Thursday, 23 April 2009

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

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