The following is from Ian Johnson of the Socialist Labour Party who makes a case for a socialist response to the current crisis of capitalism. All the major parties offer, including the New Labour Government, is more of the same. They think the very same forces that have landed us in the crisis are the ones that can solve the problem. How likely is that?
Crisis Deepens and the Poor Pay the Price
The deepening financial crisis gripping the capitalism system has already seen a swathe of banks and financial institutions go to the wall or be taken over or merged.
The list already contains household names of US and British finance and more will be added.
Moreover the interventions of the US Federal Reserve Board and the UK’s Bank of England carry with it the real threat of state bankruptcy.
Politicians and economists may belatedly throw up their hands in mock horror at the unregulated and unrestrained activities of the parasites of finance capital, yet they were all very well aware of what was going on long ago. Nevertheless, while these institutions were generating obscene amounts of profit for the few, at the expense of the majority of the population, they were content to say nothing. Only now, when the reckless speculation, criminal incompetence and sheer orgy of greed threatens to bring the entire global financial system crashing down do they murmur any criticism.
It is only three months ago that the Sunday Times ran a headline that boasted “Rich Get Richer under New Labour” and only last year that the City of London paid itself over £14 billion in bonuses alone. However there is no mention by our politicians and bourgeois economists that any of this amount should now be returned. On the contrary, the Brown government has told the working class, the very victims of the financial rogues, that they must accept below inflation pay rises, and that they must economise on their food purchases and be prepared for ‘difficult times’.
Moreover, what no British or US mainstream politician is mentioning is that the financial speculators and hedge funds have also played a crucial role in driving up basic commodity prices, including food items, that has resulted, according to the United Nations World Food Programme “in plunging more than 100 million people on every continent into hunger. This is the new face of hunger – the millions of people who were not in the urgent hunger category six months ago but now are”. (WFP 22nd April 2008).
This occurred when, because of the approaching turmoil, the speculators moved out of the property, credit and debt markets and into food and raw materials, without a second thought for the catastrophic outcome this would mean for millions of the world’s poor.
Yet it is not these millions who the US and UK governments are now rushing to help; on the contrary, like the loyal servants of capitalism that they are, they are hurrying to assist the very financial institutions responsible for this increasing poverty and hunger.
The following came to me from Ian Johnson of the Socialist Labour Party. For me it puts the current crisis of capitalism in context with New Labour vying with the other parties for the affections of the rich – getting richer- and powerful. It’s a crisis which has happened largely through speculation and greed. The solution? All we can see is more of the same. A speaker at a meeting I attended yesterday spoke of the nationalisation of failing banks and mortgage lenders as reminiscent of fascism in Germany in the 1930s.
Furthermore, the deepening financial chaos will only serve to spur on the Labour government’s privatisation plans and their attacks on welfare, pensions, health and education, as they attempt to impose the full effects of the crisis onto the backs of workers. It is their belief that every penny spent on unemployment and incapacity benefits, on pensions and on health, is a drain on profits.
Only the introduction of socialist policies can counter this unfolding nightmare and that means building the SLP into a Party capable of government. That is the task ahead.
For background information, in view of the ‘credit crisis’ developments in the capitalist economy, we are reissuing an article from 2001 by Ian Johnson which traces the rise of finance capital in the 20th Century.
NEW LABOUR AND THE RISE OF FINANCE CAPITAL.
When we talk about finance capital we are talking about the banks, insurance companies, and other financial institutions and their representatives, in short, we are talking about ‘the City’.
This section of society does not manufacture anything, it does not build or create anything, yet it is now the most dominant sector in the U.K. Its chief objective is the movement of money in search of the biggest profit margin in the quickest possible time.
In the early part of the 20th century the financial sector was subjected to government controls and confined its activities to the sterling area of the Commonwealth, indeed, even through the latter part of the 1940s the stock market and merchant banking was at best static, and at worst transactions were actually in decline. In the 1950s the financial sector tried to break free from government controls but achieved only partial success. It was not until the late 1960s that the City really began to expand with the development of London as an off‑shore base for American money fleeing the low interest rates in the United States.
This was followed in 1971 by the Tory Government removing controls on credit growth which meant that market forces, namely interest rates, would now control the growth of credit in the system. This led to an end to limits on lending and meant that banking would have greater control over British industry and the economy as a whole. This coincided with the ending of the post‑war Bretton Woods agreement which had backed paper money with real value by linking it to the gold standard at the rate of 35 dollars equalling an ounce of gold. Now however, paper money was being printed and was not backed by any real value whatsoever.
Between 1979 and 1982 Margaret Thatcher’s Tory Government removed all remaining controls from the financial sector and left it virtually unregulated and unchallenged.
Thatcher abolished restrictions on bank lending and hire purchase transactions and lifted all controls over building society lending, thus starting them off on the road to becoming banks and creating the basis for the great credit explosion in the late 1980s.
The Tory Government crucially abolished all exchange controls with the immediate effect that capital previously invested in the U.K. began going abroad in search of greater and quicker profits. There has been hardly any investment in U.K. manufacturing since exchange controls were abolished.
The dominance of finance capital became obvious in the 1980s when manufacturing output fell by 25%, when house building plummeted and thousands slept on the street, yet the City boomed. The banks made so much money in the ’80s that even the Tories eventually levied a national ‘windfall tax’, though this was compensated for by tax allowances on bad overseas loans.
The Tories and the financial sector were responsible for the squandering of North Sea oil revenue during this period, with not one penny invested in U.K. manufacturing. The City wanted to use it to recreate their earlier role of financiers of the world, and the Tories believed that North Sea oil had made sterling a petro‑currency which signalled the days of manufacturing were over and that Britain was on a path to becoming a post‑industrial service economy.
THE GREAT RIP OFF
The looting of the British economy for the benefit of the few reached its most obscene proportions with the privatisation process of state assets which was first elaborated in the Tory election manifesto of 1983 and which resulted in the following years with the privatisation of coal, steel, gas, electricity, water, railways, telecommunications, shipbuilding and also took part of the oil and road haulage industries. This is not to mention the devastation of council housing that took place in the same period.
The sell‑off of state assets was overseen by City merchant banks who acted as ‘advisors’ and received literally hundreds of millions of pounds in fees for this ‘service’. This period will rightly go down in history as one of the great rip‑offs of all time.
Alongside this privatisation came the reform of the National Health Service, schools and universities, prisons, the police force and justice departments and their regulating authorities, with the plan being to remove them from the control of democratically elected local authorities and place them under the control of unelected quangos and Next Step Agencies. By such means the market mechanisms of compulsory competitive tendering, performance related and profit related pay and other such devices, were introduced into all public services.
Of course none of the above would have been possible without an attack on the traditional defensive organisations of the working class ‑ the trade unions. The destruction of the trade union movement was a clear objective of the Thatcher regime and resulted in confrontations with virtually all sections of workers. Indeed, the destruction of manufacturing and the move to a service based industry made it imperative for the ruling class to introduce anti‑trade union laws to shackle workers and reduce their ability to fight back.
That they were partially successful is a reflection not on the fighting capacity of the working class but on its social democratic leaders.
With a few honourable exceptions these politicians and trade union leaders functioned as policemen for the capitalist state against their own members. These careerists and opportunists are tied to capitalism, their status and significant salaries are dependent upon it, and forced into a situation where they have to choose, they will always come down on the side of the present system.
The introduction of new employment law effectively weakened the trade unions and created a more individualist labour market, moreover a labour market that would be open to the whims of a free market economy, modelled on the American labour market with its high levels of mobility, downward flexibility of wages and low employer costs.
As a result of these policies there has been an increase in part‑time and contract work and an ending of any traditional career with its accompanying security. Furthermore, many low‑skilled workers now earn less than the minimum needed to support a family, resulting in the diseases associated with poverty, TB, rickets and others, returning.
At the same time the restrictions on welfare entitlements, particularly with unemployment benefits such as the Job Seekers Allowance introduced in 1996, are designed to compel recipients to accept work at market‑driven rates.
It was the finance sector that Blair’s New Labour courted for over a year prior to the 1997 general election. They had to convince the financiers that they were the Party for them, and that they would continue to create the framework where they could operate freely. New Labour people threw so many banquets for these financial parasites that the City’s nickname for the Labour Party is, ‘the prawn cocktail party.’
Members of the then Shadow Cabinet began touring the dining rooms of the City of London assuring their hosts that Labour had no intention of bringing back exchange controls and had no intention of doing anything they would not approve of.
Stuart Bell MP went to New York on a trip paid for by Kleinwort Benson Securities to reassure Wall Street that the ‘financial markets will be safe in the hands of a future Labour government.’ (Sunday Telegraph 17th Dec. 1995). Consequently, by the beginning of 1996, the financial pages of the newspapers were full of articles in praise of Labour’s policies. Thus the stage was set for New Labour to not only continue Tory policies but to take them farther than even the most right wing Tory dared to imagine.
The Labour Party had concluded that the only way to get elected was to accept the agenda of the Americans and the City, to be pro Nato, pro EEC and pro non regulation of the City.
Due to the massive exportation of British capital, which began during the Thatcher years, Britain now has the largest overseas investment after America, and this will dictate that they continue to support American political and military hegemony as the best way to protect those interests. Indeed, all the key Labour personnel are linked to the United States, with the intent to preserve the so‑called Anglo‑American special relationship, to compensate for British capitalism’s long term decline.