Election crisis: markets call the shots

The hung parliament that has resulted from Britain’s inconclusive general election is certain to lead to a prolonged period of political instability slap bang in the middle of the gravest economic and financial crisis since the 1930s.

Now the horse-trading begins – behind the voters’ backs – to put together a government that is unlikely to see the year out. The Tories, New Labour and the Lib Dems don’t have much time, as the markets made clear while the last votes were being counted.

Sterling fell on the foreign exchange markets, while the cost of borrowing to fund the huge budget deficit rose as dealers in British bonds began to take evasive action. Shares on the FTSE 250 – which more closely reflects the British economy – fell by over 270 points. “They have got until the markets open on Monday to sort this out,” one dealer said.

Paralysis at Westminster comes amidst turmoil coursing through global markets in the wake of Greece’s bail-out by the International Monetary Fund and other eurozone countries. Few think the £100 billion rescue package will be sufficient and the resistance by Greek workers has further unnerved the markets.

“The election is shaping up to create the worst possible outcome at the worst possible time,” warned David Morrison, strategist at GFT. “Investors’ nerves are already jangling and this added uncertainty will undermine UK equities further. The sell-off in gilts [bonds] and sterling is a clear indication of how unimpressed the City is by the lack of a clear winner.”

If the City was unimpressed, so too were the electorate. Their refusal to give any party a clear mandate could be seen to express a fear that such an outcome would make massive cuts in services and living standards more certain. While the turnout was up slightly on 2005, in many inner-city areas it was below 60%. More than one in three registered voters did not participate, despite intense pressure to do so.

Clearly the TV debates did nothing to enable voters to distinguish one party from another, apart from the style of the respective leaders. Many undecided voters failed to work out a choice in time while thousands of those who made up their minds late in the day found themselves locked out because polling stations were understaffed.

All the major parties have now pledged to act “in the national interest”, which is tantamount to saying that the markets must be mollified by a cross-party agreement to make the cuts they hinted at but shied away from spelling out in any detail during the election campaign. Ruling in the people’s interest is not an option for any of them.

One thing is clear. New Labour spent 13 years in office promoting a market capitalist economy that ultimately crashed and in doing so created the political space for the hated Tories to make a comeback from the dead. In 1997, New Labour got 43% of the vote and more than 12 million votes. Now they are down to a 29% share and 8 million votes.

A majority New Labour government is now no longer a practical possibility in British politics. Any pact with the Lib Dems would simply confirm a new political alignment that is not so much “progressive” as anti-socialist, anti-trade union and pro-business.

The election result shows that the Parliamentary system is in melt-down, one that reflects the real chaos in global economics and finance. An anti-people regime without any mandate will set about clobbering the electorate very shortly. On that basis, we have an absolute right to oppose and reject whatever government and policies emerges this weekend. More than that, we should set out creating the framework for a real democracy in the shape of a network of People’s Assemblies. The old system is broken and can’t be fixed.

Paul Feldman
Communications editor
7 May 2010
www.aworldtowin.net

There Is An Alternative

To its credit, the conference provided a rare opportunity for a good number of concerned people – mostly politically active already - to raise a broad range of different ideas and proposals in response to the rapidly escalating crisis. Many, but far from all, saw the urgent need to end corporate power and establish 21st century models of social ownership. Some were for a return to Keynesian economics looking for ways to get the economy back in control through improved systems of regulation.

But it seems that ordinary people understand the immediacy of the global economic crisis of capitalism better than many political activists because working people are struggling every day with rising prices for food, shocked every time they fill up with a tank of petrol or heating oil, with mounting debts, lower wages and redundancies. Evidence is mounting of a new imminent implosion in the financial system, beginning with the biggest US mortgage lender Countrywide, that will reverberate throughout the world, whilst in the UK, Bradford & Bingley heads the sick list. Its effects could be many times greater then the 2007 credit crunch which broke the property market leaving millions here and abroad facing repossession. The coincidence of all these facts of daily existence with a mounting political crisis in Britain adds up to an even greater test for political campaigners.

It can seem difficult to identify immediate “practical” solutions to recession plus inflation, especially when the market state and client governments like New Labour have neither the capacity nor the political will to intervene. Any action they take in one area makes things worse elsewhere. Providing tax breaks for North Sea oil producers, for example, can only deepen the ecological crisis. The environmentalist Jonathon Porritt summed it up pretty well in his blog earlier this month. “So, food security is back on the political agenda. Climate change is omni-present. Peak Oil is rising. The credit crunch is the new player on the block. Resource wars are looming. Rainforest destruction just won’t go away. Species loss is as bad as ever, but no one cares – for now. Water shortages are chronic. But much, much more worrying are the linkages between all these notionally ‘separate’ phenomena. The synergies, feedback loops, interdependencies. At long last, people are starting to make the connections – and are even beginning to link all those separate symptoms back to their root cause: today’s literally insane notion of getting richer by trashing the planet and screwing the poor.”

We’re in a period of history in which no amount of tinkering can solve the big questions. So we’re obliged to work on the development of ideas that link to immediate problems but raise the spectre of radical socialist transformation.

For example, on the energy crisis, the case for social ownership of power generating and oil corporations increases daily. This essential resource should not be left in private hands or market forces. In the interim, the state could slash prices and subsidise energy through the scrapping of Trident and foreign wars. To save energy, public transport fares could be reduced drastically and services reorganised so that people could get to and from work without using their cars. Rail and bus networks would then be taken back into public ownership.

Food prices could be frozen and steps taken towards bringing the supermarket chains into co-operative ownership, ending their profiteering at consumers’ expense. People threatened with repossession should be allowed to stay in their homes pending plans to convert everyone’s mortgage debt into something more affordable and less of a long-term burden. Speculating in commodities and currencies should be blocked and a programme of turning private sector finance into mutual, co-operatively owned enterprises launched.

The big question of questions looms: Who on earth is going to implement such a programme? New Labour? You can’t be serious. The Tories or Lib Dems? To ask the question is to answer it. The apparent political impasse only poses in a sharper way the spectre already mentioned, that of a break with the capitalist present and a leap into a socialist future. It’s difficult to conceive of but it’s an eminently practical solution given the prevailing view that There is No Alternative. The real challenge out of the Leap conference is to create the leadership and organization needed to bring such policies to fruition. The urgency of achieving this cannot be overstated.