Two Eds aren't better than none

It's been a demoralising spectacle watching senior Labour politicians attempt to announce their 'fiscal credibility'.

Far from being on the side of the economics gurus, the two Eds have lined up with George Osborne as austerity enthusiasts - to be condemned by Nobel Prize winning economist Joseph Stiglitz.

The last time we had a consensus such as this was the 1930s, and Unite general secretary Len McCluskey was right to invoke the spectre of Philip Snowden in his Guardian article today excoriating the two Eds.

McCluskey's riposte was in response to Ed Balls' Fabian speech on Saturday, and various media interviews, during which he said: "There is no way we should be arguing for higher pay", and supported the pay freeze followed by pay restraint policy of the Tory-led coalition.

Indeed with failing consumer demand and rising living costs, why would higher pay be important? Best to just drive wages down to ensure what? More loan and mortgage defaults, less consumer demand and VAT revenues, lower income tax revenues, more stress, anxiety and suicides (that inevitably accompany money worries).

Ed Miliband went on the offensive via Twitter today (as Len McCluskey started trending). Ed tweeted:

"Len McCluskey is entitled to his views but he's wrong. Im changing Labour so we can deliver fairness w less money.That means tough decisions"

Less money? Really? Rolls Royce and Bentley sales are up over 30% in the last year, while executive pay shot up by 49%. The tax gap is £120bn, the money's there - you just need to get it.

Tough decisions? Really? Why not take a 'tough decision' to scrap Trident, cancel Osborne's proposed reductions in Corporation Tax or raise the 50% tax rate to 60%?

So the two Eds weren't being credible, just capitulating to the Tories failed economics of austerity. They weren't making 'tough decisions' either, just ones already written for them by the leader writers of the Times and the Telegraph.

Fence-sitting Labour needs a push to the left

Last week, on 22 June, MPs debated the economy. It was an 'opposition day' in the House of Commons, which means the opposition party tables a motion for debate on a subject of its choosing.

The Labour frontbench chose the economy - neatly on the first anniversary of George Osborne's 'Emergency Budget'. Their motion is set out below:

That this House notes that on 22 June 2010 the Chancellor announced his first Budget with a target to eliminate the structural deficit by 2015-16 through an additional £40 billion of spending cuts and tax rises, including a VAT rise; further notes that over the last six months the economy has not grown, in the last month retail sales fell by 1.4 per cent. and manufacturing output fell by 1.5 per cent. and despite a welcome recent fall in unemployment, the Office for Budget Responsibility predicts that future unemployment will be up to 200,000 higher than expected; believes the Government’s policies to cut the deficit too far and too fast have led to slower growth, higher inflation and higher unemployment, which are creating a vicious circle, since the Government is now set to borrow £46 billion more than previously forecast; calls on the Government to adopt a more balanced deficit plan which, alongside tough decisions on tax and spending cuts, puts jobs first and will be a better way to get the deficit down over the longer term and avoid long-term damage to the economy; and, if the Government will not change course and halve the deficit over four years, demands that it should take a step in the right direction by temporarily cutting VAT to 17.5 per cent. until the economy returns to strong growth and by using funds raised from repeating the 2010 bank bonus tax to build 25,000 affordable homes and create 100,000 jobs for young people.

Very moderate stuff - and still the 'too far and too fast' line. However, it would be foolish not to recognise that this is progress from the "cuts deeper than Thatcher" line of Alistair Darling barely more than a year ago.

The pledge to cut VAT and re-institute the bank bonus tax should be welcomed as the modest, progressive measures that they would be - esepcially since they advocate hypothecating the revenue into affordable house-building (though not council house-building) and job creation to tackle youth unemployment.

However trade unions and Labour Party members still have much further to go to move the party to a more radical position of 'no cuts' - although very welcome that Unite's Executive has passed this very clear policy.

There is the sense of a real battle going on within the Cabinet at the moment. It has also manifested itself over the 30 June strikes with Ed Balls initially breaking cover to say "The trade unions must not walk in to the trap of giving George Osborne the confrontation he wants to divert attention from a failing economy". He neither supported nor condemned the strikes.

On Saturday, Ed Miliband told the Guardian the strikes were a "mistake" and said "I don't think the argument has yet been got across on public sector pensions as to some of the injustices contained on what the government is doing. Personally I don't think actually strike action is going to help win that argument and I think it inconveniences the public" - seemingly not having looked at polls showing 48% of the public supported public sector workers striking to defend their pensions, with only 36% opposed.

But later on Saturday, Peter Hain saluted trade unions "fighting for justice" in the public sector, and followed that up with an appearance on Andrew Marr where he said "One of the things that's led to this situation is the government's reckless and arbitrary attack on public sector pensions without being willing to negotiate. I mean here's Michael Gove coming on your programme and he's urging parents to break strikes. That's not a responsible way of resolving these situations". He also added it was not for Labour to urge union members to go to work saying political leaders should be trying to resolve strikes, not applauding or condemning them.

The question Labour is failing to clearly answer is 'which side are you on?' Labour continues to sit on the fence. It needs members and unions to give it a firm push to the left.

Cracks deepen as 'recovery' proves a myth

New figures from the Office for National Statistics confirm what most people know only too well: living standards are falling sharply as a result of the recession. And the Con-Dem Coalition’s budget measures will ensure that things get a whole lot worse.

Real household disposable income – the total income of Britain's working and unemployed populations after taxes and adjusted for inflation – dropped by 0.8% in 2010, according to the ONS. The slide signals the first drop in real incomes since 1981, also during a recession, and the biggest since 1977, when there was double-digit inflation. The decline is set to worsen sharply to about 2.0% this year as the biggest public spending cuts since the second world war begin in earnest.

Incomes are being held down or falling, whilst prices of basic necessities including food, clothing and transport are soaring. Despite historically low interest rates and falling property prices, housing hasn’t got any cheaper apart from a lucky few with short-lived tracker deals.

Chancellor Osborne has learned something from the family wall coverings firm of Osborne and Little. He’s adept at papering over the cracks, or trying to, using faint praise from the Organisation of Economic Co-operation and Development – the club of rich countries – which said: “While this budget includes hard measures, we are convinced they are unavoidable in the short term to pave the way for a strong recovery".

The trouble is there’s no chance of a strong recovery. Trying to bring one about just makes things worse. Despite adopting a series of unprecedented changes, the list of bankrupt European countries is growing rapidly.

Food price inflation brought on by the tsunami of credit that followed the 2008 financial meltdown triggered a wave of simmering revolutions in the Middle East and North Africa that is spreading throughout the region to Syria and Saudi Arabia sending oil prices to record levels despite slowing demand.

In America, the strengthening of financial services regulation is already making a bad crisis worse. According to Alan Greenspan, former chairman of the US Federal Reserve, the legislation “fails to capture the degree of global interconnectedness of recent decades which has not been substantially altered by the crisis of 2008”. Greenspan should know about these things as he presided over the growth of the credit bubble in the first place.

Greenspan, an arch-defender of unbridled capitalism says the modern economy is far too complex for regulators to understand, and to meddle is dangerous. He’s a much more old-fashioned kind of 'hands-off' guy, seeing crises as unfortunate exceptions to the normal functioning of the system.

He says: “Today’s competitive markets, whether we seek to recognise it or not, are driven by an international version of Adam Smith’s ‘invisible hand’ that is unredeemably opaque. With notably rare exceptions (2008, for example), the global ‘invisible hand’ has created relatively stable exchange rates, interest rates, prices, and wage rates.”

There is a truth in what he says, of course, in that market forces are pretty much uncontrollable. But in arguing against regulation, Greenspan is forced to open the can of worms that bedevils every one of the capitalist camps – the post-war relationship between growth and ever-expanding credit:

“The vexing question confronting regulators is whether this rising share of finance has been a necessary condition of growth in the past half century, or coincidence. In moving forward with regulatory repair, we may have to address the as yet unproved tie between the degree of financial complexity and higher standards of living.”

Like Osborne’s wallpaper, this thinly-veiled threat fails to mask the reality. Regulation or not, the majority of us will either have to live with the devastating and worsening consequences of the great crash that inevitably brought 50 years of credit fuelled growth to an end, or organise ourselves to replace the capitalist system with a sustainable, not-for-profit alternative.

Gerry Gold
Economics editor

www.aworldtowin.net

March for a real alternative

Figures published on the eve of the Budget shed more light on an unrelenting global crisis that pays little or no attention to chancellor Osborne, or to his shadow-boxing 'critics' at the Trades Union Congress.

Ever since the TUC announced its March for the Alternative way back in October, it has been promoting the slogan – “Jobs, Growth, Justice”. In practice, it's no alternative at all.

To back up its central plea for growth, the TUC has been arguing that spending cuts announced last October and being implemented around the country by Labour and Tory councils alike, are just not necessary. They are simply part of a conspiracy by the government to favour the bankers who are really the culprits and should be made to pay the cost of the yawning deficit.

This simplistic, muddle-headed 'analysis' has, unfortunately, been picked up and broadcast onwards by people engaged in the most radical of actions. As one student in a college occupation said: “There are real alternatives to the problems facing higher education funding ... what we are seeing are ideological political choices, not necessities… It is the public sector, including students and lecturers, who are being made to pay, not the overzealous banking system who caused many problems that the country is now dealing with.”

At the heart of it all is a global crisis of capitalism, however, not just a bunch of crazed bankers who got out of hand. This can’t be sorted by pumping more money into the economy and can make even matters worse, as figures from the Office for National Statistics show. The injection of massive doses of credit to shock the stopped heart of global capital back to life after 2008 has at best put the economy back on the accelerating inflationary path it has been following for more than 10 years, whilst gross domestic product – the key measure of growth – has failed to recover.

The Consumer Prices Index annual rate of inflation has risen to 4.4%, while a more realistic index shows a rate of price increases of 5.5%. All the essentials are soaring: clothing, footwear, food and fuel. Diesel prices have passed 140 pence per litre at the pump in some areas. Clearly much worse is to come as events in the Middle East unfold.

The combined effect of the crisis and actions by governments has been to reduce the incomes of households in the UK. The real income of those in the middle of the income distribution will be 1.6% lower in 2011 than it was in 2008, wiping out all the gains made in the previous 50 years. Pensioner households saw their average income fall even further, by 2.4%. As Stephanie Flanders, the BBC’s economics editor has it, for most people “the recovery has been more painful so far than the recession”.

All the analysts agree on one thing: Osborne has little room for manoeuvre. So we’re likely to see plans to revive the Wild West-style low tax, low regulation, low-wage economy of enterprise zone of the 1980s. It's desperate stuff from a cornered government that, however, knows it faces little official opposition in Parliament or from the TUC.

This isn’t a peculiarly British phenomenon that can be fixed with more credit, or even by changing the government. The TUC’s policies of more taxes and higher public spending wilfully fail to address the real issue: the meltdown at the core of the economic system of production for profit, aka capitalism, for which there are no quick fixes. Avoiding the challenge of an alternative not-for-profit model of ecologically-sustainable production for need, simply strengthens the hand of Osborne and company.

See you in Hyde Park?

Gerry Gold
Economics editor
www.aworldtowin.net

Miliband also in denial

If Colonel Gaddafi is said to be “delusional”, believing that all Libyans love him when clearly they do not, where does that leave Ed Miliband? At best he is in denial about 13 years of New Labour. At worst he takes no responsibility for his actions and ought to seek help.

In a somewhat astonishing – for the wrong reasons – speech yesterday, he reeled off statistics that confirmed the growth of inequality in the period 1997 to 2010. Can any of us forget that this was the period of massive Labour majorities under Blair and Brown, and when Miliband was in the cabinet?

Yet, ultimately, Miliband, apparently Labour’s present leader, could only tell his audience: “The task is to create a more prosperous capitalism but also one that is fairer than we had before the financial crisis.” Excuse me?

In the period we are talking about, capitalism was indeed “prosperous”. It was just that it was at the expense of working people’s wages and conditions. Bankers and CEOs of transnational corporations did not go hungry or homeless in this period, in which inequality grew apace.

As the power of globalised capital to dictate to governments and trade unions grew, so the share of wealth going to those actually working fell. The wage share of annual national income (GDP) rose to a high of 64.5% in 1975, falling to a record post-war low of 51.7% in 1996. From then it recovered slightly to reach 55.2% in 2001 before slipping back to 53.2 per cent in 2008 – close to where it was more than a decade before. In the United States, by the end of 2006, the share of national income going to wages and salaries in 2006 was at its lowest level on record, with data going back to 1929.

As the 2009 TUC report Unfair to Middling explained:

The declining wage share has been driven by the introduction of flexible labour markets since the 1980s (with the paring back of employment protection rules); economic liberalisation (including privatisation); the increasing constraints on collective bargaining; a reduction in the demand for unskilled labour resulting from technical change; and the global transfer of jobs triggered by globalisation.

This is the new world order that New Labour embraced with enthusiasm. Instead of wages, workers could get easy credit in a modern version of living on tick. The whole growth system of capitalist production and finance became driven by debt until it went down in flames in 2008. Of this, Miliband had nothing to say.

No apology for giving the financial sector carte blanche, for restricting union rights, for allowing inequality to grow. Just platitudes about how “our economy has become progressively less fair and the losers have been those on middle and low incomes.

He warned,however, of an impending cost-of-living crisis as a result of rising food and fuel prices. These will further erode the wage share of GDP, which accelerated in the last two years of the previous government. This is how capitalism “solves” its crisis. It destroys jobs and living standards because that’s all it knows. With the global debt crisis still reverberating, the attack on living standards will intensify because that’s how the system functions.

Miliband did not contemplate how the soaring cost of living in Britain, alongside mass unemployment and short-time working, could easily turn into a movement for social change, much as it did in Tunisia and Egypt. Just as well, because Labour is a party of big business, making the cuts at town hall level, and will be just as
much in the firing line as the ConDem coalition when the working people of Britain decide that enough is enough.

Paul Feldman
Communications editor
www.aworldtowin.net

Council cuts - Osborne's axe wins Round 1

Osborne's decision to pass onto local councils a large proportion of the unnecessary £80 billion-plus cuts he announced in the CSR is a mark of tactical genius, amid economic incompetence.

It means councillors who stood on manifestos on the same day he was elected, obliged to tear up their commitments to their local communities. It means putting councillors in the invidious role of deciding how to implement huge cuts and then defending their decisions (which will often contradict their manifesto commitments) to their supporters.


And it is predominantly the poorest councils (which are more likely to be Labour) that are suffering the greatest cuts. Of the 33 London boroughs, the 8 suffering the greatest cuts are all Labour-controlled boroughs. Of the ten boroughs with the lightest cuts, 8 of them are Tory-controlled.

Despite the protests and lobbies of many anti-cuts campaigners to resist and defy the cuts, all councils implemented cuts. Many Labour councils take a 'dented shield' approach, preserving 'vital services' as best they can.

The Guardian reported in mid-February that 'Labour councils shed 50% more jobs than Tory areas' which shows both the severity of the cuts inflicted on Labour councils, but also the failure of the 'dented shield'.

A recent survey of local government Finance Directors found 81% looking at cutting public library provision, 76% cutting 'back office' roles like finance, IT and HR, 73% looking at leisure provision cuts, 71% considering scaling back capital budgets and the same percentage looking to privatise council property.

None of these measures will increase local demand or revitalise local economies. They will involve cutting jobs and reducing demand. In the areas where stimulating demand would be most effective (i.e. poorest boroughs) the opposite will happen.

Osborne's cuts across the whole of government, and the strong position of the private sector in holding down pay (weak trade union rights and labour laws combined with high unemployment) mean the economy will sink further.

Capital spending was being cut at national level under Darling's prospectus now embellished by Osborne. But locally now too many councils will cut capital spending - reducing opportunities for both public and private sector job creation.

Osborne front-loaded the cuts to councils - with harsher cuts this year than will follow in years two, three or four. Councillors might be breathing a sigh of relief therefore that next year won't be so bad.

However, that assumes economic growth and increased tax revenue in line with Osborne's predictions (not to mention that the cuts are cumulative, further cuts will be from the 2011 baseline, not 2010). If revenues stagnate or even fall, Osborne will be coming back for further cuts.

Teachi-n this Saturday. Birkbeck College London

Capitalism isn't sustainable. Spending cuts, climate change, unemployment and soaring prices. What's the alternative? Teach-in this Saturday, Birkbeck College, London.

Details http://tinyurl.com/6x8fk43

George's simple strategy for class war

Inflation is at nearly 5%, before the impact of the VAT rise. Meanwhile public sector workers suffer a two year pay freeze, potentially a real terms cut in income of around 10%. Private sector workers are averaging 2% pay settlements, and so are suffering a real terms cut too.

Osborne’s Budget and Spending Review slashed £18bn from welfare, while pensions will be reduced by shifting their uprating from RPI to the CPI, so those on welfare and pensioners are also facing cuts in their disposable income in 2011.

He’s announced over £80 billion in public sector cuts, while unemployment continues to rise.

‘Don’t worry’ says George, because the private sector is coming to the rescue – and to encourage them Osborne announced £24 billion in business tax cuts in the Emergency Budget in June 2010.

The Budget announced a 4% cut in corporation tax from 28% to 24%, a higher threshold for employer NI contributions and employer NI exemptions for new businesses, and a cut in the small business rate of tax.

This is the Osborne economic strategy: the public sector is too big, and is ‘crowding out’ the private sector. The Conservative narrative is that over-spending in the public sector caused the crisis and cutting it will allow the private sector to flourish – and the economy to revive.

Like George, this strategy is simple and discredited.

Leaked papers from his own ‘independent’ Office for Budget Responsibility (OBR) in June 2010 showed that if 600,000 public sector jobs were cut the knock-on effects would mean 700,000 private sector jobs would be lost. In the Comprehensive Spending Review, Osborne said that actually only 490,000 public sector jobs would go. However, the Chartered Institute for Personnel and Development looked at his figures and estimates that in fact there will be 725,000 public sector job losses as a result of the £80billion-plus cuts.

It’s not just the OBR that’s sceptical either. David Leigh, IMF economist, said “we should not kid ourselves. In the short term, tax hikes and spending cuts will reduce growth and raise the unemployment rate”, before adding “in today’s environment, fiscal consolidation is likely to have more negative short-term effects than usual”.

The Nobel laureate and former World Bank chief economist, Joseph Stiglitz, said in December that current policies meant “a slower recovery and an even longer delay before unemployment falls to acceptable levels”.

Unemployment rose to 2.5 million in December – it was the first rise in six months, and was swiftly followed by a further rise in January 2011. Long-term unemployment (those unemployed 12 months or more) is now at its highest since February 1997 and youth unemployment, at over 20% of 16-25s, is the highest on record.

Public sector job losses are only just beginning to feed through, yet there is no sign of private sector demand compensating.

The other problem for Osborne’s ‘don’t crowd out the private sector’ slash and burn policies is Ireland. The public sector has been slashed (services, jobs, pay and pensions), corporation tax is lower than almost anywhere else in Europe, and the economy is in a death spiral.

In fact, if you want to see what the future holds for the UK economy under Osborne’s economic theory you don’t need to look at a crystal ball, you need to look to the Emerald Isle.

This is because Osborne’s ‘crowding-out’ theory is just plain wrong. And wrong on two counts: the public sector didn’t cause the crisis; and secondly, and more importantly, cutting the public sector will not solve the economic crisis. If anything, it will worsen it.

I doubt that George fails to grasp this, but despite the negative consequences of his policies, especially for unemployment, corporate Britain is doing very nicely. Corporate profits are recovering nicely, especially in the banking sector where margins have expanded impressively, and the stock market is buoyant.

Due to the shortage, house prices have remained relatively stable (they have fallen around 40% in Dublin and over 50% in some US cities) even if the market is subdued, while executive pay is skyrocketing. Yes, 2011 will be a good year for the people that matter to George.

• This article appears in the February 2011 issue of Labour Briefing under the heading 'By George, we've got it'

Workers must sacrifice so capitalists can profit

The Governor of the Bank of England, Mervyn King has assured us that unemployment will rise and the value of wages will fall as inflation lets rip, leading to the most dramatic assault on living standards since the 1920s.

What’s more, you’ll be pleased to know, it’s absolutely necessary. This is the price we are obliged to pay, says King, to smooth the path to growth and economic recovery.

In actuality, it’s the consequence of failed attempts to stave off the deepening recession and confirms that they don’t have a clue what to do, apart from the usual capitalist remedy of increasing exploitation and the share of national wealth that goes to the ruling classes.

It’s a similar story across the Atlantic as the rate of repossessions accelerates, driving millions of families from their homes and unemployment touches 10%. President Obama used his annual State of the Union address to warn that the US must mobilise to meet the “mortal threat of foreign competition from China and India”.

He is proposing to reduce government spending to the lowest share of the US economy since the 1950s. Despite renewed attempts to rehabilitate the policies of Keynes – who favoured higher spending in a recession – the crash of 2007-8 means that, for capitalism, the era of high levels of government spending is over.

Are these programmes of slashing cuts “ideological”? Yes indeed, they manifest the ideology of those whose job it is to sustain a society devoted to profit at the expense of the majority of people on the planet, and the planet itself.

Throughout the relatively short period in which capitalist production spread across the world, its inner dynamic forced its human agents to find ways to counteract the relentless tendency for the rate of profit to fall.

Investing in technology to increase productivity is one. Forcing wages down another. Together they lead to increases in productive capacity and the volume of goods and services. They call it “growth”.

Pretty soon production expands beyond the available marketplace of consumers. And then credit comes into play, stretching things beyond their “natural” limits – for a while. Then comes the crash. Surplus productive capacity is eliminated, and the process starts up, once again.

This time there’s a difference.

The period of growth called “globalisation” consumed the world’s natural resources at an exponential rate. Corporations spread production throughout the world by recklessly burning fossil fuels, unlocking energy and releasing it into the atmosphere and so intensifying weather patterns.

Early snow in Britain helped to reduce national output by an estimated 0.5% in the last three months of 2010. Floods in Pakistan and Queensland, Australia wiped out crops. Nature mocked capital as the floodwaters wrecked the extraction of coal.

But capital’s human agents are blind to these effects. They are tied into the historic logic of profit from which they cannot escape. Sir Richard Lambert, outgoing chief of the Confederation of British Industry accused the Coalition of having no strategy for growth.

But the Cameron-Clegg branch better reflects the needs of capital at this point in history. They are hell-bent on cutting the deficit, reducing capacity, shrinking incomes, eliminating jobs and services – every action aimed at facilitating the contraction without which “recovery” is impossible.

Rather than allow the destruction of the valuable results of a couple of centuries of human endeavour, it falls to the rest of us to bring the destructive system to an end before it threatens to end the conditions for life on the planet.

In the process of building a global network of people’s assemblies we can establish democratic stewardship of the world’s resources, utilising and advancing the science and technology for sustainable production, and setting ourselves the task of converting it to satisfy the needs of the majority.

Gerry Gold
Economics editor
26 January 2011

A World to Win Blogs Workers must sacrifice so capitalists can profit

Latest growth forecasts show gloomy future for Britain

From the Morning Star

Economic growth forecasts have been revised down to 0.7 per cent in the latest quarter, according to figures released today.

The Office of National Statistics found that growth in the construction, mining and quarrying industries all fell and there was a recorded fall in service industry output.

The drop indicates that 2011 will be another tough year for the public, with the VAT rise to 20 per cent to dampen consumer spending, on top of the effects of government spending cuts.

Left Economic Advisory Panel co-ordinator Andrew Fisher said that prospects for the economy were "grim."

He added that, in the long term, Britain could be in the same situation as Ireland, which recently took out a controversial IMF loan to help keep its struggling economy afloat.

"Continued slow growth - or even a slip back into recession - will encourage the coalition government to make further cuts and could send the UK into a spiral similar to Ireland's.

"It is clear that the labour movement needs to force a major shift in economic policy in 2011 to prevent misery for millions."

More at diggersland blog.

Irish budget won't stop the rot

The Irish Parliament’s vote to implement a further, more savage €6 billion programme of spending cuts and tax increases has done nothing to stop the worsening debt crisis transforming the political landscape throughout Europe and beyond.

Quite the opposite. As Ireland follows Greece, and with Portugal and Spain jostling for position in the queue for aid, the conditions of the Intenational Monetary Fund-sponsored package for the Irish Republic are reverberating throughout the continent. And the pressure is mounting across the Atlantic too.

In the United States, Democrats are in open revolt against President Obama’s deal with the Tea Party-inspired Republicans to continue Bush’s 10-year-old tax breaks for the wealthy, which were widely expected to be allowed to expire at the end of the year.

This proposed new deal is part of the political price for agreement on a further debt-funded stimulus. But the markets are worried, and the cost of US borrowing has started to rise.

Dominique Strauss-Kahn the managing director of the IMF says the “piecemeal” country-by-country approach can’t solve the crisis but Germany’s chancellor Angela Merkel is not alone in blocking proposals for a Europe wide rescue scheme. In the Netherlands, Geert Wilders far-right Freedom party teamed up with the so-called Socialist Party to oppose the deal for Ireland.

For the Irish people, the new budget slashes social welfare benefits, public pensions and capital projects, whilst forcing the 45% of low wage earners to pay income tax for the first time in order to rescue the banks and pay the interest on government bonds.

Michael Noonan, finance spokesman for the centre-right Fine Gael party stated the obvious: "This budget is the budget of a puppet government who are doing what they have been told to do by the IMF, the EU Commission and the European Central Bank."

But what he didn’t say is that the demands of these agencies are themselves orchestrated and conducted by the much more powerful forces at work in the rapidly contracting global capitalist economy.

Even as the captive Irish government was applauding itself, warnings of further mass assaults could be detected in the absurdly optimistic growth forecasts underpinning the new budget.

Finance Minister Brian Lenihan pins Irish hopes on gross domestic product national income (GDP) expanding by 1.7 percent next year, nearly double the European Commission's forecast of 0.9 percent.

The government is forecasting growth of 3.2 percent in 2012, 3.0 percent in 2013 and 2.8 percent in 2014, but Danny McCoy, head of the Irish Business and Employers Confederation said he saw little in the budget to help job creation or restore economic competitiveness.

In reality, governments throughout the world are in a competitive race to destroy living standards, driven by the needs of an economic system of global corporations competing for declining profits as markets shrink and collapse.

The crisis began when credit-funded stimulus reached its limits. Political parties of the left and right are ganging up together to design and implement “austerity” programmes that can only accelerate the process of contraction. Despite the rhetoric of recovery it is what they are required to do.

Campaigns to resist the assault on people’s lives must be brought together with the democratic and legislative means to replace the moribund capitalist system rather than patch it up. People’s Assemblies can begin to construct a richer form of democratic control based on social ownership and not-for-profit production and finance. Check out A World to Win’s proposals for transforming social relations in our new Beyond Resistance booklet.

Gerry Gold
Economics Editor
reposted from www.aworldtowin.net

False Economy

The TUC has launched a new website - False Economy - spelling out "why cuts are the wrong cure".

This video sets out why we shouldn't be suffering for the crisis caused by the finance sector:

Why cuts are the wrong cure from False Economy on Vimeo.

There's also the ability to add details of the cuts in your area and provide testimony of how the cuts affect you.

The ultra-rich could solve this financial crisis

Surely it is far better to inconvenience 1,000 of the country's richest people than destroy millions of lives

The news that 'only' around 330,000 public sector jobs will be lost, is of little comfort to millions of people; especially as another 500,000 are likely disappear from the private sector. The government's austerity plans will hasten home repossessions, shop closures, increase hospital queues and condemn children to crumbling schools. Yet the chancellor has been quiet about the contribution expected from the ultra-rich.

Warren Buffett, the world's third-richest person, estimated to worth around $37bn (£24bn), has urged the US government to tax the rich more saying "people at the high end, people like myself should be paying a lot more in taxes. We have it better than we've ever had it". Yet there is deafening silence from his UK counterparts. The government can solve the financial crisis by inconveniencing the richest 1,000 people in the UK.

According to the Sunday Times Rich List, the collective wealth of the 1,000 richest people in the UK rose to £335.5bn in 2010. 53 of the richest 1,000 are billionaires. In 1997, when Labour came to office, the collective wealth of the richest 1,000 stood at £98.99bn. No other group has received such a massive boost in its wealth. Even if they have all the clothes, mansions, cars, yachts and jets they want, they still cannot spend it all. They came into this world empty-handed and will exit in exactly the same way, but leave behind impoverished citizens and employees when they could easily give 25%, or some £84bn of their wealth away without any noticeable effect on the quality of their life. This redistribution would reduce and probably eliminate the need for deeper cuts.

With a private fortune of £22.45bn, steel tycoon Lakshmi Mittal is thought to be Britain's richest man. He has connections with offshore tax havens, but his wealth has been amassed though cultivation of the UK political machinery. Tony Blair personally intervened to help him expand his empire in Romania and other places. Some years ago, he spent £38m on the wedding of his daughter and also bought her a £70m mansion in Kensington Gardens in London.

Others on the ultra-rich list include Chelsea football club owner and oil industry magnate Roman Abramovich, worth some £7.4bn; Gerald Cavendish Grosvenor, the 6th Duke of Westminster, whose company Grosvenor Estates is one of the largest property developer and landowner in the UK and worth some £6.75bn. Brothers Simon and David Reuben have amassed a fortune estimated to be around £5.5bn, largely through property, private equity and the Wellington Pub Company.

Sir Philip Green, owner of BHS and Top Shop, is estimated to be worth £4.1bn. Sir Philip, an adviser to the government, has registered the shares in his business empire in his Monaco-resident wife's name to avoid UK taxes. Sir Richard Branson has a fondness of tax havens and weighs in at £2.6bn. Sports entrepreneur Bernie Ecclestone, one-time donor to the Labour party, weighs in at £1.4bn.

Politics is about choices. The government can choose to punish millions of people for the recession that they did not cause, or inconvenience a few rich people. These rich people have gained the most in the boom years. The richest 1% of the population owns 21% of marketable wealth and the bottom 50% own just 7% of the wealth; and if the value of the dwellings is taken out then that figure stands at around 1%. The proportion of gross domestic product going to employees in the shape of wages and salaries has declined from 65.1% in 1976 and now stands at around 55% (see Table D). Ordinary people just don't have the capacity to take economic hits.

We have given the ultra-rich UK passports, peerages, knighthoods, public accolades and public services. Yet many respond by avoiding taxes and impoverishing employees. Without social stability and people's purchasing power they cannot keep or multiply their wealth. The prime minister, David Cameron, could ask his billionaire friend Lord Ashcroft to mobilise the billionaires and ask them to give 25% of their wealth to the country. He could be assisted by the "you've never had it so good" Lord Young.

Surely it is far better to inconvenience 1,000 people than destroy millions of lives. If rich turkeys don't voluntarily vote for Christmas they could be helped by a mansion tax, a wealth tax, the end of their offshore tax haven shenanigans, higher rates of income tax and a higher rate of value added tax on luxury goods.

This article first appeared on Comment is Free

See also proposals for a Wealth Tax

The 'nether world' of capitalism

The propaganda that accompanies the cutting, slashing and burning of government spending is all about “securing the fragile recovery”. It is used in every country from Iceland, Greece, Ireland, Spain, to the US and Britain – to justify what in effect adds up to crashing the economy.

But don’t get the idea that anything else can be done within the capitalist framework. After decades of credit-led expansion, the logic of capital now demands its opposite – ruthless contraction. It turns public pronouncements into lies, and politics inside out. Ireland’s government won’t be the last to find itself in trouble.

The economic trajectory of country after country, region after region confirms the slide from recession to depression. The Organisation for Economic Co-operation and Development last week cut its forecast of UK economic growth in 2011 from 2.5% to 1.7%. The Institute of Directors is forecasting UK growth of 1.2% next year. In real terms, these figures represent a decline in activity.

The eurozone, having pumped billions of euros into recovery measures, achieved relatively strong second-quarter growth of 1% to the surprise of the markets. But the “recovery” was short-lived. Despite the export of capital goods from Germany to China, growth slowed to 0.4% in the third quarter. Euro zone unemployment rose to 10.1% in September and it is forecast to go higher next year. In the United States, another round of “quantitative easing” – aka printing money – is under way in an increasingly desperate bid to boost economic activity.

The World Bank predicts that China’s growth will slow in 2011 from attempts to constrain the country’s uncontrollable credit boom. Lending by its vast, unregulated underground financial market is sending the prices of staple foods soaring and triggering social unrest. The average price of 18 staple vegetables is 62% higher than a year ago.

Inflation is eating away at incomes not only in China. Commodity speculators have driven up the price of food worldwide, while transport and energy prices in Britain are set to soar. The inexorable fall in consumer spending power – VAT is going up to 20% in January – can only deepen the contraction.

Desperate times lead to panic measures, as the so-called rescue plan for Ireland’s bankrupt banks shows. Ireland, however, is only an extreme example of the rotten core of the global financial system, which has been on state life support since 2008. All the talk of the dangers of “contagion” and the threat to the euro itself indicates that another crisis-point has been reached.

We are not the first to analyse the destructive side of capitalism. In 1848, Marx and Engels wrote in their Communist Manifesto:

Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells … In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed.

No amount of counter-propaganda against spending cuts can halt the inexorable contraction of the global economy. Avoiding the consequences means that the system must be replaced as a matter of urgency. Today’s general strike in Portugal against budget cuts and student actions in Britain against soaring tuition fees are only flashes of the struggles ahead. Going beyond resistance to putting an end to capitalism is the real challenge.

Gerry Gold
Economics editor
24 November 2010

reposted from www.aworldtowin.net

Most workers take pay cuts

From today's Morning Star, by John Millington

Most workers have taken a pay cut over the past year, with the average deals lagging well behind inflation at 2 per cent, the Labour Research Department revealed today.

One in six pay settlements involved a wage freeze, with many workers not getting a pay rise for the second successive year.

Only a minority of deals kept pace with RPI inflation, which peaked at 5.3 per cent in April, and these mainly involved long-term agreements with a built-in inflation link.

Pay rises in private firms - such as inflation-beating deals at Jaguar Land Rover (5 per cent) and South West Trains (5.2 per cent) - remained exceptions to the rule due to high-density unionisation.

The report also revealed that public-sector workers faced pay freezes and there were plans to "undermine" wage bargaining in sectors including agriculture, schools and health.

The findings come just over a week after a study by Incomes Data Services, which said that over 80 per cent of pay settlements were actually real-terms cuts to workers' wages.

Labour Research Department pay and conditions researcher Lewis Emery said the research showed that disparities in pay could widen between "those able to push for a pay deal at least close to the level of inflation and the rest where job security and minimum standards become the over-riding priorities."

Leap co-ordinator Andrew Fisher said the evidence had to be put into the context of the overall cuts agenda.

"With utility bills, rail fares, food prices and housing rents all set to rise there will be a real squeeze on household income, especially as job losses increase too," he said.

"Wages as a percentage of GDP are already at a post-war low, while corporate profits are at a high.

"There is no economic reason why workers should accept pay freezes."

Communist Party of Britain general secretary Rob Griffiths said workers were being made to pay for the economic crisis and faced a "clear choice" on how to deal with it.

"With big increases to come in VAT, public transport and energy prices workers are faced with a clear choice - either defend their living standards and our public services or to let the corporate fat cats get away with crime of the century," he said.

"Workers, pensioners, the unemployed, students and benefit claimants are being called upon to pay the bill for bailing out the banks, boosting corporate profits and funding massive increases in directors' salaries and bonuses."

Osborne's class war

What Osborne unleashed on 20 October was an all out class war. It was comprehensive, as promised, and a precision assault on the working class. Let’s work through it:

Osborne pronounces his cuts will mean half a million public sector job losses, which the Chartered Institute for Personnel and Development says will be nearer 750,000. But before he does that his government is attempting to tear up the redundancy terms of civil servants, so that they can be sacked on the cheap.

For those that do remain, their pensions will be cut and he will perpetuate the lie about ‘rising’ and ‘unsustainable’ costs, when in fact the costs are falling as the Hutton report showed. Workers will also face a pay freeze for two years – a real terms cut of nearly 10%.

There is no strategy to create jobs, and rising unemployment is implicitly accepted. Since there will be a knock-on effect on the private sector from cutting public sector investment and capital spending, another million people will be out of work, and eligible for various elements of welfare.

Osborne is ahead of the game here, having now announced £18 billion of welfare cuts since June. Those still eligible to claim jobseekers allowance will face delays, a poor service and privatised contractors paid by results, profiting from your misery.

This is because the DWP is being forced to shed 15,000 jobs to help finance the new Work Programme, which will be run entirely by the private and voluntary sectors, which – DWP’s own research suggests – are less effective at supporting people into work than Jobcentre Plus staff

Then of course there’s the problem of getting to a Jobcentre since the network will be “rationalised” (i.e. cut). It will mean a bus or even train ride for many now – and the fares are about to skyrocket, as bus subsidies are cut and rail companies have been allowed to raise fares by 30% over the next four years.

There are further cuts to housing benefit and a huge hike to 80% of market rates for new social tenants (there won’t be many since the budget for new housing has been halved). Yet Osborne of course does nothing about private landlords’ inflated rent demands or investing in council housing. This is a recipe for mass homelessness. There are already 1.8 million families on council waiting lists and 100,000 families living in temporary accommodation.

For those on Incapacity Benefit, Employment and Support Allowance or Disability Living Allowance there are cuts and privatised profit-making and target-driven assessments to shift sick and disabled people onto the lower Jobseeker’s Allowance.
So Osborne is demonising those on benefits, and introducing new workfare policies, when there are already 2.5 million unemployed and less than 500,000 vacancies.

His answer is that the Big Society will step in – the social equivalent of laissez-faire – yet voluntary sector funding is being cut by central and local government and the Charity Commission (which regulates the sector) received a budget cut of 33%.

In case of any media dissent, Osborne has cut the only major not-for-profit broadcaster, the BBC, by 16%, while cutting the regulation of private media through cuts to Ofcom.

If that wasn’t enough, Osborne will also be handing over public assets like the Royal Mail, the Tote, Royal Mint, Ordnance Survey and air traffic control to his mates in the City. All of these bring in revenue to the Exchequer, and that’s why they are attractive to big business.

This government will also soon allow market rates of interest on student debt, making it attractive to the private sector, and the CSR again proposed privatising the student loan debt which will be big money once that debt amasses at £7-12,000 per year.

Osborne also announced he is giving up on child poverty – “the Spending Review has no measurable impact on child poverty over the next two years”, he proudly announced in his speech. There are currently nearly four million children living in poverty, and that will rise as more of their parents lose their jobs and have their benefits cut.

So it’s class war, all-out class war, and so to mitigate against people becoming aware of that Osborne is taking two logical steps – firstly lying about the necessity for cuts, but secondly to divide and rule: between public sector and private sector workers, and between those in work and those out of work.

There is a third step too – the devolution of many cuts to local government to implement, dividing the blame.

We therefore have to challenge each of these strands if we are to mobilise effectively. We must re-but his lies, and explain the alternatives at every opportunity: public ownership, tax justice, a wealth tax, a million climate jobs, etc. We also have to not let ourselves be divided – and say that there should be no cuts – not in welfare, public services, jobs or pensions – and no privatisation and marketisation of our public services.

The question of councils implementing the cuts needs serious discussions. In May 2011, Labour is likely to gain more councils as the backlash bites against the Tories and their Liberal lapdogs. These newly elected councillors will need to consider how they can resist the cuts. It’s a discussion that local LRCs and community anti-cuts campaign are having now.

Osborne has unleashed an all-out class war. If we are to defeat this we need to bring our trade unions and the Labour Party back into struggle – otherwise what do we replace this government with? It is not going to be easy, but there really is no alternative.

*This is the second part of an article that appears in the November 2010 issue of Labour Briefing.

Race to the bottom

Ireland’s already severe economic troubles just got a whole lot worse.

Its plan to reduce its budget deficit to 3% of GDP in four years by cutting spending by €7.5bn has been undermined by lower growth prospects both at home and abroad and higher debt interest costs.

So, in a warning of what is to come elsewhere, Ireland’s Fianna Fail government has DOUBLED its programme of cuts to €15bn.

And this comes only days after the UK's Lib-Tory Coalition announced the latest details of its own savage assault on the public sector intended to hit a strikingly similar target.

You can almost feel the brutal threat contained within the official Irish statement:

'The Government realises that the expenditure adjustments and revenue raising measures that must now be introduced will have an impact on the living standards of citizens. But it is neither credible nor realistic to delay these measures.'

And you can almost see the baseball bats wielded by the bailiffs sent in by the money marketeers who’ve driven up the price of borrowing for Ireland, and a long list of other highly indebted countries.

'Our obligations are clear. We must demonstrate that we are bringing sustainability to our public finances. We must stabilise our debt to GDP ratio over the period of the Plan. And we must set out our strategy for returning our economy to growth.'

Things are getting rapidly worse for the millions of ordinary people already struggling to deal with the costs of debt repayments incurred when governments decided they had no option but to bail out the bankrupt banking sector in 2007 and 2008 and issued monstrous amounts of new credit in the hope that it would stimulate a ‘recovery’.

Despite better than expected growth figures for the UK in the last half year, its economy hasn’t even recovered half of the production it lost during the first part of the dive into its worst post war recession.

Meanwhile, the world economy is heading into a renewal of decline. Look at South Africa for example. Unemployment there is growing relentlessly beyond 25%. If the workers who’ve given up looking for a non-existent job are included the figure is over 36%. Whilst carmaker Ford has used its government bailout to slash production, sell off Volvo and cut its involvement with Mazda and returned to profit, parts of America have an official unemployment rate of 20%. And one person in five out of work is the official rate for the whole of Spain.

With profit-seeking capitalist society no longer able to offer jobs to so many people – and forcing governments to slash support for the unemployed – belief in the system is being undermined. It’s no wonder that the dream weavers are hard at work spreading the myth of a ‘return to growth and prosperity’. As increasing numbers begin to realise that the game is up, the need for a society that is based on need rather than shareholder returns becomes increasingly urgent.

Cameron has just delayed the details of the growth package that was expected to follow the biggest assault on public spending since the post war creation of the welfare state. Could this be an admission that there’s nothing he can do besides opening the way for a few thousand jobs in off-shore wind turbine manufacture?

It’s high time people – workers, students, farmers, pensioners, the unemployed, communities – formed new kinds of democratic forums and began to explore how to use them to take things into their own hands. As illusions that the system can provide for people’s needs are broken up, there is nothing to lose and everything to gain.

Gerry Gold
Economics editor
http://www.aworldtowin.net/
27 October 2010

Time to end the profit system

The Lib-Con Coalition government’s Spending Review is an attempt to rescue an already bankrupt economy. With £81bn cuts in public spending, it is the biggest and most sustained assault on the public sector since the creation of the welfare state sixty years ago.

But the reality is that despite the ruthless measures announced yesterday, the cuts will hardly make a dent on Britain’s budget deficit, which at £162 billion is the largest of the world’s major economies.

The plan is to bring government borrowing down by £149 billion in four years. This is a 19% per cent cut in real terms, as opposed to New Labour’s proposed 12 per cent. But can this gamble succeed? The very measures intended to reduce the deficit will deepen the crisis.

The one million people who will be thrown out of work and those made homeless will need some kind of support. And whilst blighting the lives of countless citizens, especially the most vulnerable, government spending will continue to rise by an additional £38 billion over the coming four years. As Chancellor Osborne announced: “total public expenditure – capital and current – over the coming years will be £702 billion next year, then £713 billion, £724 billion and £740 billion in 2014-15.”

An additional £7 billion cut brings the total cut in the welfare budget to £18 billion so far. The poorest ten per cent of the population stand to lose the most. It is a monstrous bludgeon expected to achieve just a £5 billion reduction in the £43 billion per year interest payments.

The measures include:

a 30% cut in funding for local authorities

a 74% cut in the budget for house-building combined with a trebling of rents for new tenants in social housing

insecure tenancy of council house dwellers

the minimum possible increase for the NHS, that will leave health care struggling to keep up with an aging population and scientific advance
ending the universal right to Child benefits

a 3.4% real cut in education

cancellation of major infrastructure projects, like the renewal energy from the Severn Barrage

a 10% increase in rail fares

a £7 billion cut in the welfare budget

Culture Department to be cut by 42% with almost 30% cut for Arts Council

up to 30% cuts in budgets for government departments

20% cut in funding for the police

rapid acceleration in the process of adding a year to the working life of a man and six to that of a woman before they can claim a state pension

huge and damaging reductions in the settlements for Scotland, Wales and Northern Ireland.

There is certain to be much more pain as the contraction of the global capitalist economy tightens its grip. The attempt to reduce repayments to the money markets will be undermined by tax revenues falling faster as the recession turns to slump. The populist gesture of £2 billion to be raised from a permanent levy on banks will surely be passed on in the form of higher costs of borrowing.

Cuts in administration of around 30% over four years will lead to a loss of an estimated 490,000 public sector jobs, 8% of the total. The effects of the overall programme confirms consultancy PriceWaterhouseCooper’s estimate of a further 500,000 jobs evaporating in the private sector as spending is reduced and contracts are cancelled.

The Coalition has issued a sinister threat with its promise that it will always be better to be in work than on benefits. It means that they’re hard at work on schemes to reduce wages across the board. No doubt employers will be rubbing their hands at the prospect of new sources of cheap labour from the enlarged European Union and beyond.

This is only the beginning. The Spending Review spells out that the capitalist state can no longer afford to fund any of the rights or life-support benefits won by unions in a century of struggle.

The intention to reduce the wide and complex range of benefits needed by millions of people suffering the effects of three decades of profit-chasing globalisation to an all-encompassing single payment, and a time-limit on the Employment and Support Allowance reflects a profound contempt for the individuals whose needs have been assessed by cohorts of public sector workers. Capitalism in crisis wants to reduce millions of people to bottom-line cyphers of cost before trying to eliminate them altogether.

Calls outside Downing Street for “French-style” strikes are a welcome move from the total inaction of the Trade Union Congress. But even industrial action needs a political purpose. The desperate gamblers in No10 and 11 are driven by a real economic crisis of the capitalist system itself.

The solution to the debt mountain comes in the shape of action by People's Assemblies, formed locally throughout the country with a view to defending services, livelihoods, jobs, and homes. Eventually a government formed from a network of people's assemblies will need to take control of the financial sector, cancel the debts and turn it into a not-for-profit service.

The global capitalist classes are watching to see the results of Osborne’s cruel experiment. It’s time to realise that we too must enter new territory.

Gerry Gold
Economics editor, 21 October 2010
reposted from http://www.aworldtowin.net/