Economic blues

Issue: 138

Alex Callinicos

It will soon be six years since the credit crunch that developed in the summer of 2007 announced the onset of the present global economic and financial crisis. But the core regions of advanced capitalism remain mired in depression—that is, a long period when economies expand below their growth rate in the years before the crisis. To quote the Marxist economist Michael Roberts: “The world economy crawls along, with the US and China leading the way and Japan and Europe struggling along behind”.1

The Financial Times recently reported the findings of a new real-time growth index:

In one of the weakest recoveries from recession on record, the pattern of economic data posted has struggled to remain above par in the US, the eurozone, Japan or the UK since the depths of the financial and economic crisis four years ago.

Persistent weak growth has dashed the hopes of governments and economists and cast doubt on the ability of rich economies to grow at anything like the 2 percent plus annual rates enjoyed before the crisis…

The research, for example, suggests that US economic news has been no better than normal and the country’s recovery has been characterised by mini-cycles of moderately good, then bad, data since 2010. The growth figures subsequently published by official sources corroborate that account.

Allesandro Beber, professor of finance at Cass Business School, said: “Since the crisis, the US has been chugging along around zero. Each time the recovery looks like it’s picking up, it then falls back.”

If the US has struggled to achieve a recovery, with better than normal growth, from recession, it is a miracle economy compared with the eurozone.2

Indeed, what has become most visible recently is that the eurozone crisis hasn’t gone away. This reality has been masked by the impact of the announcement last July by Mario Draghi, president of the European Central Bank (ECB), that “the ECB is ready to do whatever it takes to preserve the euro”. The implicit promise that the ECB would use its unlimited power to create money to prevent the eurozone from disintegrating was followed up with a bizarrely named new programme, Outright Monetary Transactions (OMT). Under this the ECB undertook to intervene in secondary bond markets to buy the debt of eurozone governments that in exchange implemented austerity measures under the surveillance of the troika of the bank itself, the European Commission and the International Monetary Fund (IMF).

No member state has taken up this enticing offer, but Draghi’s demarche was sufficient to reassure financial markets. The spreads on government debt for states such as Ireland, Italy, Portugal, and Spain—ie the difference between the interest rate that the governments of these countries need to pay to borrow money and that on ultra-safe German Bunds—narrowed significantly, and investors started buying bank and corporate bonds in the so-called eurozone “periphery”. It looked as if the economic situation in the eurozone was beginning to return to what counts as “normality” for the financial markets, even if tens of millions of people were being driven by austerity into conditions of great misery.

The gap between this perception and economic reality was exposed by the outcome of the Italian general election on 24-25 February. The Italian economy has been hit hard by austerity, implemented by Mario Monti, the “technocratic” prime minister installed after his predecessor, Silvio Berlusconi, had been effectively sacked by the German chancellor, Angela Merkel, and the then French president, Nicolas Sarkozy, in November 2011. According to Roberts, “Italy is entering a second year of real GDP contraction since the ‘recovery’ from the Great Recession” of 2008-9. Monti’s measures exacerbated the long-term difficulties of Italian capitalism: the rate of profit has fallen by 20 percent since 2000 and real average earnings are now 2 percent below their 2004 level.3 In January the unemployment rate rose to 11.7 percent, the highest level for 21 years.4 Meanwhile, industrial output is 25 percent below the pre-crisis level.

The election was therefore a referendum against austerity. Monti, the Troika’s man, was humiliated with 10.56 percent of the vote. The big winners were Beppe Grillo’s populist Five-Star Movement (M5S, 25.5 percent), which is, rhetorically at least, against austerity and for an Italian exit from the eurozone, and the right wing coalition headed by Berlusconi (29.18 percent): he managed to clamber out of the political grave by campaigning against Monti’s economic policies. The big loser was the social liberal Democratic Party (PD) headed by Pier Luigi Bersani, who sought to demonstrate his moderation by aligning himself with Monti. Although PD and its allies squeaked narrowly into first place with 29.54 percent of the vote, the majority they secured in the Chamber of Deputies thanks to the rule that gives the first party extra seats isn’t enough to form a stable government because they lack a majority in the upper house of parliament.

Grillo’s ambiguous politics combines denunciations of Italy’s deeply corrupt establishment with much more reactionary themes (for example, opposition to the children of immigrants getting Italian citizenship, and hostility to the trade unions). The M5S’s anti-elite rhetoric and identification with protest movements against high-speed rail lines and the privatisation of water attracted the votes of workers and young people disillusioned with the PD and the radical left. Grillo, who describes his role as that of “social containment”, preventing discontent turning violent, seems intent on acting as a spoiler in the cabinet games now being played out in Rome, presumably in the hope of winning the next election outright.

Political instability in Italy sent a shiver through the markets reminding them of the economic weakness underlying the recovery in confidence since Draghi’s intervention last summer. Spreads on Italian and Spanish government debt widened. Elsewhere in southern Europe the picture also looks grim: Greece’s central bank predicts that the economy will shrink another
5 percent in 2013 (the sixth straight year of a 1930s style slump) and the government is resisting the Troika’s demand that it sack 25,000 civil servants.5

But these problems have been overshadowed by a development that underlines the scale of the crisis that the financialised capitalism of the neoliberal era is facing. In mid-March southern Cyprus became the fourth eurozone member (after Greece, Ireland and Portugal) to be bailed out by the troika. The Greek Cypriot banking system has been used by Russian oligarchs to launder money then employed to finance property speculation all over Europe. Southern Cyprus banks, which were hit hard by the Greek crisis, held €68 billion in deposits (an estimated €25 billion of these Russian) at the end of January, compared to a GDP of only €17.31 billion.6 The €10 billion “rescue” would have been larger if the IMF and German finance minister Wolfgang Schäuble hadn’t in an astonishingly inept move forced Nicosia to seize €5.8 billion from depositors to help pay for their banks’ failed gambles and to protect the holders of Cyprus government bonds.

Faced with the imminent collapse of the second biggest bank, Laiki, and with threats by the ECB to withdraw its programme of Emergency Liquidity Assistance from all the island’s banks, the newly elected right wing president Nicos Anastasiades caved in and imposed a 6.75 percent tax on deposits of up to €100,000. In hitting small savers he was trying to keep the tax on the bigger fish below 10 percent and thereby to preserve southern Cyprus’s role as an offshore banking centre. Instead he provoked a domestic political storm and furious attacks from Russia. We go to press after the Cypriot parliament had rejected the deal: with the finance minister visiting Moscow cap in hand, the ECB threatened to pull out the liquidity plug unless Nicosia accepted the Troika’s terms.7

As the economic commentator Wolfgang Münchau points out, the deal “effectively defaults on” the national guarantees of bank deposits up to €100,000 introduced by European governments introduced at the height of the financial panic in the autumn of 2008: “If one wanted to feed the political mood of insurrection in southern Europe, this was the way to do it. The long-term political damage of this agreement is going to be huge. In the short term, the danger consists of a generalised bank run, not just in Cyprus”.8 Marc Ostwald of Monument Securities said the bailout “highlights how post 2007 efforts to resuscitate and rescue Western economies have continued to favour the vested interests of the financial sector, while treating the ‘population at large’ with disdain and contempt—this sort of attitude is still a seedbed for social revolution, as has been witnessed above all in the Arab Spring”.9 What looks to be the final deal protects small savers, while bailing the bigger ones into the brutal restructuring of the two biggest banks demanded by the Troika. But the after-effects will make themselves felt well beyond Cyprus for some time to come.

Even before the Cypriot debacle Ian Kelson at T Rowe Price International told the Financial Times: “We’ve now moved from ‘crisis contained’ to ‘crisis not solved’. Growth is still weak, especially in Spain and Italy, and the politics are becoming noisier”.10 There is, however, no sign of any retreat from austerity. In the eurozone it is locked into place by the fiscal treaty signed at German insistence by most European Union (EU) member states. “Much of the fiscal adjustment Italy went through will continue going on on automatic-pilot,” Draghi smugly told a recent press conference: so much for the electoral revolt against austerity.11 The German government has increased the pressure on the rest of the eurozone by announcing it intends to bring the budget into balance in 2015, a year earlier than it is required to under a constitutional amendment passed in 2009 (the new treaty makes signatories write a similar commitment to balanced budgets into their constitutions).

Britain stayed out of the pact, but its Conservative-Liberal coalition continues to press ahead with more cuts in public spending, despite the fact that it is presiding over a shrinking economy. Prime minister David Cameron echoed Margaret Thatcher when he announced before the budget on 20 March: “This month’s budget will be about sticking to the course because there is no alternative that will secure our country’s future”.12 Across the Atlantic the US economy is also on fiscal autopilot. The standoff between Barack Obama and the Republicans in Congress meant that the sequester agreed on to end the debt crisis in July 2011 came into force at the beginning of March. The cuts it mandates will take $3.5 trillion off federal government spending over the next decade, amounting to nearly 5 percent of national income in 2010-14.13

Draghi’s prominence in managing the eurozone crisis highlights the other side to the fiscal squeeze on public spending: the central banks are exercising great discretion in seeking to keep the financial system—and the world economy—afloat. The main traditional tool of monetary policy—setting interest rates—is ineffective: even though rates are at record lows, banks are refusing to lend. So central banks are resorting to more unorthodox methods. Draghi’s OMT is one example, as is the quantitative easing—creating money to buy government and corporate bonds—used by the US Federal Reserve Board and the Bank of England.

But these haven’t kick-started growth, and both Draghi and Paul Tucker of the Bank of England have speculated about introducing negative interest rates—that is, charging banks for the reserves they hold in the central bank as a way of forcing them to lend. Mark Carney, who takes over as governor of the Bank of England in July, has said central banks may have to stop rigidly targeting a low inflation rate (the orthodoxy of the past 20 years) to get economic growth going again. He is being encouraged in this course by Tory chancellor of the exchequer George Osborne, who sees “monetary activism” as the necessary complement to continuing fiscal austerity.14 In the budget Osborne gave the bank more flexibility to take into account growth in meeting its 2 percent inflation target.

All the cheap money that the central banks have been pumping into the financial system has helped to push the markets upwards. As the Dow Industrial Average reached record levels in early March, the Financial Times complained: “Financial markets eye new peaks, yet output is everywhere decelerating or shrinking”.15 Or, as Kit Juckes of Société Générale put it, “despite spending cuts in the US, a lack of any kind of political resolution in Italy and weaker data in Asia, we just can’t get a proper ‘risk-off’ mood going…as mad money trumps every other concern”.16

“Mad money” also acts as a means through which states can devalue their currencies and, through thereby boosting the competitiveness of their exports, get their economies growing again. One of the most significant political developments of the past few months has been the return to office of the historic party of post-war Japanese capitalism, the Liberal Democratic Party (LDP), thanks to its sweeping victory in the general election last December. The new prime minister, Shinz_ Abe, is a right wing nationalist who, as Kim Ha-young shows elsewhere in this issue, is stoking up the growing geopolitical tensions in North East Asia. In February he went to Washington to announce that “Japan is back” and told the Washington Post that, “in order to gain natural resources for their economy, China is taking action by coercion or intimidation, both in the South China Sea and the East China Sea”.17

But Abe also has an important domestic agenda. The Japanese economy has been caught in a vicious cycle of deflation and stagnation ever since the collapse of a huge property bubble in the early 1990s. In the past five years it has contracted at a rate of 0.2 percent a year.18 Abe, while campaigning for the premiership, denounced the orthodox monetary policies of the Bank of Japan (BoJ) under its outgoing governor, Masaaki Shirakawa. He forced the BoJ to adopt in January a target of achieving a rate of inflation of 2 percent, which, since prices continue to fall in Japan, requires the bank to create large amounts of money. Haruhiko Kuroda, Abe’s candidate to replace Shirakawa, is pledged to implement this ambitious policy shift. “No other advanced economy has ever tried anything like this”, one Japanese economist commented.19

A key feature of “Abenomics” is forcing down the yen on the foreign exchange markets and thereby boosting Japan’s crucial export industries. Abe said in December that Japan must print more money because “it makes a big difference whether the yen is at 80 to the dollar or 90 to the dollar”.20 By early February the yen had fallen to its lowest rate for the dollar for the past three years. This revived the fears of “an international currency war” first articulated by Guido Mantega, the Brazilian finance minister, in 2010.21

Mantega’s target was American quantitative easing, which was flooding Brazil and other “emerging market” economies with hot money and therefore pushing their currencies up against the dollar. But now it is Washington that is complaining about Abe’s efforts to talk down the yen. In February a senior US Treasury official called on members of the G20 leading economic powers to “refrain from competitive devaluation”.22

Meetings of G7 and G20 finance ministers papered over the cracks, but it’s clear that Japan isn’t the only state seeking devaluation as a means of boosting growth. Mervyn King, the outgoing governor of the Bank of England, has encouraged the pound fall by nearly 6 percent against the currencies of Britain’s main trade partners so far in 2013. The Chinese commerce minister, Chen Deming, recently warned “about inflation, about competitive currency depreciation and about the negative spillover effects of excessive issuance of the main currencies”.23

Behind the denunciations of currency wars is the fear that a cycle of competitive devaluations might precipitate another global slump. The example of the 1930s is often cited, although the evidence suggests the devaluations that followed Britain abandoning the gold standard in September 1931 liberated those governments that went off gold to pursue reflationary policies boosting growth.24 Nevertheless, austerity, by squeezing domestic demand, does push states to seek growth by exporting.

Here economic competition can fuse with geopolitical rivalries. Abe’s attempt to revive Japanese capitalism by devaluing the yen and using a language of confrontation with China is one example. Cyprus is another. Anastasiades is effectively caught between two imperialist powers—a
German-dominated eurozone that is seeking to liquidate the bloated southern Cypriot banking system and Russia, for which that system is an important financial outlet and whose energy industry is eyeing the island’s gas reserves. The tenth anniversary of the invasion of Iraq by the US and Britain is a reminder of the historic defeat American imperialism has suffered in the “war on terror”. But Western intervention in the Middle East and its environs continues, as the French military expedition to Mali and the debate over arming the Syrian resistance show. More importantly, imperialism in the broader sense of a system of capitalist rivalries is very much alive and kicking.25

From a more narrowly economic point of view, the increasingly desperate monetary experimentation being practised from Tokyo to London reveals the impasse official policy has reached four years after the world economy started to recover from the depths of the Great Recession. The crucial question is whether the continuing stagnation is simply a consequence of austerity, as Keynesian and post-Keynesian economists such as Paul Krugman argue.26 Because the present crisis originated in a financial bubble made possible by floods of cheap credit, many companies and households are loaded down with debt. The result is a process of “deleveraging” in which economic actors concentrate on repaying their debts. This has particularly affected the banks in both Europe and the US. A recent study illustrates the negative impact this process may be having on financial globalisation:

Global cross-border capital flows have shrunk more than 60 percent from their pre-crisis peak, with the UK seeing the biggest decline, highlighting the retrenchment in global finance and pressures on the world’s banks.

Loans and investment flows between countries were worth $4.6 trillion last year—down from $11.8 trillion in 2007, show calculations by McKinsey.27

But deleveraging has a broader negative impact. To repay their debts households and firms must save rather than spend on consumption and investment, reducing aggregate effective demand for goods and services. Unless counterbalanced by spending by the public sector, paying down private debt on a sufficiently large scale will cause the economy to contract.28 Keynesians argue that austerity, by reducing public expenditure, is kicking away the prop that has been holding the advanced capitalist economies up since the financial crash in 2008. But this argument, while undoubtedly valid, doesn’t go deep enough. 29 Both Marx and Keynes identified the critical role played by investment in driving capitalist economies. Roberts argues there is what he calls an “investment strike” in the US, where corporate profits have soared to record levels as a share of national income but investment is still below its pre-crisis peak. 30

Krugman himself has acknowledged that “the level of corporate profits…is arguably serving as a kind of sinkhole for purchasing power”.31 But the Keynesian explanation for this state of affairs is likely to be that the political uncertainty created by the eurozone crisis and the fiscal battle between Obama and Congress is dampening capitalists’ “animal spirits” and discouraging them from investing. Rather than rely on this kind of psychological explanation, Marx argues that the rate of capital accumulation is determined primarily by the rate of profit—that is, by the mass of surplus value relative to the total capital invested. We have consistently argued in this journal that behind the financial bubble and crash that precipitated the present crisis lie the chronic problems of profitability with which the advanced capitalist economies have been struggling since the late 1960s.32

For Marx, the devaluation of capital—the reduction in the value of the means of production, which is a trend inherent in capitalist development because of the constant increases in productivity forced on firms by competition—counteracts the tendency of the rate of profit to fall:

The periodic devaluation of the existing capital, which is a means, immanent to the capitalist mode of production, for delaying the fall in the profit rate and accelerating the accumulation of capital value by the formation of new capital, disturbs the given conditions in which the circulation and reproduction process of capital takes place, and is therefore accompanied by sudden stoppages and crises in the production process.33

Economic crises therefore have the function of destroying surplus capital and thereby permitting the resumption of profitable capital accumulation. One can think of the deleveraging as one form taken by this process. The credit bubble of the mid-2000s involved an immense expansion of what Marx called “fictitious capital”—assets created in order to give the holder a claim on the surplus value created in production. Repaying debt involves the liquidation of assets represented by the loans that are being redeemed. Roberts has tried to estimate the amount of deleveraging required by studying:

global liquidity as measured by the amount of bank loans, securitised debt and derivatives in the world. Global liquidity as a share of world GDP took off in the great credit bubble that began in the mid-1990s. After the credit crunch and the Great Recession, liquidating all that fictitious capital…various studies…suggest there is still some way to go…global liquidity to GDP…remains some 11 percent above the pre-credit bubble trend line. At current rates, to get rid of the remaining fictitious capital will take at least until 2015—and then it may only be achieved by a new global slump in production.34

So deleveraging is necessary to restore profitability but has a depressing effect on economic output. It is this dilemma that underlies the debates between austerians and Keynesians: austerity may accelerate the destruction of capital but fear of economic collapse leads central banks to create money and pump it into the financial system, thereby slowing down the necessary liquidation of fictitious capital. The Great Recession allowed employers to squeeze their workers harder and thereby to force up the rate of exploitation. As a result the mass of profits increased, but by 2012 the rate of profit (that is profits relative to the capital invested) was falling again in all the major economic regions.35

This analysis has focused on the advanced capitalist economies. But, of course, as Kim shows, China’s rise has unbalanced the global economic and geopolitical equations. Beijing responded to the 2008 crash with a huge fiscal stimulus; a flood of loans from the state banks funded a surge of investment that revived the economies of China and its major suppliers. The Chinese government responded to a surge in inflation and signs of a developing credit bubble by engineering an economic slowdown in 2012. Despite much talk of a “rebalancing” of the Chinese economy away from investments and exports and towards domestic consumption, little fundamentally seems to have changed. Unicredit recently commented:

The recent data from the second-largest world economy paint a picture of an overall modest, uneven and still fragile economic recovery that may even peak over the next few months… State-mandated strong FAI [fixed asset investment] as well as upbeat trade figures (although they seem inflated when confronted with the disappointing production picture and moderate global recovery) imply that exports as well as investment activity are still the key drivers of the Chinese recovery.36

Over the longer term the Chinese economy is highly vulnerable to deleveraging in the US and Europe, which will constrain demand for its exports. It may consequently be unable to regain the heady 10 percent annual growth rates of the past 30 years. One authoritative commentator, Michael Pettis, writes: “Beijing so far has been very reluctant to force through an adjustment and rebalancing of its extreme underconsumptionist policies, but rapidly rising debt means that within four or five years it will have no choice. As the economy adjusts, I expect Chinese GDP growth to average 3 percent or less over the decade of adjustment”.37

None of this means that the US and China, the two most robust major economies, may not enjoy somewhat higher growth rates this year. Global capitalism, however, remains stuck in the doldrums. Austerity is, of course, an attempt to displace the cost onto working people and the poor. It is failing economically, but its political fate remains open. Resistance is growing in Europe, albeit unevenly, as Joseph Choonara and Catarina Príncipe show elsewhere in this journal. The giant Portuguese protests on 2 March—1.5 million people out of a total population of 10.8 million demonstrating against austerity—bear witness to the potential. But, to break the vice the troika is imposing on Europe, opposition will have to generalise and to acquire the muscle that only collective workers’ action can provide.

The role of politics here is central. The spectacular rise of Syriza (the Coalition of the Radical Left) in Greece has captured the imagination of people right across Europe and indeed the world. But whether Syriza represents a real break with the reformist mould is a matter of much controversy on the radical and revolutionary left. Thanasis Kampagiannis continues the debate in our present issue. His criticisms of the rightward evolution of Syriza since the last Greek general election in June 2012 are not a case of sectarian nit-picking. One reason why Grillo has been able successfully to pose as an alternative to the Italian political elite is the disillusioning effect of the last centre-left government under Romano Prodi in 2006-8, when it continued Italian participation in the occupation of Afghanistan as well as Berluscolin’s neoliberal economic policies. The radical left party Rifondazione Comunista was effectively destroyed by its participation in this government, helping to create a political vacuum that Grillo has been able to fill temporarily.38 How to build genuine political alternatives to austerity and war will continue to preoccupy this journal in coming issues. The stakes are high.

Thunder on the right

The plight of the British coalition government has continued to worsen since we surveyed it in our last issue.39 Output is still 3 percent lower than its peak in 2008. Fears are growing that the pound’s devaluation will, by raising import costs, push the British economy into stagflation, with rising prices continuing to squeeze living standards while output remains depressed. The Office for Budget Responsibility’s calculations at the time of the budget on 20 March offered a grim prognosis for growth and for the coalition’s own targets for reducing government borrowing. Osborne’s response was to stick by his guns while slashing corporation tax to 20 percent in 2015, continuing to cut real wages in the public sector, and seeking to revive the property market and please marginal voters with a programme of publicly guaranteed mortgages. An Opinium/Observer poll in early March found that 58 percent of voters believe austerity is harming the economy, compared to 20 percent who think it is the right medicine for the economy. 40 No wonder Labour is ahead in this and other polls.

The predictable result is both greater friction between the coalition parties—for example, over Lord Leveson’s recommendations for preventing future press abuses after the News International scandal—and greater divisions among the Tories themselves, notably between Cameron and Osborne on the one hand, and the Thatcherite right on the other. Amid rumours of an absurd leadership challenge by an obscure millionaire backbencher, the Guardian reported at the end of January the view of “members of the government and prominent backbenchers” that:

enough MPs are prepared to trigger a vote of confidence in the prime minister in the summer of 2014 if the Tories experience a setback in the local elections… The events of the past weeks have also clarified in the minds of senior Tories that George Osborne enjoys negligible support on the Tory benches should he decide to stand [for the leadership].41

Cameron hoped to head off his right wing with a much trailed and delayed speech on the EU finally given on 23 January. Here he promised that if the Tories won the next general election he would seek to renegotiate Britain’s membership, with the aim of “repatriating” powers from Brussels to Westminster, and put the resulting deal to a referendum offering voters the choice of staying in or out of the EU. But whatever political capital this gave him was wiped out by the results of the Eastleigh by-election on 28 February. The Liberal Democrats, reeling from multiple scandals, managed to hang onto the seat, while the Tories were shoved into third place, behind the UK Independence Party.

Eastleigh followed a run of good results for UKIP, which was put at 17 percent in the same Opinium/Observer poll cited earlier.42 UKIP’s unifying theme is xenophobia—often more effective at the doorsteps when directed at migrants rather than at Brussels. Given that the next general election is barely a couple of years away, the most important effect of Eastleigh will be to encourage the Tories and Labour to engage in a Dutch auction over which party is tougher on immigration. For example, the BBC reports that Cameron is considering limiting British citizens’ entitlements to benefits in order to deny these to immigrants from Bulgaria and Romania when restrictions on the latters’ access to Britain are scrapped later this year.43 Labour responded with its own proposals, for example, to ban new migrants from receiving the jobseeker’s allowance, as part of what shadow home secretary Yvette Cooper calls a “one nation immigration policy”.44

What we see at work here is the political logic that Paul Foot so brilliantly analysed back in the 1960s, for example, in Enoch Powell’s intervention against Commonwealth immigration: racist demands from the extreme right are taken up and legitimised by establishment politicians, which simply strengthens the far right and increases the pressure on the mainstream parties to accommodate.45 The fascist organisations—the British National Party and the English Defence League—are down, thanks especially to the campaigning of Unite against Fascism, but not out. We can see elsewhere in Europe, above all in Greece, how the suffering and dislocation caused by the crisis can benefit the extreme right. Vigilance against the Nazis is essential, but it must be linked to effective struggle against austerity and to political opposition to immigration controls.

Debates inside the Socialist Workers Party

International Socialism is relatively unusual among Marxist theoretical journals these days in being the journal of a political organisation—the Socialist Workers Party (SWP), as it was of its predecessors (the Socialist Review group and the International Socialists). We have, therefore, inevitably been affected by the intense internal debates the SWP has experienced over the past six months. These originated in disagreements over how the party handled serious sexual allegations against a leading member, but have broadened out into much wider political arguments.46

A special conference of the SWP met on 10 March and sought to resolve the original controversy by setting up a committee to examine the party’s disciplinary procedures. But the main resolution passed by a large majority of delegates also stated:

We believe that underlying many of the recent debates in and around the party lie a series of vital political questions where we need to seek urgently to assert, develop and win our political tradition. Some of the key debates include:

a) The changing nature of the working class.

b) Lenin’s conception of the party and its relevance in the 21st century.

c) Oppression and capitalism.

d) The trade union bureaucracy and the rank and file.

e) The radical left, the united front and the SWP.

f) The role of students and intellectuals in revolutionary struggle.

g) The value of new electronic media in the ideological and organisational work of a revolutionary party.

The pages of this journal are an obvious venue for these debates, and we intend to make sure they happen here. Sheila McGregor’s article in the present issue on Marxism and women’s oppression today represents a start but there will be others, expressing a variety of standpoints. All these debates matter, and not simply for those who share the politics of the SWP.


1: Roberts, 2013d.

2: Giles, 2013.

3: Roberts, 2013c.


5: Hope and Spiegel, 2013.

6: Hope, Clover and Steen, 2013.

7: Spiegel, 2013a and 2013b.

8: Munchau, 2013.

9: Quoted in Elliott, 2013.

10: Watkins, 2013.


12: See Wolf, 2013, for a damning critique of this speech.

13: Davies, 2013.

14: Parker and Giles, 2013.

15: Financial Times, 2013.

16: Rodrigues, 2013.

17: Washington Post, 2013.

18: Roberts, 2013a.

19: McLannahan, 2013.

20: Harding, 2013.

21: Wheatley and Garnham, 2010.

22: Steen, Barker and Harding, 2013.

23: Hook and Rabinovitch, 2013.

24: Eichengreen, 1992, makes this case strongly.

25: Callinicos, 2009.

26: For example, Krugman, 2012.

27: Atkins, 2013.

28: See Koo, 2008, for an analysis of this process at work during the Great Depression of the 1930s and the Japanese slump of the past twenty years.

29: Outstanding though the economic analysis that Roberts offers in his blog is, he has a tendency in criticising Keynesians to echo neoliberal arguments that the higher public spending and borrowing they advocate will “crowd out” productive investment. For example: “the increase in government spending begins to encroach on the private sector’s ability to make profit, both through increased taxation and also through competing with the private sector in various areas of investment. Of course, pro-capitalist governments bend over backwards to reduce that burden through cutting corporate taxes (and shifting the burden of taxation onto households and to any spending by households). Indeed, during the Great Recession, most large corporations paid little tax as they claimed their losses against future tax charges. But even so, over the long term, if government debt keeps rising or does not fall, it will become an albatross around the capitalist sector, reducing its ability or willingness to invest. That is why debt matters, contrary to the view of the Keynesians, who see government spending (through borrowing or not) as the way out of recession”-Roberts, 2011. But, while in the abstract this may be true, it is hardly relevant when the major economies are operating at well below full employment, particularly since, as Roberts repeatedly points out, companies are sitting on huge cash mountains of profits they are refusing to invest. Nevertheless, Roberts and Guglielmo Carchedi are of course right in their fundamental criticism of Keynesianism-that the main determinant of the accumulation process is profitability, and not, as Keynesians argue, spending (whether consumption or investment: thus Hyman Minsky argues that “financed investment determines aggregate income, its distribution between wages and profits, and the aggregate mark-ups that are realised”-Minsky, 2008, p163). See especially Carchedi, 2012.

30: For example, Roberts, 2012.

31: Krugman, 2013.

32: See most recently Choonara, 2011 and 2012.

33: Marx, 1981, p358.

34: Roberts, 2013b.

35: Roberts, 2013b.

36: Quoted in Wagstyl, 2013.

37: Pettis, 2013, p189.

38: Harman, 2008.

39: Callinicos, 2013.

40: Helm and Boffey, 2013.

41: Watt, 2013.

42: Helm and Boffey, 2013.


44: Travis, 2013.

45: Foot, 1969.

46: See the material collected at


Atkins, Ralph, 2013, “Global Capital Flows Plunge 68 Percent”, Financial Times (28 February),

Callinicos, Alex, 2009, Imperialism and Global Political Economy (Polity).

Callinicos, Alex, 2013, “British Sounds”, International Socialism 137 (winter),

Carchedi, Guglielmo, 2012, “Could Keynes End the Slump? Introducing the Marxist Multiplier”, International Socialism 136 (autumn),

Choonara, Joseph, 2011,”Once More (with Feeling) on Marxist Accounts of the Crisis”, International Socialism 132 (autumn),

Choonara, Joseph, 2012, “A Reply to David McNally”, International Socialism 135 (summer),

Davies, Gavyn, 2013, “The US Economy after Sequestration” (3 March),

Eichengreen, Barry, 1992, Golden Fetters: the Gold Standard and the Great Depression, 19191939 (Oxford University Press).

Elliott, Larry, 2013, “Cyprus Bailout Shows European Policy Elite has Learned Nothing from Crisis”, Guardian (18 March),

Financial Times, 2013, “Stock Markets Defy Economic Woes” (6 March),

Foot, Paul, 1969, The Rise of Enoch Powell (Penguin).

Giles, Chris, 2013, “Little Recovery in Advanced Economies”, Financial Times (5 March),

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