Roy Wilkes writes
Even if the Condem government gets away with its entire austerity offensive, they will not be satisfied. For the capitalist class, who are motivated only by the desire for accumulation (i.e. pure greed), enough is never enough.
The public sector has already endured over a year of cuts and a pay freeze (at a time when inflation is running at over 5%). The pay freeze will extend for another year, and possibly even beyond that. But despite all these sacrifices the national debt isn’t falling; on the contrary, because of the so called automatic stabilisers of lower tax revenues and increased benefits expenditure at times of high unemployment, it is continuing to rise. However much they get away with taking from us – from our pensions, from our pay, from our jobs and services – it will never be enough and they will keep coming back for more.
Indeed, the debt crisis across Europe is so severe that the IMF is already advising European governments to set aside yet more money to bail out the banks. By the time this article goes to press, those bail outs will almost certainly be in place. And we all know what that means for us – more cuts, more austerity, and more privatization. Enough is never enough, it seems.
In actual fact the crisis runs much deeper than a European debt crisis. What is unfolding is a structural crisis of the entire system. As a consequence of neo-liberalism, ‘globalization’ and the collapse of the Soviet Union, that system now extends into every corner of the globe and into every pore of life on our planet. Its crises are therefore deeper, more malignant and more dangerous than in any previous period of history. We are being told to pay for the crisis with our pensions and services; millions of others, in the Horn of Africa and elsewhere, are paying for it literally with their lives.
So what is the root cause of this crisis? It is not, as bourgeois commentators try to persuade us, that there simply “isn’t enough” to go around. On the contrary, and somewhat paradoxically, the crisis is consequence of there being too much capital in the world. The rich have accumulated so much that they are having difficulty finding profitable sources of investment. This "overproduction of capital" creates a permanent tendency for the rate of profit to fall, which is of course a serious problem for a system whose raison d’etre is the pursuit of profit and capital accumulation.
So how have the capitalists attempted to arrest this fall in the rate of profit? Since the 1980s they have done their level best to suppress the unions, which has helped them to keep real wages down. The problem with this of course is that if workers’ wages are kept down, no one can afford to buy the stuff that is produced. This problem was resolved with cheap credit; but of course that meant workers getting deeper and deeper into debt, which as we’ve seen is not sustainable indefinitely.
Another solution was to shift industrial production to the low wage economies of the East, which had the triple advantage of further weakening the industrial unions in the West, of providing a steady source of cheap commodities (thus keeping inflation down and ameliorating the impact of stagnant wages) and most importantly of boosting the profits of the big corporations. A major disadvantage however, was that it resulted in huge trade imbalances.
Up to now these trade deficits have been funded by selling bonds (and in particular US treasuries) to the surplus countries, especially China, which helped thrust the US in particular every deeper into both public and private debt. China’s bond purchases kept bond prices high and therefore interest rates low, which encouraged investment bankers to produce and sell exotic financial instruments, such as bundled-up sub prime mortgages, which of course led directly to the banking crash of 2007/8. And it was the resultant recession, as well as the bail outs of the banks, that produced the sovereign debt crisis now wreaking havoc across Europe and North America.
So what should be the response of the workers’ movement to this situation?
TUC economic policy (the ‘alternative’ which we marched for in March and again at the Tory party conference in October) advocates government investment to promote economic growth. In a growing economy the size of the debt would fall as a proportion of GDP and would therefore be less of a problem. This is what happened after the second world war, when the national debt was considerably higher than it is now (as a proportion of GDP).
Sections of the left agree with this strategy. The Coalition of Resistance, in its Bulletin Number 3, carries a “People’s Virtuous Cycle” diagram, which shows New Borrowing leading to Planned Investment leading to Sustainable Growth leading to Rising Revenues leading to Debts Paid leading back to New Borrowing etc.
However, there are three really big problems with the TUC’s and the Coalition of Resistance’s neo-Keynesian economic policy and its reliance on restoring growth as the panacea for the crisis.
The first is that it simply wouldn’t work.
Conditions were very different in the post war period. The massive destruction of capital during the war years had overcome the pre-war over-accumulation of capital, thereby providing the conditions for the restoration of the rate of profit. Capital controls allowed governments to keep interest rates down without fearing the flight of capital, which made it easier to channel capital into industry and reconstruction, both of which contributed to growth and the subsequent whittling away of the national debt.
We are not living in the 1950’s. The world is very different now. Once the genie of financial liberalisation is out of the bottle it isn’t easy to put it back. And in a deregulated world, global monopoly finance capital (commonly referred to as "the market") holds the reins of power. Any government which attempted to follow TUC economic policy would be swiftly and severely punished by the bond markets, with sky rocketing interest rates both compounding the national debt and at the same time choking off investment and therefore growth.
Secondly, growth, even if it is restored, benefits the few and not the many. The ‘trickle down’ theory is a myth, as workers in the US are now realising during the so called “jobless recovery”.
Against the background of unprecedented levels of global growth in recent decades, the masses in Africa and in the world’s growing super-slums have become intolerably impoverished, while at the same time most workers in the rich countries of the North have seen their living standards stagnate. Growth in the capitalist world economy has enriched a tiny minority beyond all the dreams of avarice while deepening the impoverishment of the many.
But the third and by far the most serious problem with the TUC and CoR alternative is that growth is inherently ecologically unsustainable. ‘Sustainable growth’ is not only a myth it is a contradiction in terms.
Growth is defined in mainstream economics as the year on year increase in GDP. It is usually measured as the total of all incomes (from profit, rent, interest and wages) which is assumed to equate to the total expenditure (on both consumer and investment goods.) In other words, growth is the year on year increase in the total mass of commodities in circulation. A very high proportion of those commodities are unnecessary, useless, or even positively harmful.
And this growth, which is absolutely necessary for capital accumulation, comes at a very high cost: the increasingly dangerous degradation of the real wealth of the natural world. Loss of biodiversity (the planet is now on the precipice of its sixth mass extinction event); ocean acidification; degradation of the soil; disruption of the nitrogen cycle; and of course, atmospheric concentration of greenhouse gases, are all approaching levels which put the survival of human civilization (and possibly even of our species) at serious risk.
The idea that growth can be ecologically benign (or ‘sustainable’) is undermined by the Jevons Paradox. Jevons demonstrated in the 19th Century that improvements in the efficiency of steam engines invariably led to an increase in coal consumption, because increased efficiency led to a rise in output far outweighing the original efficiency gains. The paradox still applies: total fuel consumption has risen with every improvement in the efficiency of car and jet engines; the introduction of computers and email into offices actually increases paper consumption (the paperless office has turned out to be a complete myth.) And most importantly, as surely as water runs downhill, capital eventually seeks the highest rates of profit available to it. So even capital that may have been accumulated ‘sustainably’ through ‘green investments’ will eventually find its way into world financial markets which have no such qualms about destroying our planet.
We can’t simply put the ecological consequences of economic activity into a separate compartment called “environment”, to be considered once the serious business of ‘restoring economic growth’ has been dealt with. Ecological devastation is a direct consequence of capital accumulation. It must therefore be considered holistically, as a central part of our movement’s economic policy.
So what then should our economic policy be? To the capitalist class we have to say, enough is enough. Our priority will henceforth be the satisfaction of human need, and we will stop pretending that this can only be accomplished by amassing more and more commodities. Our aim should therefore be for a growth in the quality of life rather than in the quantity of output.
A few examples will suffice to show how quality of life can be enhanced simultaneously with a decline in output: armaments, advertising, transport and food.
- Global expenditure on armaments is now over $1.6 trillion per year. It is difficult to comprehend such a vast figure, but suffice to say it represents a grotesque and dangerous squandering of scientific and technical talent (which the armaments corporations are more than happy to throw on the scrap heap whenever demand for their weaponry falters, as we’ve seen at BAe Systems). If we were to somehow switch that talent to socially useful ends, such as curing cancer or providing 100% renewable energy for the world, humanity would undoubtedly be better off for it. However, growth would decline, since the super profits of the armaments industry, which would be lost, count positively towards GDP.
- In Britain alone, the advertising industry directly contributes £20bn a year to GDP. It actually contributes substantially more than that by artificially stimulating our (and our children’s) desires for unnecessary junk, ephemeral fashions, and the ‘latest’ upgrades to our gadgets. There is a huge pool of talent which, if it were released from bondage to the advertising industry, could engender an artistic and cultural renaissance to the benefit of us all. However, the decline of the advertising industry, while beneficial to humanity, would undoubtedly have a negative impact on growth.
- If we were to replace the existing monstrously inefficient mass transit system (i.e. the private automobile) with an efficient, fully integrated, publicly owned and massively expanded free public transport system, few would deny that life for the vast majority would be immeasurably healthier, safer, less polluted, quieter and more pleasant in every way. Yet output of commodities (cars, spare parts, road building and most importantly oil) would certainly decline, i.e. there would be negative growth.
- Similarly, if we were to bring the great landed estates back into common ownership and break the monopoly of agribusiness, thereby encouraging local production of nutritious, organic food, monetised output would fall (to the detriment of fertiliser and pesticide manufacturers, supermarkets, road haulage companies etc.) but, as UN research has shown, the amount of actual food produced would probably rise, and the quality of life for the masses would certainly improve. Yet once again, the effect on GDP growth would be negative.
Socialists have long believed that socialism can only be built on the basis of abundance. However, abundance should not be confused with the infinite growth of commodities. The abundance of socialism is first and foremost the abundance of free time, so that we can both enjoy life to the full and also collectively administer ourselves, instead of being controlled by managers and rulers. And secondly, it is the abundance of use value (and in particular the natural wealth of the commons) rather than of exchange value (commodities).
There are some essential steps that would have to be taken on the road towards an economy based on the satisfaction of human need rather than on the accumulation of capital, and these, rather than a demand for more growth, should form the basis of our movement’s alternative economic policy:
First, we need to impose strict and immediate controls on the movement of capital. A steeply progressive tax on income, wealth and financial transactions could then be brought in without risking a flight of capital.
Secondly, the banks and other financial institutions need to be brought into public ownership, so that funds can be marshalled towards re-orienting the economy towards the satisfaction of human need.
We will then be well placed to conduct a citizen’s debt audit in order to ascertain which parts of the national debt are illegitimate or odious (such as those arising from bank bailouts); those debts should be unilaterally written off.
Measures to bring about full employment would include: a substantial reduction in the length of the working week (and an increase in paid holiday leave); a program of useful public works (including the urgent expansion of health, education and other public services, of renewable energy, of genuinely affordable and high quality social housing, and of publicly owned (and free) public transport); and the taking into public ownership of any firm declaring redundancies (beginning with BAe Systems and Bombardier), with subsequent transition where necessary to socially useful production. We should also aim for the early reversal of all the privatizations of utilities and services brought in by Thatcher and subsequent governments.
It may seem to serve a short term propaganda advantage to counter-pose an alternative economic strategy based on investment and growth to government cuts and austerity. But in the long run we are doing our class a huge disservice in promulgating this myth. If we are not careful, our movement will become the prisoner of its own policy, forced to implement a policy which is ineffective at best and disastrous at worst.
Instead, we as workers should educate ourselves and each other in the real causes of the economic crisis, so we can develop solutions that are really in our own interest. We need to push within the TUC for a real alternative economic strategy, one that recognises when enough is enough.