Events in the last year have provided some definitive answers to debates in the left about the nature of the crisis and the future of Neoliberalism writes Phil Hearse.
Expectations in 2009 that the bank bailout plus quantitative easing could chart the road to worldwide economic recovery have been proven false.
The extent of sovereign debt, particularly in Europe, now threatens the many banks who are the owners of that debt with bankruptcy. Political leaders from the pro-neoliberal right, and of course the social democrats, are clueless about how to solve this crisis, because they under-estimate its extent and because they refuse to accept the obvious facts: neoliberalism, at least in the form we have known it since the mid-1980s, is finished. Attempts to solve the crisis by using deflationary austerity measures are making the situation worse, storing up a perfect storm of economic disaster and political explosion.
In this article we ague:
· Neoliberalism cannot solve the crisis and this means the bourgeoisie internationally will eventually be compelled – kicking and screaming – to look for a different regime of accumulation.
· Unwilling to accept the end of the neoliberal gravy train, the ruling classes of the United States and especially Europe are trying to pay down the debt by assassinating the living standards of the working class, which in Greece is forcing the country into third world status and which aims to smash up huge swathes of the welfare system. Portugal is threatened with the same scenario.
· The successful imposition of such an austerity regime would amount to a world-historic defeat for the working class and is already leading an upsurge of protest movements and ant-capitalist consciousness.
· It is impossible to sustain such an economic attack while maintaining all the current forms of democratic rights within a bourgeois-democratic framework. There is now a permanent danger to democratic rights, including of course all the rights of protest and strike action. In countries like Greece where bourgeois democracy is less stable, there is a real danger of the imposition of an authoritarian military-backed regime if the working class cannot impose its will.
· Protest and society-wide mobilisation are preconditions for throwing back or limiting the austerity offensive, but this is not enough to avoid a spectacular defeat for the working class and middle layers of society. Protest movements must lead to political and organisational alternatives, including mass political parties of the militant left and an emergency plan to solve the crisis. In this context a big part of the so-called revolutionary left has shown itself to be completely useless.
Why neoliberalism is finished
The general features of the neoliberal system that came to replace post-1945 Keynesianism have been recounted many times (1), but the key feature was the creation of an international low wage economy as the big corporations ‘retrenched’, outsourcing work to un-unionised small suppliers and shifting production to the third world. Combined with busting up the unions this pushed wages to historic lows, even in the advanced capitalist countries. Appearances in terms of figures on pay packets seemed to belie this, but real purchasing power confirmed it. Few working class families could afford the luxury of one parent not working, and as the privatisation of the utilities pushed prices for power and water through the ceiling, hoovering up the possibility of saving.
The international low wage economy has a permanent deflationary bias, but the ‘great money trick’ after the deregulation of finance in the mid-1980s was ever greater amounts of lending to companies and individuals, who sustained production and family lifestyle through borrowing. The great debt mountain could go on growing forever provided everyone believed that one day, over the rainbow, the debt would be paid down. Once it becomes evident that indebtedness has no relation to the debtors’ ability to pay it back, a crash is certain, and indeed that is what happened. It is now impossible to regroup capitalist economies on the basis of more debt.
George Magnus, senior advisor to the UBS banks, says:
“Put simply, the economic model that drove the long boom from the 1980s to 2008 has broken down. Considering the scale of the bust, and the system malfunctions in advanced economies that have been exposed, I would argue that the 2008/09 financial crisis has bequeathed a once-in-a-generation crisis of capitalism, the footprints of which can be found in widespread challenges to the political order, and not just in developed economies.” (2)
The end of neoliberalism has even by officially proclaimed by the French president:
“Speaking to an audience of some 4,000 supporters in Toulon, France, Mr Sarkozy said the financial turmoil had highlighted the need to re-invent capitalism with a strong dose of morality, as well as to put in place a better regulatory system.
“The idea of the all-powerful market that must not be constrained by any rules, by any political intervention, was mad. The idea that markets were always right was mad,” Mr Sarkozy said. “The present crisis must incite us to refound capitalism on the basis of ethics and work … Self-regulation as a way of solving all problems is finished. Laissez-faire is finished. The all-powerful market that always knows best is finished,” he added. (http://euobserver.com/843/26814)
A new mechanism of growth has to be found. That is the dilemma now facing especially the European political leaders. The creation of more debt in repeated bail outs makes the situation worse. But repudiating the debt would have a devastating effect on the creditworthiness of European banks. A new regime of accumulation must emerge, and for reasons explained below, this must mean an enhanced role for the state.
They are trying to decapitate working class living standards
The crisis is enforcing social immiseration in Europe and the United States that is challenging basic social gains. This is not a question of temporary sacrifices to steady the ship; on the contrary what is proposed is the overturning of the social contract that emerged after the Second World War. Of course this is not a new process but it has been violently accelerated since the crash in 2008. Youth unemployment is huge, wages are stagnant or declining, inflation is taking off quickly in some countries, and pension, health and other welfare rights are under sharp attack.
The ‘misery index’ (unemployment+inflation) records the highest figures for Greece and Spain, but as bail outs fail and individual countries come under renewed attack from ratings agencies and speculators there is more misery on the way for the working class globally.
The attack on social spending, wages, employment and welfare systems has one huge drawback: it won’t solve the crisis it only makes it worse. At the same time the penury being felt especially in countries like Spain and especially Greece is throwing millions into social despair and political fury.
A commentator on the BBC world service said of Greece this week “I have a feeling that we are approaching a tipping point”. The tipping point can only be Greece defaulting on its debts and going out of the Euro zone with probably the same thing happening rapidly in Portugal. There is then a big danger of bank collapses all over Europe, with millions losing all their savings – as happened in Argentina in 2000-1. Whatever happens, the decline of stock markets will mean that value of pension funds is going to nosedive, with devastating consequences for current and future pensioners.
The ricochet effect: power can be challenged
Two and a half years ago I wrote an article entitled ‘Protest Goes Global’. This year has seen that process go into overdrive and it has to be seen as a global integrated process. For example, the uprisings in Egypt, Tunisia and Libya cannot be understood outside of the repeated demonstrations, riots and general strikes in France and Greece from 2008-10. We can be sure that the youth of a country as influenced by France as Tunisia had seen the demonstrations and general strikes there on TV. In turn the uprisings in the Arab world and North Africa have inspired the movements in Europe.
In any case, serious observers pointed out that the Arab Spring was not just a revolt in favour of human rights and democracy, but an uprising against the immiseration caused by neoliberalism in those countries. What the Arab Spring has done is shown how power can be challenged, even in the form of ruthless military dictatorships. There are specific lessons however to be learned from the new worldwide protests:
The emergence of the ‘Occupy’ movement in the United States marks a major shift. For the left internationally in the past two decades, for the forces of social progress everywhere, a major problem has been the complete political dominance in the US of the reactionary right and the stigmatisation of even milk and water liberals. It is no accident that the movement in New York was met by police repression and character assassination in the media from Day 1. The Occupy movement resumes the work of the global justice movement signalled by the anti-WTO demonstrations in Seattle in 1999 – a movement that was disrupted and sidelined by the carnival of patriotic reaction after 9/11.
While the protests create the basis for a new anti-capitalist movement, the political weakness of the Occupy movement is obvious. Many of its spokespeople say that rebellion comes first and political alternatives can be worked out during the movement, that is really a hopeless response to the masses of people who are conned by the ‘there is no alternative’ line coming from bourgeois politicians. All the efforts of the millions who have protested against austerity will be wasted if there is no political alternative constructed, both in terms of organisation and programme.
The events this year have proved the importance of the long-term preparation of a broad left-wing political alternative. In Egypt the military regime which is still in power is now prepared to base itself on an alliance with the Muslim Brotherhood to create a military-Islamic regime that will harshly batten down on democratic rights and workers organisation. In Libya the stabilisation of democratic rights, if it comes, can only be in the framework of a pro-capitalist regime; the only real danger to pro-capitalist stabilisation is Islamism.
The rise of repression
There is one character that symbolises the times who is permanently on our TV screens: the riot policeman, or in the case of Egypt and Syria, the military police and the army. The rise of repression has reached astonishing heights. A symbolic case was the G20 meeting in Toronto in 2010 where 20,000 police were mobilised in semi-military formation, resulting in the largest mass arrest in Canada’s history. Violent attacks on anti-capitalist protestors are becoming routine, but there are fuelled by a series of factors that make such protestors particularly irksome to the authorities:
- Incensed by injustice and the lack of real democracy, anti-capitalist protestors have been often involved in non-violent direct action and invading public spaces (like the City)where there presence is an embarrassment.
- Small sections of protestors, especially the so-called Black Bock anarchists, think the crucial anti-capitalist tactic is to smash up bourgeois property. The police of course generally defend bourgeois property, but sometimes the small sections of Blockists are deliberately allowed to smash a few shops, the better to manipulate the TV headlines ands present the whole movement as wreckers.
More generally the riot police attacks on anti-capitalists worldwide aim to criminalise and discredit the movement by portraying it as violent but also to increase the personal dangers and costs of demonstrating.
At the time of writing a massive security operation is being planned for the Cannes G-20 meeting in November. As the Guardian points out:
“Protesters hope to defy attempts by French authorities to lock down a swath of the Côte d’Azur, including plans to close France’s border with Italy to block protesters from crossing into the country.
Residents have been warned to expect major disruption and told that nobody, including those living locally, will be allowed into Cannes without official badges.” (October 17).
The police reaction to the anti-capitalist movement symbolises one thing above all: those in power are afraid of it, and the potential long-term consequences for the re-emergence of mass radicalism.
Amongst the minority who engage in attacks on property and sometimes the police there is of course genuine frustration and anger. But it is also a political problem, a problem of the lack of political perspective and organization that can point a radical way out of the crisis. Commenting on the violent demonstrations in Rome on 16 October, Leo Coretti notes:
“The point here is that what happened in Rome is the result of the inability of the Italian radical Left, and the anti-capitalist/alter-globalist/indignant social movements, to build a united opposition front. Factional rivalries, widespread ‘anti-political’ feelings and – the most important – strong disagreements (and to an extent, a lack of ideas) regarding what is the purpose of the mobilization – to put it more clearly: regarding what is the alternative to neoliberal capitalism – made it impossible to put together a platform for the movement that could go beyond the watchword of “indignation” (in fact, different movements and coalitions drafted different documents before 15 October). And if many people (also outside the traditional constituencies of the Left) are outraged and angry, indignation and anger are not enough. Better, they are the expression of a widespread social malaise, but they are not a solution, they are not a cure to it.” (http://www.counterfire.org/index.php/articles/opinion/15051-the-good-the-bad-and-the-ugly-notes-on-the-rome-riot)
The radical left and political change: an emergency plan, a united front
Over the next period political turmoil is certain, especially in Europe. Probably all governments in power are going to be heavily defeated in the next elections. Merkel, Zapatero and Sarkosi are going to be thrown out. Most existing governments are right-wing and thus social democracy is likely to come to power in a series of countries, as it already has in Denmark.
But in terms of policy to face the crisis, no major changes can be expected in the short term. As with Miliband in Britain all we have is the promise of ‘more of the same only less so’ – austerity lite which will quickly revert to austerity heavy.
The possibility of ‘left’ governments will pose many difficult political choices for the militant left, but joining anti-working class governments is not an option although in those cases where the militant left has parliamentary representation ‘toleration’ – voting against no confidence motions and voting for or against the government on a case by case basis – is not unprincipled. In some countries of course (probably Germany on recent experience) the social democrats would probably rather hand government back to the right or engage in a coalition than rely on the votes of the militant left.
As an aside we should also note that where the social democrats are already in power, PASOK in Greece and PSOE in Spain, they are also facing defeat in the next elections and it is likely that the right will come to power – but in a paradoxical situation of mass anti-austerity mobilization. This is an explosive combination.
Meanwhile there are major issues in how the left is going to respond to the crisis, or rather how it is responding to the crisis. The failure of the far left to grow, and the distance of some of the mass movements from the organized left, is in part of course a result of the years of defeat and ideological offensive by the right. But it is also the result of the fact that much of the ‘revolutionary’ left is perfectly useless from the point of view of constructing the left we need now. Why?
This is both a programmatic and organizational question. If there is a major European banking collapse, the extent of austerity we see now will be a picnic compared with what is to come. In that sense David Cameron is absolutely right to argue that a strong Euro zone is best for Britain. An enfeebled Euro zone with banks collapsing threatens economic disaster for Britain. In such a catastrophic situation the left must unite around an emergency plan to solve the crisis, including:
· Nationalise the banks, insurance companies and pension funds
· A punitive wealth tax on the richest 1% of society
· State directed investment to boost the economy, defeat unemployment, solve the housing crisis and build sustainable production.
Programme mongering by small groups of people is no substitute for struggle; but then without political perspective struggle will decline. In any case without the left putting forward its emergency proposals, the right and the extreme right will monopolise the political space.
However to get its voice heard against the prohibition of the media on reporting the organized radical left, the militant left needs a united front approach as exemplified by the Coalition of Resistance, and indeed there needs to be a Marxist-led political bloc to propel the united front.
Against such elementary and obvious tasks the SWP and Socialist Party have both erected a sign saying ‘not open for business’. Instead of taking any risks they have opted for the tried and trusted tactic of the wholly owned subsidiary campaign (Right to Work, Youth March for Jobs) and ‘party building’ propagandistic routines. Unfortunately in this the Callinicos-Smith leadership of the SWP is repudiating the positive turn made by the organisation’s previous leadership when it launched the Socialist Alliance in 2000.
Added to this is a clapped out, ultra-hierarchical concept of ‘Leninism’ that is utterly repugnant to young people today. These organisations are condemned to decline and irrelevance in the medium term.
A crisis of capitalism?
The issue of whether there is any way out for neoliberalism has been settled; like Keynesianism it was the product of an era that is now finished. But if not neoliberalism, then what? This is the crisis that is taxing the most far sighted bourgeois ideologues.
Because neoliberalism became the religion of the financial elite that has been the dominant fraction of capital in the US and Britain, it refuses to lie down despite being mortally wounded. Eventually its sponsors will be forced to put it down by massive state intervention in the economy. Experience has shown us that radical right-wing, statist regimes that put severe controls on capital and direct production are eminently possible. Thirty years ago such thoughts would have been dismissed as delusional; today the raw material of extreme reaction is everywhere, from the Northern League in Italy to the Tea Party in the United States.
Lenin said there is no crisis from which the ruling class cannot escape of the working class is prepared to pay the price. An historic battle to decide that issue is just commencing. To link up with the mass forces that can give life to its programme, the militant left needs political renovation and organisational reconstruction.