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Issue 56, May 2001

Stormy forecast for Britain

    Making the workers pay
    A June election

New Labour delayed the expected May election when foot and mouth got out of hand. Now the clouds of an economic downturn are gathering and Tony Blair is impatient to get re-elected before they break. HANNAH SELL explains what an economic recession will mean and assesses the political situation.

AFTER FOUR YEARS of claiming that he had overcome the boom-and-bust cycle, Gordon Brown has finally been forced to admit that bust is on the horizon. He is still trying to put a brave face on things, claiming that Britain is 'well placed to avoid the worst effects of a global downturn'. However, even to him, this must seem like an increasingly vain hope. As the Financial Times reported: "Senior government officials have warned that the outlook for the world economy could become 'pretty rough' over the next 18 months... They fear that the US could face a two-year downturn, that Europe's economy is likely to suffer because of the European Central Bank's refusal to cut interest rates, and that Japan's economy is on the verge of an implosion". (14 April)

No country will escape unscathed from the coming world recession. In Europe, Britain is more vulnerable than most. Manufacturing industry has been decimated - in 2000 an average of 300 manufacturing jobs were lost every day. The Engineering Employers' Federation predicts that another 150,000 jobs will go in this sector this year. In the last few weeks, massive job losses have been announced at Cammell Laird shipbuilders, followed by a series of devastating cuts in the high-tech sector: 3,000 jobs at Motorola, 1,500 at Marconi, and around 1,000 at Ericsson. If these job losses are allowed to go through it will mean the wholesale destruction of the working-class communities reliant on these industries, in the same way that the pit closures decimated mining communities a decade ago. New Labour has once again wrung its hands and done nothing.

 

Fury has erupted among many sections of workers facing redundancy. Last year, 80,000 demonstrated to save the Longbridge car plant in Birmingham and Vauxhall workers stormed their managers' offices in Luton, action more reminiscent of Southern Europe than the previous traditions of the British working class. We will undoubtedly see further eruptions of anger over the latest threats to jobs. However, it will take a concerted battle to prevent workers having to pay for the economic crisis. Unfortunately, the national trade union leaders have to date failed to lead any struggles. The Socialist Party is calling for a plan of action by the working class to prevent this jobs slaughter. At the same time, we call for the nationalisation of all firms threatening mass redundancies under democratic working-class control and management.

The particular weakness of British capitalism flows from the strategy of the British bourgeoisie over decades. The capitalist class has always been driven by the need to make profits. Today, the long-term crisis of British capitalism results in a capitalist class that is exceptionally short-sighted, driven purely by the best way to make a quick buck. Sir Brian Moffat, Chairman of Corus Steel, brutally summed this up when he justified slashing jobs by saying, 'we make profits not steel'.

Manufacturing, the production of goods, remains the key foundation of any modern economy. Yet in Britain, the financial and service sectors predominate. In 1978, manufacturing employed seven million people, almost three times as many as were employed in financial services. Today only 4.3 million are employed in manufacturing while financial services employ 5.2 million. There are half as many workers employed in tourism as in the whole of manufacturing!

 

The capitalist class in Britain does not invest in industry. Productivity levels (the average amount produced by each worker) lag way behind the rest of the so-called 'advanced' world. A recent study by the London School of Economics showed that if productivity levels in Britain were given a score of 100, France would score 133, Germany 129, and the US 126. Overwhelmingly, any productivity increases have come from the increased exploitation of working people rather than as a result of new technology.

top     Making the workers pay

BRITAIN HAS BECOME the sweatshop of Europe. The majority of those working in manufacturing labour for overseas firms exploiting some of the cheapest labour in the European trading bloc. Britain has been producing more cars in the last three years than at any time since the 1960s, yet less than one-hundredth of its output is from British-owned companies. Britain is the leading producer of TVs in Europe, but of the six companies producing them five are Japanese and one is Korean.

The neo-liberal, short-term policies of the British capitalists have been faithfully implemented by Margaret Thatcher and the Tories and, in the last four years, by Tony Blair and New Labour. While the national trade union leaders have opposed deregulation in words, they have not been prepared to lead a fight against it. Now the working class is facing the brutal consequences.

In the face of massive overproduction and overcapacity, big business worldwide is destroying capacity by shutting plants. Contrary to the claims of many commentators in the 1990s, the globalisation of the world economy has not led to capitalism overcoming the limitations of the nation state. When presented with the choice of shutting plants in their home countries or abroad, the general trend will be for companies to choose to shut foreign plants first.

 

Nor will manufacturing be the only sector affected by a world recession. According to official figures, Britain is the fourth largest economy in the world in terms of income. This growth comes overwhelmingly from the finance sector and from the massive investments of British capitalism abroad, particularly in the USA. As the US crisis deepens, these investments will inevitably suffer.

The dominance of the stock market in Britain also makes it particularly vulnerable to the current crisis. 'The world's biggest hedge fund', was how a recent report by the City of London firm, Smithers and Co, described Britain. In other words, Britain is one big casino where the world's financiers come and gamble their billions. The report went on to say that Britain was uniquely vulnerable to a world recession because its "foreign liabilities exceed its assets and it is only remaining profitable by making skilful bets on the financial markets" (Guardian, 9 January).

Since January, 15 billion has been lost from the value of British shares. As a result, the Centre for Economics and Business research forecast that 20,000 jobs could go this year from the City alone. This is likely to be an underestimate. What is more, jobs in the City will only be the beginning. The whole of London and the south-east is fuelled by the finance industry. According to the London Evening Standard, 60,000 non-City service and construction jobs were lost in London during the 1991 recession, which was shallower than the coming recession is likely to be.

 

More than in other parts of the country, a section of workers in London and the south-east have felt some benefits from the boom of the late 1990s. For this section, the coming recession is likely to be particularly shocking as the horrible realities of capitalism hit home. This was graphically illustrated by Simon Jenkins in the Evening Standard: "After the last City downturn, I recall meeting a man in his early forties with two small children in a London park. He had been laid off by a bank where he was not well paid, his income dependent on bonus expectation. He had lost everything... His marriage had collapsed. He felt bereft of support and was very low. Welcome to the big city, I thought. Here is capitalism red in tooth and claw, where the loser gets neither sympathy nor television coverage".

Britain's future can be seen in Japan where the economic crisis has led to tens of thousands of 'salary men' (lower management) finding themselves jobless, penniless, and in many cases homeless. Such a sudden change in conditions is likely to lead to a rapid radicalisation of a previously more comfortable layer of the working and middle classes.

New Labour has no concept of the full force of the coming economic crisis and its political repercussions. They do not understand that it is ruled out that the government's second term will be like the last, with relative social stability and calm, at least on the surface. This is partly because of the simmering discontent that already exists. It will be massively intensified by economic developments. Nevertheless, Blair & Co are undoubtedly worried about the impact the looming economic crisis will have on the general election.

 

top     A June election

NEW LABOUR'S MISHANDLING of the foot and mouth crisis, alongside its abject failure to do anything to stop big companies slashing jobs, is likely to severely cut its majority in many seats. However, the New Labour leaders realise that the economic situation will have become far worse by the autumn. That is why, despite ongoing difficulties with foot and mouth, it would take cataclysmic events to force them to move the election date back from 7 June. Ironically, the government's mishandling of the foot and mouth crisis will add considerably to the strains on the economy. According to the Independent on Sunday, tourism and related industries will lose 40 billion, the equivalent of 4% of GDP.

Provided that New Labour goes ahead on 7 June, they will almost certainly retain a workable majority. This does not alter the fact that they are extremely unpopular amongst the majority of working-class people and many of the middle class. On most issues - the railways, NHS, education - the majority of the population are far to the left of New Labour. The turnout is likely to be the lowest in a national parliamentary election since the second world war. New Labour will be re-elected simply because, on a national scale, there is no credible alternative.

It is true that the Liberal-Democrats will gain some support. They are seen by some workers as more left-wing than New Labour, although less so in areas where they control local authorities, invariably carrying out the same cuts in services and conditions as the other major parties. Even nationally, their capacity to appear as a left alternative is severely undermined by the way they have tied themselves to New Labour's apron strings, in return for a vague promise to look at proportional representation in the next parliament. They have agreed non-aggression pacts with Labour in many seats and constantly defend the government in the media. This raises the prospect that in the next parliament New Labour will work more openly with the Liberals, in a kind of informal coalition.

 

The election prospects of the Tories were summed up at the National Union of Teachers (NUT) conference when Teresa May, the shadow education minister, declared that she would be a member of the next government. The conference burst into derisive laughter. In recognition of their expected rout, the Tories have already started the post-election leadership contest, with Michael Portillo looking the most likely contender.

There will be a section of working-class people who will vote Labour, although disgusted with their policies, for fear that if they don't the Tories could be re-elected, despite all evidence to the contrary. Whilst it is true that both the Tories and New Labour are fundamentally alike in that they are both parties of big business, they are not identical. The difference between the Tories and New Labour is the difference between a right-wing bourgeois party, on the one hand, and a more liberal bourgeois party, on the other. While Brown's recently announced public spending increases, for example, fail to restore earlier spending cuts - and will anyway be blown away in the coming recession - Hague's Tories proposed to spend the current budget surplus on Bush-like tax cuts. The important issue, however, is not the secondary differences between Tories and New Labour but the need to build a socialist alternative that represents the interests of working-class people.

The Socialist Party is contesting 14 seats in England and Wales, where we are taking part in the broader Socialist Alliance campaign. In Scotland, CWI members are participating in the Scottish Socialist Party's campaign. Voters in approximately a quarter of seats will have an opportunity to vote for a socialist alternative. However, the achievements of socialists on 7 June will be only be a modest foretaste of the potential that will exist for socialist ideas in Labour's second term.

 

Enormous discontent with life under New Labour exists within every section of society. Working-class people are, in general, looking for a left alternative: for example, support for re-nationalisation of privatised utilities has grown exponentially. At the same time, the anti-capitalist protests are the first signs of a new generation searching for an alternative to the rule of big business. Under the impact of a recession, all these trends in society will grow dramatically. New Labour will be faced with ferocious and explosive struggles of workers and young people. Socialists will face the challenge of reaping the whirlwind, of attempting to ensure struggles are successful, and the task of building on the increased anger at capitalism to win support for socialist ideas.


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