Capitalism responds to the crisis by cutting our living standards
The day after Alistair Darling's Budget speech the front page of the Daily Telegraph declared a "Return to class war" because of the increased income tax for those earning more than £150,000. Andrew Lloyd Webber described it as a "Somali piratestyle raid" on "wealth creators", but the Treasury forecasts that 69% of those eligible would find ways not to pay, and the rich will also be getting improved tax relief on their pension contributions.
In the real class war the government is determined that the working class will pay for capitalism's economic crisis. There will be billions of pounds worth of public spending cuts, billions cut in ‘efficiency savings' that will affect those working in the public sector and those who rely on state-funded services. Writers in the Labour-supporting Guardian were united on how bad things are going to be. Polly Toynbee said "These will be harsher cuts than any in memory - yes, worse even than in the Thatcher 1980s." Larry Elliot agreed that there will be "A squeeze on public spending even more severe than during the Thatcher years." Patrick Butler traced out the future: "The real pain, however, starts in 2011, when the next three-year spending period starts. ... Things may look tight now ...but for public services the really hard times are yet to come." David Cameron has confirmed that the Conservatives will continue the programme of public sector cuts and preside over an "age of austerity" (and the abolition of the new 50p top rate of tax would not be a big priority for them).
Darling predicted a shrinking in the British economy of 3.5% this year and growth of 1.25% in 2010. The IMF thinks that the recession in the UK would be "quite severe" and that there will be a 4.1% contraction this year and a further 0.4% next. The OECD agreed that Darling was too upbeat but Howard Archer at IHS Global Insight thought that "While the OECD projections make depressing reading, we suspect they may even be a little on the optimistic side."
Within 48 hours of the Budget Darling's figures were shown to be out. He had underestimated the contraction of the British economy in the first three months of the year which officially amounted to a 1.9% fall in GDP, the fastest shrinkage in 30 years.
Other figures which might well prove to be out are those for the national debt. After all the attempts to ‘stimulate' the economy this has already reached 51% of GDP. Darling predicts this could reach nearly 80% by 2013-14. Meanwhile public spending will decline from 48% now to 39% by 2017-18. This will include more than £10 billion off the health budget and spending on infrastructure down from £44 to £22bn by 2013-14. Whatever the exact figures turn out to be, it's the working class that will have to pay.
An international capitalist crisis
The Labour government has been quick to point out that the crisis is global, and that predictions for the US, Japan, Germany and the eurozone are even worse. This is no cause for comfort, as the accelerating decline in trade will have a universal impact. The IMF predicts that the global recession is likely to be "unusually severe and long-lasting" and the recovery sluggish, resulting in ‘developing' countries being further starved of resources. It says that the world economy will experience the largest contraction since the Depression and will "enter deeply negative territory" later this year. It thinks the human consequences of the crisis could be "devastating". This is far from doom-mongering as it finds 65% of the word's countries already in recession and others on the way. There are hardly any major economies among the exceptions, as the IMF sees the world economy as being trapped in a "corrosive global feedback loop"
While some commentators already see signs of bounce-back in the economy, the IMF sees "worrisome parallels" between the current global crisis and the Great Depression. Simon Johnson, former chief economist at the IMF, suggests that "Rather than a V-shaped recovery, at the global level we may be looking at something more like an L-shape; we go down and we stay down" (New York Times 16/4/9).
The global perspective is for cuts in public services and massive unemployment. As for the income of those in work, a recent survey by the British Chambers of Commerce showed that 70% of firms planned to freeze or cut wages this year.
Not just an economic crisis
Beyond the immediate impact of the deepening economic crisis it will tend to accelerate the drive of all countries, big or small, toward further military confrontation. In particular, competition over natural resources will increasingly take place in the military rather than the business arena. In turn, the drive to war will put further stress on already vulnerable economies.
Against this situation there is only one force with the capacity to challenge and ultimately overthrow capitalism, and that's the working class. As individuals, if you're told you're being made redundant, or your home is being repossessed, it can feel like a crushing blow. However, the strength of the working class lies in its capacity for collective action.
In recent years we have seen much evidence of workers' militancy. There has been the appearance of general assemblies in some of the movements, large scale strikes in places like Egypt and Bangladesh, and wildcats outside the control of the unions. In Britain, this year, the struggle of the Visteon workers and the earlier wildcats around the oil refineries' dispute have shown both militancy and the search for solidarity. It's in such struggles that we can see the seeds for the development of future, more extensive, more powerful movements.