War on the home front
Tony Blair, in the role of special envoy to the US, has travelled the world shoring up the war ‘coalition’. Under the cover of media preoccupation with Afghanistan, the New Labour government has pursued its privatisation programme and cuts in social spending. With an economic recession looming, PETER TAAFFE looks at the situation facing Britain.
IN ALL CAPITALIST wars the government of the day invariably bangs the drum of ‘national unity’ as a means of mobilising the population for its war aims. Sure enough, Britain’s official parliamentary ‘opposition’, the Tories, have fallen in behind the Blair government with almost military precision, appropriate for a party now led by an ex-army junior officer. So it also was in the Falklands/Malvinas conflict – where the Labour front bench led by Michael Foot ultimately fell into line behind Margaret Thatcher’s government – and in the Gulf and Balkans wars.
But never, perhaps, has the official ‘opposition’ been more timid or supine than now: "Far from giving himself elbow room, IDS’s [Iain Duncan Smith] shoulder was thrusting to push ahead of TB’s [Tony Blair’s] in mutual bondage". (Hugo Young, The Guardian, London, 11 October 2001) Charles Kennedy’s Liberal Democrats have also lined up behind Blair, albeit with the usual ritualistic wringing of hands at the ‘humanitarian’ fall-out of the Afghanistan war. Indeed, we have in Britain now a strong element of an unofficial ‘national government’ in place.
Blair has also achieved, for a short time, the compliance of right-wing national trade union leaders who waved the white flag over issues such as privatisation at the recently truncated Labour Party and TUC conferences. In parliament to begin with it was just lone voices, such as the courageous left MP George Galloway, who attacked the war, warning that the Moslem world ‘from Gaza to Jakarta’ would be inflamed and that the bombing and military action in Afghanistan would create the conditions where ‘10,000 bin Ladens’ would arise.
Such warnings seemed to have as much effect as a drop of water on a hot stove. However, the chorus of opposition has now been joined by figures from the most unlikely quarters of the Parliamentary Labour Party. Paul Marsden, who by no stretch of the imagination could be described as on the left, attacked the brutal bombing campaign in Afghanistan and called for it to be halted. This earned him a vitriolic dressing down by Chief Whip, Hilary Armstrong, who compared those who opposed the war to the ‘appeasers of Hitler’ in the 1930s.
The storm of criticism with which this was met compelled even Blair to repudiate the comparison and to give his benediction to opponents of the war – Blair’s dog licence to dissent – as long as, of course, they remain a tiny minority. However, it is not just Marsden but those in the moderate and centre wing of the Labour party who have also questioned the ‘war aims’ of the government and the US-led coalition. Peter Kilfoyle, right-wing witch-hunter against socialists, Marxists and the left in the Liverpool Labour Party in the 1980s, now busy painting himself as a left champion of the working class, has also questioned the war.
They have been joined by a powerful extra-parliamentary voice in the growing anti-war movement which is developing in Britain and, surprisingly, by the daily tabloid newspaper, The Mirror, up to now a slavish supporter of the government. The Mirror’s stance on the war is partly motivated by a big shift in the views of its readers – a recent poll showed that the majority of the British people now favour a pause in the bombing campaign – and partly by the pique it feels at the grace and favour accorded to its arch-rival, The Sun, by the Blairista spindoctors. (It was recently revealed that Downing Street exclusively informed The Sun of the date of this year’s general election before it was officially announced.)
Replying to Blair’s critics of the war as lacking ‘moral fibre’ The Mirror declared: "New Labour does not like criticism. It expects us to tow the line, agree with what it is doing and keep our questioning minds firmly to ourselves". (29 October) It has re-employed the well-known left-wing journalist, John Pilger, to write a searing indictment of the real purposes of US and British imperialism’s aims in this conflict: "This war is a fraud". The Mirror, while distancing itself from some of Pilger’s criticisms, nevertheless attacked the idea that the bombing will eradicate terrorism: "When the IRA started blowing up innocent people in Britain, we did not react by sending fighter jets to Belfast".
It is not likely that The Mirror will remain constant in its criticism of even some aspects of the war but the same will not be the case with the British people. Dick Cheney, US vice-president, said that this is a ‘war without end’. The main burden of this will be borne, as it already has, by working-class people. The inevitable economic retrenchment, particularly in government expenditure (apart from a bloated and increased military budget), is a guarantee that opposition to the war will merge with resistance by working-class people, the unions and the labour movement generally.
World economic prospects
IN THE RECENT past, chancellor Gordon Brown boasted that his ‘prudence’ and economic management had banished the capitalist ‘boom and bust’ economic cycle, if not from the whole world then certainly from Britain’s shores. But like king Canute, with the waves around his midriff, he was compelled to declare at October’s New Labour conference: "No country can insulate itself from the global economy". This has not stopped the National Institute for Economic and Social Research picking up Brown’s discarded mantra to claim: "The chancellor has achieved his aim of abolishing boom and bust and that Britain is likely to emerge almost unscathed from the global economic slowdown".
This is in the teeth of all the evidence to the contrary, particularly the developments in the world economy, with big areas either already mired in recession – the US and Japan – or moving into that situation – Europe. The UN has warned of a "vicious circle of downward adjustment" rippling out from the battered US economy to the rest of the world. The European Union has cut its projected growth rate from 2.7% this year to 1.8%. Japan is virtually stagnant. As the Financial Times reports: "The Bank of Japan abandoned any hope that the world’s second largest economy will grow this year and predicted instead it would shrink sharply while deflation would last for at least two years". Industrial output fell by an annualised rate of 12.7% in September, which on a year-on-year basis represents the largest drop since May 1975. A similar situation is developing in Germany. The International Monetary Fund in September expected that the advanced economies would grow by only 1.3% this year and 2.1% next. These were predictions made before the 11 September attacks in the US.
The US economy is key. The Economist baldly states: "Economists now agree on something. Practically all of them now say that the American economy is in recession. They could not make any other conclusion against the background of a 5.8% loss in US output in the past 12 months, which is already greater than the recession of 1990-91. Moreover, in September industry’s capacity utilisation fell to 75.5%, its lowest since 1983". This is a searing indictment of capitalism. The system is only capable of operating by leaving almost 25% of productive potential idle.
"Profits have already taken a beating", with reported profits of companies in the S&P 500 index falling by 60% in the year to the second quarter. This leads The Economist to conclude: "Even taking a four year quarter moving average, [profits] fell by 30%, the biggest decline since the 1930s. This means that profits in the non-financial corporate sector fell to 8.1% of gross domestic product in the second quarter, down from 12.5% in 1997".
Alarmingly from the point of view of the capitalists, The Economist declares: "Even with a mild recession in America, this could still turn out to be the most severe world recession since the 1930s. Such a recession is commonly defined as an annual growth of less than 2%". As we have seen, the IMF and many other bodies estimate that growth in the advanced industrial countries will be less than 2%. Therefore, amongst capitalist economists, the fact of a present recession and its repercussions in every part of the globe is given.
Superimposed on this could come massive financial and currency turmoil ignited by a default in Argentina. This would be similar to the default in Russia in 1998, which triggered a worldwide financial crisis. Total collapse was only prevented by the intervention of the US Federal Reserve. An Argentinean default could trigger a similar situation in neighbouring Latin American states and have a spiral effect throughout the world.
The seriousness of the situation has compelled even the most orthodox capitalist economists to reassess and change their position. Thus The Economist, ideological bulwark of the Thatcher-Reagan monetarist counter-revolution in the 1980s – strict control of money supply, slashing public expenditure, ‘letting the market rip’ – now states: "Keynes is back in fashion". It unashamedly comes out for a boost in public expenditure and tax cuts, not aimed primarily at the rich as Bush is doing, but at boosting consumption: "Second tax cuts aimed at low earners are more likely to be spent than handouts to the rich… income tax rebates are more likely to be spent if they are permanent, temporary cuts tend to be saved". It warns: "Keynes’s solution to the Great Depression was that governments should even be willing to pay people to dig holes and fill them in again. America should avoid such a deep slump, but its policy makers are in danger of digging their own economic – and perhaps political – grave". (27 October)
However, Keynesian measures, priming the pump of increased expenditure, have done nothing to extricate Japan from its economic abyss. Yet, desperate conditions demand desperate measures. The world economy was in a tailspin before 11 September but this event and the subsequent war have enormously compounded its problems. The Gulf war knocked about 0.5% off world economic growth and it is not excluded that the effects of this long drawn-out ‘war’ could be similar, if not worse.
Britain and the world
ALREADY THE US working class is paying a heavy price in the fall out for 11 September and subsequent events. The AFL-CIO trade union federation estimates that at least 527,000 workers have lost their jobs since then, with half of the redundancies concentrated in the transport, hotel, entertainment and tourism sectors. More than 100,000 New Yorkers lost their jobs in the month after the attacks. This alone is bound to have a serious effect on spending, which was already contracting before 11 September. The propensity of the US consumer to spend, at the cost of savings, was a lifeline of the world economy as the US became the market of last resort.
How then, against the background of the most serious economic crisis for at least two decades, can the British economy escape? Geographically, Britain may be an island but it is closely integrated into the world and, particularly, US economies. Developments there have already struck a savage blow at the British economy and at Brown’s expectations for the future, although the full effects have not yet been felt.
Like Napoleon’s generals, Brown has been ‘lucky’ in having been installed as chancellor during the 1990s boom. But that is all about to change. It is true that third quarter growth was higher than expected and it is possible that Brown’s growth forecasts of between 2.25% and 2.75% could even be reached this year. But the idea that could be sustained beyond this year is a chimera. Increased spending fuelled by climbing household debt and a slower than previous decline in manufacturing industry, are the prime explanations for this blip. This growth has been consumer driven, with household lending at a ten-year high and savings at a 30-year low.
The shadow of growing redundancies will dramatically alter this pattern. Moreover, manufacturing and exports are in the casualty department, with manufacturing production having fallen for six successive months. A recent survey by the CBI showed that export prospects were at a 21-year low. The engineering industry faces its "worst recession since the early 1980s" (The Independent) with warnings of more than 300,000 job losses over the next two years. Even members of the Bank of England’s Monetary Policy Committee have suggested that a 10% devaluation of the pound is necessary in order for Britain to compete, particularly in Europe. In a contracting market, however, Britain’s rival capitalists and ‘the market’ are not likely to accede to this. We will therefore see a further attrition, both relatively and absolutely, in the economic position of British capitalism.
The economic after-effects of 11 September, coming on top of floods and foot and mouth disease, will be keenly felt in Britain. The tourism, hotel and leisure industries are already in crisis. Up to now, the decline of industry has been compensated partially by the growth of ‘services’, the financial expertise of the City and so on. In Britain’s two-speed economy between mid-2000 and mid-2001, manufacturing output fell by 3% while services grew by 3.4%. But the idea that services will offer a permanent lifeline to compensate for the decline of manufacturing has been shattered by the CBI. It has warned that huge job losses in Britain’s financial services industry will accelerate dramatically over the next three months.
It is likely that employment will drop for the first time in five years. Manufacturing and financial services make up one-fifth of the economy. Moreover, Britain has benefited from outward investment, particularly to the US, and from the inward investment of foreign capitalists. But the latter has begun to dry up as the world economic climate for investment, particularly abroad, has begun to change.
Impact on public spending
ALL OF THIS means that, rather than the rosy future painted by Blair and his apologists, the British economy and the room for manoeuvre of the Blair cabinet have been savagely reduced. This will have devastating effects on the spending plans in key social fields which, in turn, will produce political convulsions, which will put into the shade the opposition we have seen so far, even within sanitised New Labour. Such have been the savage reductions in public expenditure – now lower than under the last Tory prime minister, John Major – that, rather than cutting immediately, Blair is frantically urging ministers to spend the £6.8 billion allocated but not spent. Indeed, last year government departments underspent by more than 3% of their collective budgets, with shamefully the biggest shortfalls in areas such as schools, hospitals and transport. The Department of Education "underspent by £5 billion, enough to pay for an extra 50,000 teachers, while the Department of Health underspent by £500 million". (The Independent)
The cuts have gone so far that it is estimated that there would have to be a 10% rise in spending and public services this year for all the money already allocated to be used. What are the reasons for this? The cuts culture in Whitehall – Brown and Blair’s fanaticism until now to out-Tory the Tories in cuts – has led to a situation where "civil servants… [are] unused to having such large sums at their disposal". Tell that to the nursery workers and parents, hospital patients, teachers and kids in overcrowded classrooms, and to those whose special needs facilities are being closed by local authorities, that this is due to civil servants being organically incapable of actually spending money, our money.
The idea that the government is going to bestow largesse on local councils is a mirage. It is true that Brown did amass a cash mountain of £19 billion – 2% of GDP – up to the financial year ending in March, due to his ‘prudence’ (read savage cuts in public-sector services and jobs). During the boom, government revenue was boosted by tax receipts by increased employment but that will now be reversed. Indeed, in Labour’s first period of office, revenue consistently exceeded budget forecasts. The opposite will be the case in the next period.
Spending is now due to increase. Moreover, the government’s contingency reserve of £2.8 billion has already been raided to pay for foot and mouth compensation. In addition, the costs of the war could soar. This, together with the slowing of the economy, means that a government surplus could swing abruptly into an estimated £7.7 billion deficit next year. This deficit could be lived with if the present economic downturn was temporary and significant growth was expected in the future. But even Eddie George, governor of the Bank of the England, is now warning of a prolonged, three-year downturn.
The government therefore faces a ballooning budget deficit which could be resolved by increased taxes, which Brown flagged up in his Labour Party conference speech; borrowing, which seems unlikely from this most ‘prudent’ of prudent chancellors; further restrictions on public spending; or, a combination of these.
It is certain that the working class will be called upon to foot the bill. Estimates already suggest that the ‘war against terrorism’ could cost Britain £13 billion and the "loss of more than 100,000 British jobs before Christmas". (The Observer, 21 October) Thirty-six thousand jobs have been lost since 11 September, including redundancies at Rolls Royce and BT, with a predicted 75,000 jobs to be shed in the tourist industry. It is conservatively estimated that it will cost each person in Britain £200 to prosecute this war. That does not take into account the knock-on effects of job losses, the drop in house prices (already starting), and cuts in housing, education, health and social services.
Official unemployment has risen to over 1.5 million, a 53,000 increase in the three months to August and the biggest rise in more than eight years. And the number of claimants masks the real unemployment figure. At the same time, it is estimated that Britain now has "one of the least generous benefit systems in the Western world. The ‘replacement rate’ – the amount of income made up by the state when someone becomes jobless – for a normal British family is about 18%. Compare that to Denmark where it is over 60%". (The Guardian, 1 October)
A recent report from the Audit Commission showed that waiting times in Accident and Emergency departments are worse than when New Labour came to power in 1997. This even led to The Mirror calling for the head of arch-Blairite health secretary and ‘ex-Trotskyist’, Alan Milburn. Not only is Milburn sanctifying a further undermining of the NHS by promoting the discredited Private Finance Initiative but he has also attacked the ‘centralist’ legacy of Aneurin Bevan, who set up the NHS, for his alleged preoccupation with ‘nationalisation’.
The trickle of redundancies is now threatening to turn into a flood, which will exert ferocious pressure on the government to take measures to ameliorate the conditions of working people. For instance, the thousands of redundancies in Derby represent the most savage attack on employment in that town for a generation. In 1972, when Rolls Royce threatened to go bust, the Tory government led by Ted Heath stepped in and nationalised the company in 24 hours. It is a measure of how much to the right New Labour has moved that there is not even a hint that such a radical measure could be taken today.
Yet, the division between rich and poor has never been greater. London has some of the richest areas in Western Europe, but also some of the poorest. A shocking picture has emerged from the first report by the London Office of Children’s Rights Commissioner (ORC). This shows that 43% of the 1.65 million children living in the capital live in poverty, a higher proportion than in any other part of the country. More than a quarter of schoolchildren in London are eligible for free school meals, rising to two-thirds in some boroughs such as Tower Hamlets, higher than in any other region of the country.
High property prices mean people spend a higher proportion of their income on housing in the capital and elsewhere. A new health crisis looms in the winter, particularly in hospitals, and one-quarter of general practitioners are so overburdened that they want to quit ‘within five years’.
A crisis also exists in education, reflected in the government’s hasty retreat over tuition fees in England and Wales. Stunned by the anger on the doorstep during the general election, even Blair has now hinted at following the example of the Scottish parliament and, probably, the Welsh assembly in abolishing tuition fees and restoring the grant. However, all indications are that this will be a partial retreat from tuition fees to a ‘graduation tax’, in other words, deferred tuition fees.
Spin, sleaze & the growing opposition
THESE ISSUES, TOGETHER with the growing revolt against privatisation – partially pushed into the background after 11 September – will re-emerge in a sharp form in the next period even if the war continues.
Under the cover of war, the government attempted to bury ‘bad news’, in the words of the unspeakable apparatchik, Jo Moore. This creature of the Blairite counter-revolution has been a long-time hitwoman for the Labour rightwing. Moore’s dark arts of ‘spindoctory’ were first honed in the bureaucratic struggle she and her cohorts conducted against Militant supporters and the left in the Labour student organisation in the 1970s and 1980s. She did nothing new on 11 September to what she had done previously, that is, spin, lie and vilify opponents on behalf of the New Labour hierarchy. Moore’s crime in their eyes is not that she did what she did, seeking to exploit the fact that people’s attention was concentrated on the World Trade Center tragedy to ‘bury’ unpopular New Labour decisions, but that she was caught out by a stupid e-mail.
Despite the attempts of the New Labour tops to say that this incident has led to a line being drawn under their past methods, nothing could be further from the truth. Because it has been built on a lie from the outset, disguising its intention to destroy Old Labour and the struggle for socialism, New Labour is compelled to carry on doing so. The bourgeoisification of the Labour Party, pointed up by incidents like this, has also led to the evidence of financial malpractice in the Geoffrey Robinson affair. This has now been followed by the allegation that Henry McLeish, Labour leader of the Scottish parliament, claimed expenses to which he was not entitled. In Labour’s rightwing are the people who accused great fighters for socialism and the working class, including the socialists and Marxists in Liverpool from 1983-87, of corruption, ‘literal corruption’, in the words of Roy Hattersley.
Now, events are going to severely undermine the grip which Blair has exercised in the 1990s. Already, within months of its re-election, the government has performed more U-turns and body swerves than a circus acrobat. Thatcher was ‘not for turning’. This led to her downfall when she refused to abolish the poll tax, which Major promptly accomplished when he came to power. However, this government is busy jettisoning every unpopular policy which it introduced in its first term of office. Byers carried through the renationalisation of Railtrack by the backdoor, earning himself the scorn of the City for his ‘confiscatory’ measures in place of the plaudits which he previously received.
The significance of this step should not be underestimated. It marks the first breach in the 20-year programme of privatisation begun under Thatcher. It is a ‘state capitalist’ rather than a socialist measure: Byers has been compelled to rescue an industry ruined by the capitalists and will seek to renovate it and sell it back to private owners at a later stage. But ‘the appetite increases with eating’. How workers besieged by factory closures and redundancies will view this action will be entirely different to the fat cats of the City and the boardrooms.
There will be pressure to take over failing industries. Labour MPs are now exerting pressure on the government to reconsider the recent privatisation of air traffic control – the National Air Traffic Service (NATS) – which is already facing collapse because of the contraction of the airline industry following 11 September. However, the government is hell-bent on proceeding with its programme of privatisation of London Underground, in local authority services such as education, and in the health sector. The bust-up which was temporarily averted at the TUC and Labour Party conferences will take place in the next period. Local government workers are incensed at the savage retrenchment programme which has been carried through, usually by Labour councillors at local level.
Workers’ experiences of New Labour in office have resulted in an unprecedented questioning of the links of the trade unions with the Labour Party, as the Socialist Party predicted. This was underlined in a recent Labour Research survey of 301 trade union branches on the links with Labour. Two-thirds of the branches were affiliated to at least one Constituency Labour Party and yet "the results displayed an unprecedented antipathy to the party the unions created. Branches arguing for the links to be maintained and strengthened were outnumbered almost three to one by respondents who criticised the way the relationship is currently working".
Tameside Unison branch secretary, Noel Pine, comments: "Locally, we have more privatisation under New Labour (housing and leisure trusts, privatised care of the elderly) than the Tories". The comments of Roy Gladden, secretary and convenor of the GMB’s 413 branch on Merseyside, are highly significant. Although he was one of the 47 councillors who defied Thatcher and the right-wing Labour leadership by carrying through an ‘illegal’ budget in Liverpool, he ended up supporting the rightwing, and Neil Kinnock in particular, against the socialists and Marxists around Militant (now the Socialist Party). He now says: "For the first time in my recollection I have activists who supported Labour all their lives openly discussing whether the unions should continue to give their political levy or any other financial support to the party, locally or nationally".
This ‘questioning’ on the basis of the hammer blows of the events workers are about to experience, will turn into a massive active movement for the trade unions to break with right-wing, bourgeoisified Labour. Already, the leader of the GMB, John Edmonds, has threatened that his union will stand candidates against Labour. These verbal threats can be transformed into action as it becomes clear that all the avenues previously open to the trade unions for transforming the Labour Party have been dynamited away by the Blairistas. Therefore, the struggle will be on to combat a form of ‘non-political trade unionism’, which is a contradiction in terms, and link this inevitable revolt with the idea of creating the basis for a new mass party of the working class.
The opposition from below will, moreover, create schisms even within the heavily Blairised and bureaucratised Labour Party. The fact that the government has been pushed back on student fees, on the use of vouchers for asylum seekers (albeit accompanied by an attempt to introduce identity cards, which will be widened to the whole population if they are successful) and on other issues will encourage more manifestations of open revolt and possibly splits of groups of MPs from New Labour itself.
Norms of politics overturned
WAITING IN THE wings, as improbable as it may seem as an alternative, is the Tory Party. The election of IDS has further driven a wedge between the right and the ‘centre’ Clarkites. The latter wing of the party, including Kenneth Clarke himself, has refused to serve in the shadow cabinet. Their contempt for IDS is open, with one shadow cabinet member commenting to The Guardian: "His pronouncements are half-baked, immature ideas. Iain is not the sharpest knife in the drawer".
While IDS has attempted to present a more caring image – for instance, supporting the abolition of the homophobic Section 28 and outlawing the Tories’ right-wing, racist Monday Club – he and his party are still cast in a decidedly right-wing mould. So much so that Hans Nicholls, a US Republican, is scathing about the present Tory Party and its leadership. Comparing Bush’s ‘compassionate conservatism’, now called ‘outreach conservatism’, he shows that by electing Duncan Smith the Tory Party has demonstrated that it is "averse to any sort of change – even the sort of political evolution that is benefiting Bush". He shows that "to call Bush a moderate would be as inaccurate as calling him articulate". Nevertheless, Bush is surrounded by advisors who have compelled him to appeal to parts of the former Democratic ‘constituency’ – minorities, Latinos, African-Americans and, to a lesser extent, lesbians and gays.
There is no such hope that Duncan Smith’s Tory Party could travel down the same round as Bush in the US. Nicholls compares the fate of today’s Tory Party to that suffered by the Republican Party in California, whose prospects are now so bleak that they are "busy recruiting the Austrian-born Arnold Schwarzenegger to run for governor". Yet, such are the political convulsions that could flow from the government’s failures, resulting from the economic catastrophe which looms in Britain, it is not entirely excluded that even a right-wing Tory Party led by Duncan Smith could achieve the almost-impossible and come to power.
Peter Riddell in The Times pointed out: "The current one-party domination of Labour will not last forever. It could be ended by developments in the campaign against terrorism… and at some stage these (discontent) will boil over into anger against the government". At the moment, the Tories do not appear to be a viable alternative and, in fact, the political arithmetic of elections means that they would need a huge swing to come back to power. But 11 September has ushered in a disturbed period in which the norms of politics have been thrown up in the air.
The Liberal Democrats hope to be able to benefit from the split within the Tory party and the inevitable disenchantment with Labour. All they need to do is stand still and they will appear to be on the ‘left’ to disenchanted Labour supporters, such is the rightward evolution of Labour.
We have entered an unprecedented period of economic, social and political turmoil. The seething discontent at the conditions which working-class people face in Britain is partly smothered by the war but that will not last forever. The very repercussions of the war will compel working people to move into action to defend and change their conditions. The seeming tranquillity of the 1990s is over once and forever. The broad consciousness of the mass of the people has not yet caught up with objective reality. But that it will do so, and in convulsive leaps, is certain. This has laid the basis for the re-emergence of a broad anti-capitalist, anti-globalisation mood but with a growing minority looking towards the ideas of socialism and Marxism. The Socialist Party, which has rooted itself in key parts of the working class and labour movement, is destined to play an important role, both in the growing anti-war movement and in preparation for creating a mass socialist force that can show a way out of the horrors of capitalism revealed by 11 September and its aftermath.