beginning to worry about the catastrophic situation in which the government can no longer borrow and has to print money to pay its bills, leading to a further fall in the value of the pound. William Buiter, the LSE professor who used to be on the Bank of England monetary policy committee, has half jokingly presented the prospect of London as “Reykjavik-on-Thames”. He is not alone in his fears. Klaus Schmidt-Hebbel, the OECD’s chief economist, has identified Britain “as being among several economies that looked particularly vulnerable as the economic storm clouds gather, including Hungary, Iceland, Ireland, Luxembourg, Spain, and Turkey”.6
Such ultra-pessimistic forecasts are not necessarily right. Apologists for capitalism sometimes panic excessively when things are going badly for the system, just as they get excessively euphoric when things seem to be going well. But the forecasts do indicate that the sorts of cuts and attacks on workers’ living standards assumed in Labour’s pre-budget report are the minimum we should expect them to attempt—and the actual pain may be much greater. And whichever scenario materialises, there is a need to turn bitterness into resistance before it transmutes into demoralisation.
What is to be done?
There are some immediate tasks for revolutionary socialists. The first is to intervene in the ideological turmoil resulting from the jettisoning of big chunks of neoliberal ideology. A space has been opened up for Marxist analyses to be taken seriously. Even the mainstream media have felt compelled to give a little space to Karl Marx’s economic analysis alongside the reams given over to John Maynard Keynes—the Guardian, for instance, provided a very brief resumé of Capital. There is an opportunity to present the full indictment of capitalism and the full case for socialism to a much wider audience than has been the case since the early 1970s.
Propaganda alone is clearly not enough. Socialists have to try to be present at the myriad points where the pain caused by the recession can lead to resistance—whether it is factory closures, wholesale sackings in call centres, waves of repossessions or the draconian measures imposed on benefit claimants. There will be many occasions on which bitter grumbling by people will not turn into active defiance—particularly given the failure of unions nationally to provide any lead. But the very character of the crisis means that any acts of resistance have the capacity to generalise. The blame cannot, as in the crises of the mid-1970s and early 1980s, be deflected onto oil sheikhs or union strength, because the immediate trigger has been the behaviour of the banks. In such circumstances, action to defend jobs or homes or public services can provide a symbol around which others suffering can gather—and at the same time take on an anti-capitalist character.
Events elsewhere provide a glimpse of the potential. Italy has witnessed a sudden upsurge of struggles just six months after Silvio Berlusconi’s re-election obliterated the parliamentary left and caused immense demoralisation. In Spain a student movement emerged out of nowhere at the end of last year, with occupations in major cities. In Ireland the government was stunned as thousands of pensioners protesting at health charges and thousands of students protesting at fees converged on the centre of Dublin, kept apart only by lines of police. In Greece the Tory government’s hold on power has looked increasingly precarious in the face of wave after wave of workers’ and students’ struggles. In Canada an upsurge of popular discontent at the government’s failure to deal with the effects of the recession has produced a crisis for that country’s Tories within weeks of them winning office. In all these cases there are opportunities for groups of revolutionary socialists, who played a role in the anti-capitalist and anti-war movements of the past decade, to have a wider impact on the working class.
We cannot tell if and when similar upsurges will occur in Britain. The sheer unexpected, chaotic way in which economic crises develop precludes that. A sudden bout of deflation might lead to resistance on the jobs front—of the kind seen at the Upper Clyde Shipyard in 1971, during the massive unemployment protests of 1980-1 or in the pit closure crisis of 1992, while partial economic recovery accompanied by renewed inflation could produce a wave of wage struggles, of the kind seen in the mid-1930s. In either case New Labour’s agenda of attempts to provide economic stimulus followed by deep cuts is likely to provide a framework for resistance within the public sector unions and working class communities in the medium term. There are many other possible scenarios. But the outcome to any of them will depend in part on revolutionary socialists moving now to take up the ideological arguments and to be integral to attempts at resistance.
1: This is the government’s own estimate, which the Institute of Fiscal Studies describes as “subject to a wide margin of error”, with the possibility that “the measure will lose the government tax revenue”-Financial Times, 6 December 2008.
2: Guardian, 26 November 2008.
3: Financial Times, 27 November 2008.
4: See, for instance, the Guardian, 2 December 2008, for details.
5: Guardian, 4 December 2009.
6: Quoted in the Guardian, 26 November 2008.