So-called “globalisation” doesn’t work. Even before this crisis, most of the world’s peoples were worse off than they were in 1989. But some things do work – self-reliance, controls on capital, protection, national liberation, workers’ nationalism and fighting for wages and jobs…
The acid test for any economy. What works? And what doesn’t work?
WORKERS, JUNE 2009 ISSUE
Looking at the shambles that is the world’s economy we need to apply a simple test to all its features which up to now have been taken as inevitable, permanent. What works? What doesn’t work?
So-called “globalisation” doesn’t work. Even before this crisis, most of the world’s peoples were worse off than they were in 1989. The solution of integrating into global capitalism turns out to be the cause of the problem. Half the world’s workers are poor, living on less than $2 a day. Over 190 million people worldwide are registered as unemployed, including 76 million young people.
The finance sector doesn’t work. It doesn’t do what it’s supposed to do: get capital into profitable enterprises. The City of London seizes the wealth we create – our savings, mortgages and pensions – and gambles it away. Successive governments, none more than Brown’s, have embraced this treachery in the City.
Free trade doesn’t work. World Bank economists admit, “During periods of trade liberalization...job destruction rates can be expected to proceed at a much faster pace than job creation. Globalization could therefore be associated with higher unemployment rates.” So Latin America lost more than 10 million jobs during the 1990s.
Capitalist crises have cost developing countries a quarter of their output since 1984. But the banks profit: NatWest boasts, “Currency and interest rate volatility provided significant trading opportunities.”
The International Monetary Fund still forces liberalisation on developing countries. Debt Relief Initiatives force countries into Structural Adjustment Programmes for decades, to get the debt cancellation promised as the swift solution to their urgent problems.
Thatcherism doesn’t work, even when it’s Thatcherism with a smiley face or now with a sour face. The problem is not “government failure” or “failed states” but a failed system, not toxic assets but a toxic system. The capitalist model is shattered. The crash is in every kind of financial asset – there are no firebreaks. Where can any rebound come from? Capitalism has wrecked industry, services, housing and pensions: it has run out of options. Which is not to rule out future flare-ups in the markets.
Two years ago, a Nobel Prize-winning economist said, “the central problem of depression-prevention has been solved.” He should give his prize back. Gordon Brown said there would be no more boom and bust. Inflated reputations, supply-side trickle-down economics, free market policies, are as bankrupt as the banks they serve.
Now Brown wants to restore faith in capitalism, which is Labour’s historic role. He spoke recently to “faith leaders”, fitting, since he leads the faith in the dead god of “free enterprise”. He said, “Most people … don’t understand … how some people have grown fabulously wealthy making failed bets with other people’s money.” But this is what capitalism does.
Labour doesn’t work
Labour doesn’t work – exactly 12 years on and what is it doing? Buy-ing worthless “troubled assets” for £1.3 trillion, sending good money after bad. The great economist Joseph Stiglitz said of President Obama’s similar scheme, “Quite frankly, this amounts to robbery of the American people. I don’t think it’s going to work.” Likewise, when Japan’s credit and property bubbles burst in 1990, its ruling class defended Japan’s finance capitalists – the result? A slump that has not yet ended.
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| The free market economics of the City make bankers rich – but fail the test of the real economy |
The crisis proves that we cannot just live with capitalism, letting them get on with it so they will let us live in peace. It doesn’t work like that. The EU doesn’t work: 18.4 million people in the EU are unemployed. The EU admits that its free trade policy causes large-scale redundancies in Europe, a “decline [in] employment terms and conditions” and cuts in wages.
The old empires all banned industry in their colonies. Now the EU, the World Bank, the International Monetary Fund and the World Trade Organisation do the same to us all. They lie – you don’t need industry, open up to imports of goods, capital, and cheap labour, make your labour markets flexible – and you’ll grow. The government says protection is the road to ruin, yet it supports the Common Agricultural Policy. The EU, led by Britain, tries to force poorer countries to open up their economies. The recent EU–India Free Trade Agreement would cut India’s revenues from import taxes by $6 billion and let the EU dump subsidised products into India.
The EU’s Global Europe strategy, pushed by Brown and Mandelson, is all about free trade. The EU itself predicts that its proposed Euro-Mediterranean Free Trade Area will destroy 3.4 million industrial jobs in Egypt, Morocco, Algeria, Tunisia, Syria, Jordan and Lebanon. Egypt alone is expected to lose 1.5 million jobs. Yet the ever-present Vince Cable says protecting jobs is “beggar-my-neighbour” politics. He also says, “Economic storms, like those in nature, come and go. They cannot be abolished.”
Britain’s hard-pressed MEPs are to get a £13,000 pay rise next month – a 32 per cent rise. They will also get a special EU tax rate of 15 per cent, halving their tax. In a recent poll for the BBC, 55 per cent said, “I want Britain to leave the EU.” 84 per cent said the British people must have a referendum before any more powers go to the EU. In the EU elections, the EU’s leaders are desperate for us to vote, so they can claim people support the EU.
Capitalism is proving that capitalism doesn’t work. The normal functioning of our economy leads to crises, unemployment and poverty. Absolute decline is built into the system, not caused by external shocks like wars or price rises.
So what does work?
Self-reliance works. In Britain during World War Two, arable acreage rose from 13 million to 19 million, wheat production rose 81 per cent and calorie output rose 90 per cent. Unproductive land can be made productive. We grow only 60 per cent of our food. We import foods like potatoes and apples. We must become broadly self-sufficient in food.
Industry works. Industry distinguishes rich countries from poor. Independent developing countries increase domestic demand, curb luxury consumption and have special purpose banks, like Housing Banks and Development Banks. We need to put Britain, and Britain’s industry, first, and employ all our people in making what we need.
Controls on capital work. The industrialised countries all used capital controls to protect their infant industries. European countries used them to rebuild after World War II, well before they created the free-market EEC. Japan and the “Asian tigers“ used them.
In the 1990s, Asia suffered because most of its states opened up their financial markets. India and China did not – so they coped far better. Capital controls promote investment and enhance democracy and sovereignty by stopping speculators running everything.
The great economist John Maynard Keynes wrote, “Loose funds may sweep around the world, disorganising all steady business. Nothing is more certain than that movement of capital funds must be regulated.” But if capitalism could do this, it wouldn’t be capitalism. There is no solution within capitalism to capitalism’s absolute decline. In each country, only the working class can build recovery.
Protection works. In the 18th century, the British government gave bounties to firms to increase production. We had the world’s highest tariffs on manufactured imports, and laws enforced the consumption of British-made goods, all to foster our industry. Now our class must impose its own import controls, as the Lindsey workers did to control the import of labour, protecting British jobs and wages.
Sovereignty works. Under colonial rule, most Asian countries’ income fell because they were forced to practise free trade. But after they won independence, they all grew.
National liberation works. The only good regime change comes from within, through class struggle. Occupation by outsiders produces only the sectarian chaos of feuding warlords and clans, as in pre-revolutionary China and now in Palestine, Iraq and Afghanistan.
Workers’ nationalism (see p15) works. Obama accused Hugo Chavez of being “a force that has interrupted progress in the region”. Fidel Castro by contrast said, “Venezuela has the potential to become a model of socialist development with the resources formerly extracted by the multinationals from its rich nature and the efforts of its manual and intellectual workers. No foreign power shall determine its future. The people are the masters of their destiny and they march on to attain the highest levels of education, culture, health and full employment. It is an example to be pursued by other sister nations in this hemisphere and it does not give up: it does not wish to lag behind a plundering empire.”
Fighting for wages and jobs works, as the Lindsey workers proved. To accept wage cuts, or cuts in our hours, does not save jobs; it only helps to save capitalism. We need to plan to live with full employment, with decent wages and services, and that means without capitalism.
Put together all the policies that work and we have socialism. Socialism works. In the 1930s, only the Soviet Union made progress, turning a wreck into a superpower. Any progress after World War Two was due to the challenge from the Soviet Union, not to a “golden age” of benign capitalism. Socialist Cuba flourishes despite the longest, tightest blockade in history. Here in Britain we have all that we need to live decently – all but the right politics.
This article is adapted from a speech given at this year’s CPMBL May Day Rally in London. Further issues of Workers will carry articles based on other speeches at the rallies in London and Edinburgh.