The economic crisis is material, not ideological

The British bourgeoisie has discovered that the state of the economy means it cannot put a battle fleet to sea without the cooperation of the French. However, their political acumen in presenting the crisis to the British public has not diminished in any way. The Tories and the bit part players from the Lib-Dems, with manful assistance from the unions and Labour party apparatchiks, have put across the idea that the whole business about the crisis was a kind of April Fool’s joke and the sole driving idea behind the government’s policy is simply to pare down the size of the state.

The left-wing of the bourgeoisie completely agrees with this. In fact the Labour party and unions, along with the SWP and its like, are the principal players putting forward the idea that the ‘Tory cuts’ are driven by ideology and not economic necessity. Images of customers queuing up outside Northern Rock demanding their savings, nationalisation of the banks, emergency measures taken at the international level to save the world economy: all these phenomena apparently belong to another epoch.

Len McCluskey, the favourite to win the leadership of the Unite union, told the Financial Times about the cuts: “It’s an ideological agenda pursued by the government that is not necessary. Once it starts impacting on hundreds of thousands of jobs – in the private as well as the public sector – more and more people will get angry.”

So there it is. There is no crisis requiring cuts and austerity. People are entitled to ‘feel angry’ with ideologically driven Tories, but should not think that capitalism is riven by some kind of fundamental crisis that renders it incapable of providing for people’s needs. Basically, it will be all right once the Tories are out of government and we can go back to Labour cuts. After all, the unions are a key element in choosing the Labour party leader and are an integral part of the Labour party apparatus, so we can be assured that any cuts coming from that direction were not ideologically driven but actually necessary.

The ‘phoney’ crisis

The theme that the crisis is in some measure unreal is well reflected in an article in the Evening Standard: ‘For most people, it’s just a phoney crisis’. The article quotes Rachel Lomax, a former deputy governor of the Bank of England, who puts forward the idea that for most people in Britain, this has been a phoney crisis – something got up by the bankers and the markets, but of little concern to everyday folk. Presumably, ‘everyday folk’ would not be a category that includes those who have been made redundant or those in line to lose a good portion of their housing benefit. Ms Lomax disapproves of this because she thinks that there is insufficient support for the very severe spending cuts announced by Mr. Osborne, and that the government will water them down. In the article the present situation is contrasted with previous episodes of open crisis: “There have been none of the attention-seizing, stomach-churning moments that grab everyone’s attention as in 1992 when Norman Lamont raised interest rates to 15%.”

There is truth in the idea that Lamont’s hike in interest rates had immediate repercussions for a vast swathe of people, including (and especially) those with mortgages (those whom the Standard deems to be ‘everyday folk’). It is true, also, that the bourgeoisie has been successful in creating the impression that the crisis has been contained in the sense that the economy is at least out of the recession and ‘recovering’, albeit in a very limited way. And, more important, it has created a sense that the effects of the crisis are not as generally distributed as might have been feared – particularly not for the better off sections of the population. The worst effects are for the present concentrated on the poorest – although anyone might become one of the poorest depending on the lottery of who loses their job.

This is not a mistake on the part of the bourgeoisie. On the contrary it is quite deliberate. It is necessary to put aside momentary appearances and understand that the crisis deepens over the decades. It does not retreat or become less severe. It is also necessary not to identify the underlying crisis with its secondary manifestations. The threats posed to the financial system a short time ago are not matters that belong to the past and have now ‘gone away’ as the bourgeoisie would very much like us to believe. Undoubtedly Ms Lomax, since she worked for the Bank of England, is aware of this and thinks a little intellectual rigour is in order to ‘pull people along’ behind the government’s cuts. But she should leave the politics to those who know about such matters. There is no ‘pulling people along’ behind the level of austerity implied by the present evolution of the crisis. Above all, there are no sections of the population that are not affected (apart, possibly, from the very rich).

Furthermore, the bourgeoisie would be in a better position if the measures it was taking were actually likely to slow down the evolution of the crisis in a definite way. When Thatcher got rid of industries that were taking their toll on the national economy, because they needed permanent subsidies by the state to make them at all viable, the benefit was clear from the point of view of the bourgeoisie, even if it left behind a legacy of permanent unemployment on a great scale. But the government’s present plans to deal with the large scale deficits left over after the ‘triumphant’ period of ‘40 quarters of uninterrupted growth’ have to address more difficult problems.

Undoubtedly, from the bourgeoisie’s point of view, it is necessary to try and stop the escalation of the state’s expenditure on benefits, but, since the overall plan to scale back spending also requires making 1.5 million unemployed, it is not exactly an easy thing to accomplish.

Similarly, the bourgeoisie require workers to take pay cuts, to accept cuts in hours, to work on a casualised basis (and therefore to earn less). But, to a certain extent, the state has to pick up the tab for this. This is particularly clear in terms of housing benefit.

The number of claimants has risen due to the acceleration in the crisis, the increase in the unemployed in particular. Mr. Osborne is quite right in thinking that it makes no sense for the state to be artificially propping up the level of rents by simply paying the ‘going rate’ to landlords. His response is to put on caps that will cause a great deal of hardship to those dependent on benefits. This is especially so in London where rents are exorbitantly high.

It is necessary to know that housing benefit is not only paid to the unemployed, but many employed workers are dependent on it as well. To see the scale of the problem we can note that the cap that Osborne has put on the benefit is £400 a week. This is admittedly for a 4 bedroom house, but it is over £20,000 a year. That is more than many people earn altogether – certainly after tax (and rent is paid out of after-tax income, after all). Even the bourgeoisie has to accept (as long as they intend people to be housed at all) that a worker cannot spend his or her entire income on rent. Even if there are two earners, it is a lot to ask that one earner only pays rent and one income is left for a family to live on. Furthermore it is easy to find properties advertised in London for nearly £400 a week that have only 3 bedrooms, or two or even one. There is no proportionality between rents and wages. It is a complete understatement to say merely that rents are ‘expensive’. And the capitalist state is not going to pay out its subsidies forever.

What is the underlying problem here? The problem is that the runaway increase in property prices and the attendant growth of buy-to-let landlordism were key drivers of ‘growth’ during the 10 years prior to the open financial crisis and the recession. The Financial Times reported at one point during this period that the landlord sector was the leading growth sector in the economy. The problem with this is that this is not real growth and although individuals may feel a ‘wealth effect’ from higher house prices, higher prices actually make everyone poorer (just as with any other type of inflation). The housing benefit bill covers some of those who are conspicuously and obviously poorer as a result of all this. This is not something the government can wave a magic wand at and it will go away. Nor can it simply distance itself from the problem. The idea of a ‘downsized’ state is a pure illusion as the bourgeoisie try to attend to the accumulation of problems that are attendant on the crisis.

Hardin, 5/11/10.