Tuesday, 28 April 2009

LEAP Conference - reports

The LEAP Conference 2009 'Capitalism Isn't Working' took place last Saturday, at Birkbeck College, London.

Rather than write a full report of the conference, here's some links to others' reports:

If you attended the conference, and have any feedback on any part of the conference, please email leap@l-r-c.org.uk. Any feedback will be confidential and used to help us improve future events.

As well as the some more photos, we'll also have video from the conference online soon - hopefully over the weekend!

Thursday, 23 April 2009

LEAP Conference 2009 - this Saturday, 25th April

The LEAP Conference 'Capitalism Isn't Working' takes place this Saturday, 25th April at Birkbeck College, Malet Street, London (map here, nearest tube: Russell Square).

A full agenda is available to download. The day begins with an opening address by LEAP Chair John McDonnell MP, author of Another World is Possible, and also Chair of the LRC and Socialist Campaign Group of Labour MPs.

From there we move into the morning plenary - a panel discussion Who Pays for the Crisis? with panellists including:
After a break for lunch, in which there is a free fringe with Richard Wilkinson, about his pioneering research on inequality for The Spirit Level - why more equal societies almost always do better, we break into four sub-plenary workshops:
  1. Resisting the Recession & Defending Jobs will be facilitated by Professor Gregor Gall and Jerry Jones (author of Halting the Decline of Britain's Manufacturing Industry) and will look at the industrial agenda during the recession. Download the LEAP Factsheet for this session.

  2. Where's our bailout? will be facilitated by Andrew Fisher (LEAP Co-ordinator) and Colin Hampton (National Unemployed Centres Combine). Download the LEAP Factsheet for this session.

  3. What to do with the City? will be facilitated by John Christensen (Tax Justice Network), and Gerry Gold (co-author of A House of Cards - From Fantasy Finance to Global Crash). Download the LEAP Factsheet for this session.

  4. Neoliberalism Isn't Working - fighting the ideological battle, facilitated by Paul Feldman (co-author of A House of Cards - From Fantasy Finance to Global Crash) and social psychologist Rosamund Stock. Download the Factsheet for this session.

Then it's the final plenary session - a panel discussion on The Economy We Want & How to Get There, with panelists including:
Then we start fighting for it, maybe via the pub first . . . hope to see everyone there on Saturday.

p.s. I recommend two very good articles in Friday's Morning Star - one's my own: 'Devil in the Detail' and the other by Gregor Gall 'How to fart and chew gum', both analyses of this week's Budget.

Darling's big fraud fools no one

Alistair Darling’s crisis budget is a gigantic attempted fraud that will fool no-one. New Labour’s Chancellor bears comparison with Bernard Madoff who, last month, was convicted of the largest investor fraud ever committed by a single person.

Like the most unscrupulous of doorstep loan sharks, Darling is launching an historically unprecedented mis-selling scam of financial products to investors from financial institutions and foreign governments to fund record amounts of state borrowing. Those who will be asked to front up the cash are already concerned that they may not be repaid, even allowing for savage cuts in public spending and increased taxes that are built into the budget that will shatter vital services and cut living standards drastically.

Government borrowing is set soar for years to come, from a staggering £220 billion this year and close to £600 billion in four years’ time – as high as 79% of the value of annual production by 2014. Experts in government bonds and currency speculators were among those shocked by the figures, which don’t even tell half the story because they are based on wildly optimistic projections of economic “recovery”. The falling pound revealed heightened doubts that the loans so desperately needed to delay looming state bankruptcy would be forthcoming.

After the budget, the cost of government borrowing actually rose, leading Financial Times commentator Martin Wolf to observe: “Should investors decide that a return to fiscal stability has become a remote prospect, they may turn against the UK suddenly and brutally.”

Mark Frey, head foreign-exchange trader at currency services firm Custom House, described the debt load as “an immense price tag,” and one that the UK may not be able to afford. "The problem for Darling and Prime Minister Gordon Brown, however, is that they may not be able to afford the economic carnage that could ensue with a smaller stimulus package, either." In other words, New Labour is caught whichever way they twist and turn.

In the face of a deepening global collapse of production, and against every other prediction, Darling is dreaming of – and has based his measures on – a resumption of growth by the end of the year. But as soon as he had finished delivering his budget, the International Monetary Fund (IMF) cast serious doubt on Darling’s forecast.In its world economic outlook, the IMF predicts that recession in the UK will be "quite severe", with the economy shrinking by 4.1% this year, and continuing to contract, by 0.4%, in 2010. In his patently absurd budget, Darling forecast 1.25% growth in 2010.

Even if Darling’s fantasy were to be realised – and it won’t – his actions spell out at least a decade of the deepest austerity yet imagined to be imposed on working, and increasingly not working, people as well as older people dependent on public services.

With unemployment soaring to 2.1 million, already reaching as high as 20% – one in five amongst young people in South Wales – and widely expected to exceed 3 million by the end of the year, it is becoming crystal clear that the cost of the collapse of the credit-fuelled boom is too heavy for society to bear.

The unfolding economic and financial crisis is not only more serious than any experienced in the three and a half centuries of society’s rule by capital, but is qualitatively different to all preceding examples. The nearest historically comparable collapse is 1929, a minnow in relation to today’s post-globalisation catastrophe. It only came to an end after an orgy of industrialised destruction in World War Two.

Now Britain is on the verge of state bankrupty, with all that implies for what is left of our democratic rights. To prevent a repeat of history, a qualitative leap in social relations – both economic and political – is needed, replacing rule by capital by ecologically sustainable production for need, and creating a new political system that is based on the truth rather than the big lie. As somebody else once said, there is no alternative.

Gerry Gold
Economics editor
A World to Win

Wednesday, 22 April 2009

Budget 2009: Analysis

John McDonnell MP, LEAP Chair, warns of a package of cuts buried in the Budget and "trivial" concessions.

Graham Turner, author of The Credit Crunch, gives his take on the Budget.

Mark Serwotka warns that public services will suffer.

Richard Murphy on how the Budget fails the environment.

Jeremy Corbyn MP, writing in the Morning Star, in advance of the Budget.

McDonnell: 50p rate 12 years too late and tokenistic

John McDonnell MP, LEAP Chair, said:

"Although the 50p rate is a small step in the right direction, it really is twelve years too late and a tokenistic measure, given that the poorest will stay be paying more of their incomes in tax than the rich*

"For the Government to announce tax avoidance measures amounting to only £300m per year, is derisory when £100bn is estimated as lost to the Exchequer by tax avoidance."

*Currently, the poorest 20% of people lose nearly 40% of their total income in direct and indirect taxes, compared with a national average of 35.3%. The figure is 34.8% for the richest 20%.

Richard Murphy has a similar take: "It's a start . . . But they need to go much further to ensure more reliefs and allowances cannot be used to avoid their duty to society."

£30bn worth of cuts and privatisation, says LEAP

The 2009 Budget announced a further £9bn on public service cuts, on top of the £5bn announced in the Pre-Budget Report. The Chancellor also announced £16bn of "asset sales", which will include the privatisation of Royal Mail and the Royal Mint. This is a total of £30bn of public service cuts and privatisation.

John McDonnell MP, LEAP Chair, said:

"Buried in this Budget is a programme of public expenditure cuts and privatisations never seen before in the history of this country. It means the Government is pressing ahead with the sale of Royal Mail in the face of massive public opposition. This programme of cuts and privatisation will be made worse when the Chancellor's unsustainable growth predictions are exposed.

"Cutting and privatising jobs in the public sector will simply put more people on the dole, and runs counter to the Government's overall approach of stimulating the economy."

Andrew Fisher, LEAP co-ordinator, said:

"By pushing ahead with the privatisation of Royal Mail and the Royal Mint, Darling is putting ideology before evidence. Thatcher sold off the family silver, now Brown is selling off the family gold.

"As public businesses both Royal Mail and Royal Mint are net contributors to the public purse - and with an ever-widening deficit, the Chancellor is wrong to sell-off a valuable source of public income. Darling is slaughtering the goose that laid the golden eggs."

Budget 2009 - Live blog

The Chancellor Alistair Darling will today unveil his Budget - New Labour's first during a recession. The Budget speech begins at 12:30pm, after Prime Minister's Questions.

At 5pm tonight, Their Crisis Not Ours! is organising a picket of HM Treasury, 1 Horseguards Road. There is then a Q&A session in Committee Room 10 of the House of Commons at 7:30pm, with panellists including John McDonnell MP (LEAP Chair), Clara Osagiede (RMT), Cllr Susan Press (LRC vice chair), and Graham Turner. Grahams grim assessment yesterday was: "whoever wins power in 2010, the UK faces a multi-year tightening of fiscal deficits even more extreme than that seen in Japan."

We'll be blogging throughout the day - reporting and responding to the announcements in the Budget:

11:30am: Excellent piece by Prof Gregor Gall on Comment is Free arguing the case for a maximum wage. As Gregor argues, "The notion of maximum wages is based on the idea that no matter what job a person does and no matter how many hours they work, there is no possible way that an individual's skill, expertise, intelligence or experience can justify the payment of 100, 200, 300 or even 400 times the wages of the lowest-paid worker in the organisation at hand."

Gregor will be speaking at the LEAP Conference 'Capitalism Isn't Working' this Saturday.

11:55am: The Tax Research blog will be also be posting throughout the day, with a focus on Tax Justice issues. They'll also be twittering too - for those who understand that . . . John Christensen from the Tax Justice Network will also be speaking at the LEAP Conference 'Capitalism Isn't Working' this Saturday.

12:30pm: And with the political Punch & judy of Prime Minister's Questions out of the way, which focused heavily on the national debt and unemployment figures (over 2.1m by end of Feb), it's the Budget . . .

12:35pm: Unemployment figures today (for the period to the end of Feb09) show unemployment has risen by 177,000 to 2.1m. At this rate, LEAP estimates unemployment will reach 3 million by the end of the Summer. Figures also showed that private sector wages had declined by 0.5% in the three months to February. John McDonnell MP, LEAP Chair, said:
"Demand is being sapped from the economy by unemployment and pay cuts. This requires a massive Government intervention in the economy to protect jobs and stimulate demand. The Government must now rule out further cuts in public sector jobs."

12:41pm: Chancellor says UK economy will contract by 3.5% this year, but will be growing again by the end of the year - with growth of 1.25% in 2010, and 3.5% in 2011.

12:45pm: The Chancellor praises Jobcentre Plus and promises additional £1.7bn funding - but will it be through private providers or the more efficient Jobcentre Plus?

12:50pm: on housing, no social conversion scheme, as we suggested. A holiday for stamp duty on properties under £175,000, more money for shared equity schemes, and the homeowner mortgage support scheme.

12:56pm: borrowing £175bn this year, 12% of GDP - in his last Budget, Brown lambasted Tories for hit hitting 8% under Major . . .

12:59pm: Tax avoidance: with at least £25bn missing per year, the Chancellor says he will close loopholes to gain another £1bn over 3 years. Not good enough.

1pm: Redistributive taxation? It's a start - Darling is raising top tax rate to 50% for those earning over £150,000 (top 1% of earners) from next year.

1:05pm: £16bn of asset sales - that' privatisation to you and me - Royal Mail and Royal Mint. Thatcher sold the family silver, Brown's flogging the family gold

1:09pm: A hint of local authorities being allowed to build homes. Is that council housing? As always, let's see the fine print first . . .

1:15pm: Warm words on green investment, but a lot of reannouncements, and the big figures are loans or guarantees.

1:22pm: And it's over . . . I was waiting for a rabbit to be pulled out of the hat . . . Let the post-mortem begin

Tuesday, 21 April 2009

New LEAP Red Papers - The Recession Budget

To coincide with the 2009 Budget - New Labour's first during a recession - LEAP has published its April 2009 Red Papers: The Recession Budget.

As we face the worst recession for a generation, and if Ed Balls is to be believed "more extreme and more serious than that of the 1930s", what is left in the pot for those feeling the effects of the recession: the unemployed, the repossessed, the low waged, the indebted?

It is clear that many are asking 'Where’s our bailout?', and with good reason. For years we were told there was no money to pay for student grants, to restore the pensions link with earnings, to invest in council housing or to reduce inequality. Yet when the banks collapsed through a combination of greed, incompetence and government negligence, the UK taxpayer could be indebted for decades to rescue the lame ducks of neoliberalism.

  • Graham Turner on how US policy is damaging the global economy
  • Professor Gregor Gall on the faux-Keynesian consensus and what socialists should be arguing for
  • Jerry Jones on defending jobs and the case for direct action
  • Andrew Fisher on economic insecurity and inequality in recession
  • Paul Feldman & Gerry Gold on the G20 and what it should have done
  • Richard Murphy on the campaign against Tax Havens post-G20
  • John McDonnell on why we need to build a vision of a new economy

Download the April 2009 LEAP Red Papers 'The Recession Budget'.

Update: Read John McDonnell's article on Guardian Comment is Free.

Monday, 20 April 2009

Bailouts for the banks, Cuts for the public sector

With pre-Budget leaks suggesting £15bn of public sector cuts to be announced in Wednesday's Budget, PCS has put out the statement below:

Date: 20 April 2009
For immediate use


The Public and Commercial Services Union (PCS) warned that further spending cuts will damage services and jeopardise the delivery of government policies as it responded to today’s budget speculation that the government will cut spending by £15 billion.

The Chancellor has already announced £5 billion of so called ‘efficiency savings’ across civil service departments with speculation mounting that he will announce a further £10 billion of cuts in Wednesday’s budget.

Civil and public services have already been hit by spending cuts in real terms and ‘efficiency savings’ which have lead to over 80,000 job loses and hundreds of office closures.

Key areas such a tax, jobcentres and justice have all been affected. 25,000 jobs are to go and 200 offices to close in Her Majesty’s Revenue and Customs (HMRC) by 2011. 500 jobcentres and benefit offices have closed over the last 5 years hampering the government’s ability to respond to recession and the justice system is in danger of delays and backlogs as the Ministry of Justice faces a year on year cut to its budget in real terms.

Commenting, Mark Serwotka, PCS general secretary, said: “Further so called efficiency savings should not be at the expense of jobs and services. The government should be targeting the billions of taxpayer’s money wasted on the army of consultants. We have already seen the impact of cutting services to the bone in areas such as Jobcentres, whose tireless work has been hampered by a history of job cuts and office closures. Further spending cuts will jeopardise the delivery of frontline services which people are increasingly relying on as the recession deepens.”

Later today, when he addresses the Scottish Trades Union Congress in Perth, he is expected to add: “Politicians and commentators on the right are using emotive words such as ‘apartheid’ to sow division between hard working people in the public and private sector. Not only is it divisive, it is wrong. Low paid workers, wherever they work, are in this together, the victims of the excesses of the City and casino capitalism.

“The reality for thousands of civil and public servants across the UK, delivering services such as benefits, helping people back into work, tax credits and justice, has been job cuts, pay freezes and pay cuts in real terms. The reality for the communities they serve has been office closures and the deterioration of services.

“As the recession bites deeper and more and more people become reliant on public services, the government should halt office closures and job cuts in civil and public services. In this week’s budget the government should be talking about creating jobs across the economy and increasing the support for people hit by the recession. The government also needs to recognise the pressure that Jobcentres are under by committing extra resources and by reopening some of the 500 hundred they have closed over the last five years.”


Friday, 17 April 2009

Capitalism Isn't Working - Building the New Common Sense

Building the New Common Sense – Social Ownership for the 21st Century is the pamphlet published by LEAP last September. Thanks to many LEAP supporters we have sold enough copies to break even. Unlike the capitalist banks, we break even, haven't relied on dodgy loans or Government bailouts and are reinvesting the (very) small surplus in our forthcoming conference.

In the preface to Building the New Common Sense, I wrote:

"This pamphlet is the start of a debate and of a campaign to put the question of ownership back on the industrial and political agenda. As the UK faces recession and as job losses and business failures continue to rise, this question could not be more timely."

In the concluding contribution to the pamphlet, John McDonnell MP, LEAP Chair, wrote:

"Now is the time . . . to reinvigorate a debate about a new role for social ownership in the 21st century. This pamphlet is designed to stimulate a debate among trade unionists and all those who want a stake in their community. From this debate, we need to take forward a campaign for a worker controlled economy, accountable to our communities, into our union branches and conferences, into our workplaces, and through the TUC, and eventually even Parliament."

Since then workers have occupied workplaces at Waterford Crystal and currently at Visteon. We are hoping to have a worker from the Visteon occupation at the LEAP conference 'Capitalism Isn't Working' which takes place next Saturday, 25th April. The conference will also include a workshop entitled 'Resisting the Recession: the industrial agenda' led by Professor Gregor Gall and Jerry Jones (both contributors to Building the New Common Sense).

If you are interested in continuing the debate and building a campaign for workers' control and in solidarity with those workers taking action, I hope you will attend and participate in the conference.

Thursday, 16 April 2009

US turns to socialism?

OK, apologies for the sensationalist title, but a recent US poll shows a marked increase in US citizens questioning the capitalist system. Only 53% favour capitalism over socialism.

Young Americans (under 30) are the most socialistic. The pollsters say they are "essentially evenly divided", 37% prefer capitalism, 33% socialism, and 30% are undecided.

It is perhaps unsurprising that people are questioning the capitalist system at a time when its caused the biggest crisis for a generation (and possibly much longer). However, the point is to offer a coherent alternative.

Like in the US, the mainstream political parties are all embedded with neoliberal capitalism - and because of that the mainstream media rarely reports anything that counters that world viewpoint.

It is therefore necessary for those of us who don't want capitalism to articulate a coherent vision for a socialist society. That cannot be wrenched from ancient Marxist tomes, but has to be developed in the contemporary context. That is what LEAP has been seeking to do the last few years - and what our conference on Saturday 25th April will continue.

What would a similar poll in the UK reveal?

Sat 18 Apr update: And now there's even pictorial evidence of the shift to the left in the US - Obama and Chavez warmly embrace. Roll on to the United Socialist States of the Americas!

Monday, 13 April 2009

So Where's Our Bailout?

Andrew Fisher, Coordinator of the Left Economics Advisory Panel (LEAP) (This article first appeared in the Morning Star)

As Gordon Brown can verify, it is a fool’s game to forecast the economy. However, when in 2006 Brown as Chancellor was predicting growth as far ahead as 2011 – and an end to boom and bust – LEAP was highlighting the levels of personal debt in the UK (nearly 50% greater than in the US) and warning they were unsustainable.

Now we are in a recession that looks set to eclipse that of the early nineties and probably even that of the early-mid eighties. Unemployment has breached two million, with a consensus forming that by the end of this year it will reach three million. This same consensus expects the UK economy to contract by 4-5% in the same time period.

In response the Government has awarded lavish handouts to the banking sector without any conditionality around jobs or pay (let alone public control). It is clear that New Labour in recession operates as it did in boom time – in the interests of big business.

The effects of a recession on working people always lag behind the economic data of GDP growth. When the UK economy was notionally recovering by the mid-eighties, unemployment was reaching its peak. This highlights how we measure recession is skewed towards the dominant interests.

There are several contrasts that need to be made with that period – and, if we are to comprehend how harshly this recession will ravage working class communities, we need these contrasts to be understood. The last thirty years of neoliberal economic policy have stripped away many of the protections that still existed in the eighties.

In the workplace, trade union density has nearly halved from 55% when Thatcher came to power to just 28% today; the proportion of workers covered by collective bargaining has suffered even more gravely, down from 85% to less than 40% today. As New Labour has refused to restore trade union rights, UK workers are now the easiest to sack in western Europe. The legions of non-unionised workers who retain their jobs will also be hit with pay cuts as employers seek to insulate their profits.

Just last year Gordon Brown boasted to the CBI that we have "the most flexible labour market in Europe". So when transnational corporations are judging where to cut jobs, it is in their interests to choose UK workers who are less likely to be unionised, and where they have the lowest legal commitments to fulfil.

When these workers join the army of surplus labour in the dole queues – itself helping to further suppress wages, they will find a benefits system less generous than under Thatcher. If unemployment benefit had increased in line with earnings from 1980 it would be worth nearly £110 per week. Instead today's unemployed are expected to survive on just £60.50, or £47.95 if they are reckless enough to be under 25.

They will also be faced with an unemployment service that has shed 30,000 staff in the last five years and is insufficiently staffed to cope with the rising demand – and subject to increased conditionality, now including workfare for the long-term unemployed. While the Tebbit-era rhetoric may have been more stark, the practicalities of maintaining a claim under the New Labour regime are far harsher – and for barely half the level of benefit.

As increasing numbers find themselves jobless, or their pay frozen, they will struggle to pay housing costs. In 1980, over a third of people lived in the secure tenancies of council housing. Today it's just 10%. The rest are faced with paying a mortgage and if they fail to make the payments and are repossessed –as nearly 50,000 were last year – they will join nearly two million others on the sick joke that is council house waiting lists. For private tenants of buy-to-let landlords, tenancies are insecure as many landlords struggle to maintain their mortgages. There is little good news for first time buyers. House prices, which more than doubled between 1999 and 2007, have dropped only 15%. The chronic housing shortage is keeping prices high.

Thanks to Thatcher's break of the earnings link (maintained by Major, Blair and Brown), today's pensioners face a basic state pension worth just 14% of average male earnings. In 1979 it was worth 23%. Many of those who took out private pensions have seen its value decimated by the crashing stock market, while final salary occupational schemes are increasingly the preserve of only directors and MPs – the culprits of the destruction of UK pension security. Further cuts in occupational pensions will come as employers seek to maintain profitability.

The neoliberal dogma of the past thirty years has decimated the public services on which the poorest rely. As the poorest and most vulnerable workers face lengthy periods of unemployment the true legacy of New Labour is revealed.

The 2009 Budget will be New Labour's first during a recession. The usual environmental gimmicks and corporate tax break leaks have been touted, but for the rest its austerity, rumours of a public sector pay freeze and no increase in the minimum wage. Under the slogan Their Crisis Not Ours, the LRC and others will be protesting in Whitehall on Budget Day to demand 'Where's our bailout?'

Like the MacDonald government of 1931 and Callaghan in 1978-9, this Labour Government is choosing to attack working class communities to pay for a recession not of its making.

The LEAP conference on Saturday 25th April 'Capitalism Isn't Working' is an opportunity to share information and mobilise resistance against the policies that make the poorest pay.

Equality - why it matters

There's a review of 'The Spirit Level' - the new book by Professor Richard Wilkinson and Kate Pickett in today's Morning Star.

As the review states, "The authors, who are both epidemiologists, produce a wealth of graphs based on official statistics to show that the more unequal countries are, the worse are their health and social problems.

"This is done by comparing the records of the richest 23 countries in the world on levels of trust, mental illness, life expectancy, infant mortality, obesity, children's educational performances, teenage births, homicides, imprisonment rates and social mobility.

"Britain, the US and Portugal are the most unequal countries with the worst health and social problems, while Japan and the Scandinavian countries, especially Sweden, are the most equal with the least problems."

Professor Wilkinson will be a panellist in the morning plenary session 'Who Pays?' of the LEAP Conference 'Capitalism Isn't Working' and hosting a lunchtime fringe presenting research from the book.

Research by LEAP, The Real Story of UK Inequality, published in October last year shows how inequality has continued to grow under New Labour.

Thursday, 9 April 2009

'Creative destruction' order of the day

Despite the G20’s attempts at confidence-boosting rhetoric, the interdependent components of the global economy remain locked in a deadly embrace, wrestling with each other as they plummet to the ground.

Ever more desperate attempts to resuscitate the fantastic but failed world of credit and debt dilute the value of currencies and further worsen the health of the global corporations as demand falls for the goods they produce, sending their share prices down.

In Britain, all talk of a “recovery” later this year has disappeared and next week’s Budget is in fact a crisis measure as public finances spiral out of control. European steel production is close to collapse and a trade war with China is looming over its dumping strategy.

The Irish government is the first to admit in practice that neither additional government borrowing, nor expanding the supply of money can help its country withstand the impact of the global crisis of dwindling production and consumption. It won’t be the last.

In measures designed to forestall the looming threat of state bankruptcy, its emergency second budget looks like the flailing autotomised arms of a threatened octopus, when a limb is severed by the endangered creature.

In a so far maverick response to the shock forecast that economic activity in the Republic is forecast to shrink by 8% this year, a dramatic worsening of last year’s 3% contraction, finance minister Brian Lenihan warned of "a serious decline in national living standards: the sharpest fall on record.”

Taxes will rise, though not on corporate profits, and spending on services will be slashed. In the public sector pay will be hard hit affecting a large part of the population.

Nevertheless, with already the worst government deficit in Europe, and the entire financial sector in a state of collapse, a new Irish agency will be provided with funds to buy up the banks’ property and land-based bad debt. The catch here is that no-one knows what its real value is, nor what the price should be.

Elsewhere in Europe, rather than taking the route of printing money to add to the trillions already given or promised to the banks, Germany and France have been giving away vouchers in a new-for-old car scrapping scheme.

Demand for Germany’s €2,500 vouchers has been hugely successful. Far more people have applied than expected, and concern is rising about the public anger that will erupt when the money runs out. Angela Merkel’s surprised government has added a further €3.5bn taking the total available to €5bn.

Sales of brand new small cars have soared, but there’s a catch here too – it doesn’t seem to have increased consumption overall. The second hand market has collapsed completely and what spending there is, is transferring from other products like TVs and sofas.

As the crisis enters historically uncharted territory, governments are exhausting all the weapons they can use in their attempts to rescue the capitalist way of life. The Irish pioneers have opened the doors to a new phase.

Joseph Schumpeter, an economist high priest of capitalist business cycles, and an opponent of Keynes, described the process in his famous book, Capitalism, Socialism and Democracy, when he wrote: “This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.”

Gerry Gold
Economics editor
A World to Win

Friday, 3 April 2009

G20: The IMF consolation prize isn't enough

Graham Turner (Graham will be speaking at the LEAP Conference 'Capitalism Isn't Working' on 25th April)

In the end, Brown and Obama could not get the Europeans to agree on yet another fiscal boost at the G20 meeting. But the consolation prize – an infusion of $500bn into IMF coffers – gave the Anglo Saxon leaders something to trumpet.

Their brand of casino capitalism may have spawned multiple credit bubbles across a wide swathe of emerging market economies. But as eastern Europe and many other countries slide towards depression, their governments can rest assured. The global cop of last resort, the IMF, will come to the rescue.

Many will shudder at the thought. When the SE Asian bubble burst in 1997, IMF staffers were sent to Bangkok, Seoul, Kuala Lumpur and Jakarta to impose tough conditions for loans that still failed to prevent exchange rates from collapsing.

In return for emergency loans, they demanded a draconian and anti-Keynesian tightening of fiscal policy that drove the Asian economies deeper into recession.

We wait to see if similar terms and conditions will be applied today. Judging from the myriad bailouts launched by the IMF since last year, nothing has changed since 1997. It is still one rule for the west, another for the rest.

Indeed, it was the IMF intervention in 1997 that persuaded central banks across developing countries never to be left so dependent upon the west again. They vowed to drive their foreign exchange reserves higher, to provide a cushion against financial crises. But that merely aggravated trade imbalances and provided the fuel for the global credit bubble of 2004-2008.

When it all came crashing down, record reserves were still unable to cushion these countries from the incompetence of western governments.

And trebling the IMF's kitty will not resolve the core immediate problem facing the world economy – a collapsing US housing market. Ironically, the Bank of England's rapid fire rate cuts are gaining traction, with some signs of a stabiliation in the UK housing market.

Obama can only dream. The US took the world into recession, and it may take many countries into depression yet. The collapse of the US housing market is accelerating because, for ideological reasons, the Obama administration will not nationalise its banks and intervene to stabilise its housing market. Obama's plans are little different from those seen in the final months of the Bush administration.

February saw a record decline in house prices across 20 major US cities, because banks are unable and unwilling to pass on rate cuts to homeowners. Average property values are now 30% below their peak, but they could easily fall that far again.

Unemployment in the US is soaring. March could be the worst month yet for job losses, as the wider "U6" unemployment rate, including discouraged and involuntary part-time workers, soars to 20% and beyond.

One in eight homeowners with a mortgage will have been in arrears or in default by the end of March. That could climb to one in seven or one in six over the summer. Obama is not facing up to the scale of economic and social catastrophe facing his country.

And not even a bigger IMF will be able to fix that.

Wednesday, 1 April 2009

G20: My message to the alternative summit

John McDonnell MP

Bankers banking their bonuses, MPs fiddling their expenses, ex-ministers lining their pockets with consultancies, and the prime minister in denial about his role in creating this cesspit of greed and corruption. For most of us, what else is there to do but get out on the streets to protest and resist?

Political representation isn't working.

Democracy within the political party that was founded to transform our society has been largely closed down. Political representation within it for an alternative vision of the world has increasingly been squeezed out by internal constitutional manoeuvres and manipulated selection processes, which have now even moved on to parachuting the progeny of the New Labour hierarchy into safe seats.

Within parliament, patronage has reduced the commons chamber to a rubberstamping ritual of obsequiousness, where virtually a two-day week has evolved and where vast swathes of new laws are forced through on a guillotine without even a debate.

No10 and the government departments are populated with advisers either coming from, or going to, lucrative posts in big business. The decision over Heathrow expansion exemplifies the style of policy-making that starts with capitulation to a powerful self-interested lobby, blatantly fixes a public consultation and then drives through a policy that destroys any vestiges of green credentials the government had left.

Hardly surprising, then, that people are taking to the streets and direct action. Climate campers camping, sacked workers occupying, Heathrow villagers at vigils and peace promoters marching.

Do the so-called world leaders sitting at the summit table realise the depth of anger that is brewing up in communities across the world? Maybe, but it seems not yet as they limit their horizon to minimal reform to salvage a system that has brutalised our society and plundered our planet for profit.

Between most of them they have turned the world economy into a casino, while, for most of us, to quote Morales, "We're not willing to play anymore." The solutions required to this latest crisis of capitalism have gone beyond fiscal stimuli, bank bailouts and quantitative easing. Stabilising a system so that the next generation experiences another similar crisis in 20 years, as time continues to run out for the planet, is increasingly exposed as pointless.

Spinning a summit communiqué to create an image of co-ordinated decision-making for the home country electorate just won't wash as firms close, unemployment mounts and poverty grows across the globe. The principles underlying the signs of real change that are needed to come from this summit are hardly new:

• Democratic rights at the core of every institution and every decision
• Labour rights firmly established and enforced by organisation and mobilisation
• Equality established practically by the redistribution of wealth and power founded upon common ownership, global tax justice and fair trade
• Survival ensured by a real sense of urgency in tackling climate change by concerted and decisive global action
• Peace secured by commitment to conflict prevention and resolution underpinned by disarmament and the end of the arms trade

If the summit could only make a start in setting this agenda there might be some hope. If it doesn't, the need for mass protest and direct action will prove to be not just justified but necessary.

This article originally appeared on Comment is Free

Getting it right about Marx

Mounting street-level opposition to the capitalist G20 governments London gathering prompted the Evening Standard to observe this week that the impact of the combined financial and economic crises is making Karl Marx’s analysis of capitalist society attractive to a rapidly increasing number of people looking for explanations and solutions.

With a pretence of balance the ES wheeled out two writers to present the case for and against Marx. Francis Wheen, author of Marx's Das Kapital, which tells the story of the 20-year struggle to complete his seminal analysis of capitalism, is in the red corner. Wheen, to his credit, draws attention to Marx’s profound analysis of the underlying capitalist profit-seeking alternating but worsening cycle of growth, overproduction, bust, and destruction and its mutually-dependent relation with credit and debt.

But to use Wheen as Marx’s defender is a deliberate trap for the unwary. As we have shown elsewhere, Wheen’s real mission is to undermine Marx by reducing him from a revolutionary to an acute observer, saying: “Marx's vivid portrayal of the forces that govern our lives will never lose its resonance, or its power to bring the world into focus.” Calling on financier George Soros, for help, Wheen shows that Marx was right about the inherent instability of the system but can’t resist adding: “The fall of the bourgeoisie and the victory of the proletariat have not come to pass.”

In the blue corner, defending capital, is Emma Duncan deputy editor of The Economist claiming that “the central idea in Marxism – that the interests of the workers and owners were separate and opposed – is no longer true”. Her facile argument is that anyone who has a pension or life insurance “owns part of the means of production because the pension funds and life insurance companies are the biggest owners of shares in companies in the world”. Astoundingly she concludes that as a result, the class war “which Marx thought would bring the system down is over”.

Despite Duncan, the two social, class forces set in opposition to each other by capitalist society continue to express themselves. Peter Brabeck, the head of Nestlé, the world’s largest food company, and vice-chairman of Credit Suisse, said yesterday that the company is confident that it can weather the general decline in global consumption. In the developed, rich, overstuffed countries with a mounting proportion of obese adults and children, quantitative limits of “caloric input” have been reached and are giving way to quality. But it’s OK for Nestlé. They are so big that they cover every aspect of the business, and will make their profits from whatever food people buy. And, even better, based on current projections, world population is predicted to rise from 6.5 billion to 9 billion – more mouths to fill with profitable (if sometimes dangerous) food products! Nestle owns the Chinese company that was lacing children’s milk with poison last year.

The global trade union body ITUC published its own broad-based assessment of the food crisis on the same day. It shows how investors fled from the credit crisis last year, transferring their funds to speculate on commodity futures. This has resulted in higher prices, putting even subsistence foods beyond the reach of many. As a result 150 million more people have been driven to and beyond the brink of starvation. Global estimates put the number facing acute hunger at over 1 billion.

So much for the alleged identity of interests of workers and capitalists that Duncan muses about. As to Wheen’s passive, one-sided, non-revolutionary view of Marx, we should simply repeat what Marx himself wrote in his Theses On Feuerbach in 1845: “Philosophers have hitherto only interpreted the world in various ways; the point is to change it.”

Gerry Gold
Economics editor
1 April 2009