The ruling class can’t avoid cutting our living standards

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The election campaign is already underway and one of the main points at issue between the parties is the problem of Britain's vast mountain of debt. On January 25 Brown and Cameron held back-to-back press conferences where they addressed the issue head on. Cameron accused the government of "moral cowardice" for failing to take "early action" to deal with the £178 billion budget deficit. He warned that the UK was borrowing £6000 every second. Brown, speaking the day before the official figures announced the ‘end of the recession', countered by arguing that sweeping cuts would put the ‘recovery' at risk.

Brown said: "I am confident that the UK economy is emerging from recession. But there are dangerous global forces...which mean that the world and the UK economy remain fragile. ..That is why we are all agreed around the world that we must reduce our deficits steadily, according to a plan, but that we must do nothing this year which would put the recovery, growth, and jobs at risk. Just as we were right to intervene stop collapsing banks destroying the financial economy...so it is right now we do what is necessary to lock in the economy for 2010" (Guardian 25/1/10)

Cameron is right to point out, as he does in the Tories' glossy poster campaign, that "we can't go on like this". The so-called economic boom of the last decade, advertised by Brown and New Labour as proof that the British economy was achieving the highest rates of growth for over two hundred years, was an utter fraud, based on the very flight into debt that plunged it into the ‘credit crunch' of 2008. Despite all the talk of coming out of recession, the underlying brittleness of the UK economy is plainly recognised by the international bourgeoisie. Thus Bill Gross, co-founder of the world's biggest buyer of bonds, the California-based Pimco, warned that Britain is a "must to avoid" for investors and that its economy lies "on a bed of nitro-glycerine". Because it has the "highest debt levels and a finance-oriented economy" it is completely exposed to the financial storms beating at the doors of the world economy (Guardian 27/1/10).

The huge burden of debt building up on the shoulders of the UK economy creates tremendous inflationary pressures which, in the long term, threaten to completely undermine the value of the UK's currency. Cameron is not wrong to say that this state of affairs is untenable.

Brown, for his part, is right to say that the ‘recovery' is fragile. The recent recession was the deepest since the Great Depression of the 1930s. The official claim that Britain has emerged from the recession is based on a few months of 0.1% growth. Brown doesn't dwell too much on the fact that in Britain today most ‘growth' is in any case not based on the production of real values but on the semi-mythical realm of financial manipulation and speculation. Nevertheless he is also quite right to say that without the ‘supportive actions' taken by the government, the recession would have been far more catastrophic than it was. Unfortunately the ‘supportive action' has largely involved the kinds of measures that got the economy into its current mess in the first place: international borrowing on a huge scale, doling out money to the consumer to boost demand (the ‘scrappage scheme' which has kept the ailing UK car industry puttering on for a little longer) and, most transparent of all, "quantitative easing": printing money.

Capitalism's historic bankruptcy

That's enough credit to the politicians. They are merely expressing different aspects of the complete impasse reached by the economic system that they both defend: the capitalist mode of production. This is not new and it is certainly not limited to Britain.

The great slump of the 1930s was the first demonstration, on the economic level, that the capitalist system had become an obstacle to social progress: its inherent tendency towards overproduction had created the absurdity of generalised poverty and unemployment despite, and even because of, its enormous productive potential, and this was not a temporary glitch but a genuine crisis of old age, dragging the world into the huge destruction of the Second World War. In the wake of the war the world bourgeoisie recognised that there was no going back to relying on the ‘hidden hand of the market' to restore the economy to health, and it never again abandoned the ‘supportive action' of the state to keep the economy in motion. This was the hey-day of Keynesian polices: in all countries, the resort to debt and state spending was a crucial factor in the post-war economic boom.

But when the world economic crisis resurfaced at the end of the 1960s, to a considerable extent in the form of currency devaluations and inflation, it became clear that ‘supporting' the economy through permanent state intervention also had its down side. And over the past four decades the economic arguments have swung back and forth between ‘Thatcherites' and ‘neo-liberals' on the one hand, warning about the need to slim down the burden of state expenditure, and on the other hand the heirs of Keynes who have argued that such cuts can only revive the 1930s spectre of depression and mass unemployment. This same old argument is being played out by Cameron and Brown today.

In short: capitalism is caught in a cleft stick: if it goes on relying on massive levels of debt and state spending, it heads towards galloping inflation, financial melt-downs - and in the end, the seizing up of the economic machine. But if it makes the massive and immediate cuts demanded by its burden of debt, it ends up in the same place only faster.

Of course things are never so clear cut as in a politician's press conference. Brown and New Labour are no strangers to cuts in public spending and have already accepted that the next Labour government will indeed have to make huge inroads on expenditure on health, education, pensions and the rest. They only differ from the Tories in the pace and choice of cuts to be made (see WR 330, ‘2010: workers face sweeping cuts'). And the Tories, for all their hymns to free enterprise and a smaller state, have never hesitated to use the state machine to bolster up the decrepit capitalist economy, whether through outright nationalisations or more subtle forms of supervision and control.

What is certain is that, whichever party wins the next election, they will loyally serve the dictates of the capitalist economy, which, in a time of crisis, can only mean increasing attacks on the living conditions of the working class, through wage freezes, cuts in welfare benefits, and spiralling unemployment.  

Amos 29/1/10