Capitalism depends on us. But the reverse is not true. Indeed, unless we strike out on our own we will never have what we want…
Ever since Thatcher, governments here have thought they had “picked a winner”, the City of London as a whole. How does the City operate? Low interest rates enable City traders to borrow cheap, lend dear and hedge the risk, encouraging easy loans and reckless lending, creating housing and credit bubbles.
It’s money for old rope. Leverage and the bull market, not fund management genius, brought the hedge funds’ success. Their customers paid very high fees for very low performance. The hedge funds’ big con was packaging default risk so they could sell it – they said – without risk: the market would magic the risk away! Then they put these dodgy deals into shell companies, mostly based in the Cayman Islands, to shift the deals off the books. (Try telling the taxman that your income is “off the books”!)
But cuts in interest rates do not make economies grow. Businesses borrow when they can make money, not because interest rates are low. All the City’s gambling does not create wealth: only labour creates wealth – finance capital just seizes its profits from the great streams of wealth, our wealth, our savings and pensions, flowing through the financial markets.
They need us
The City depends on us, not vice versa. As Karl Marx wrote in Das Kapital, “Gain and loss through fluctuations in the prices of these titles of ownership [stocks and shares]…become, by their very nature, more and more a matter of gamble, which appears to take the place of labour as the original method of acquiring capital wealth.”
Free movement of capital aids corruption, just as free movement of labour aids people trafficking. The profits from moving illegal gains from graft and corruption, and from tax avoidance, are major revenue sources for banks. Capital only operates freely in Britain and, it seems, Haiti. Note, if trade liberalisation and spending cuts brought wealth, Haiti would be the richest country in the world.
The state imports low-paid immigrant labour to keep wages low and to rob other countries of their skilled labour. Around 80 per cent of new jobs in the private sector have gone to migrants from Eastern Europe “keeping wages down”, as the Adam Smith Institute noted approvingly.
What’s the government doing? Gordon Brown buried the Cruickshank report urging curbs on profiteering. He sank a plan to encourage new investment in industry. He saved the tax havens like the Cayman Islands and the “off the books” banks. He refuses to stop banks gambling our money away in the stock market. He opposes even the tiniest tax on the $1000 trillion annual trade in currencies. He bought the banks’ debts as dearly as possible, so as not to hurt them, whatever the cost to us, running up huge debts and printing money, to save the banks. He put private debt into public hands.
We are not a property-owning democracy but a debt-owning plutocracy. Bankers run Britain. The bail-outs are part of capital’s war on the working class.
What are the prospects? What do the bankers say? After Wall Street collapsed in 1929, Harvard University’s Economics Society said, “A serious depression like that of 1920-21 is outside the range of probability.” The Society kept on predicting recovery, until it sadly went bankrupt two years later.
Boom and bust
In 2005 a book was published with the title, Why the real estate boom will not bust and how you can profit from it. The International Monetary Fund said in 2006, “The dispersion of credit risk by banks to a broader and more diverse set of investors … has helped to make the banking and overall financial system more resilient” ensuring “fewer bank failures”.
Gordon Brown told us in June 2007 that deregulating Britain’s banks would bring “the beginning of a new golden age”, that growth was “expected to be stronger this year than last and stronger next year than this. We will succeed if like London we think globally … advance with light-touch regulation, a competitive tax environment and flexibility”. The government forecast last year that the economy would start to recover this summer.
Now the National Institute of Economic and Social Research tells us that the recession is over, so there’s no problem, job done, we can end the discussion now. Although, it also tells us that unemployment will carry on rising well into next year and that “there may well be a period of stagnation now, with output rising in some months and falling in others; the end of the recession should not be confused with a return to normal conditions.” In the real world, investment between April and June was down by 18.4 per cent on last year, the biggest fall for 40 years. The OECD forecast a 4.7 per cent fall in Britain’s GDP this year, far worse than in any other advanced country.
What do we need to do?
John Maynard Keynes wrote in 1933, “Advisable domestic policies might often be easier to compass, if, for example, the phenomenon known as ‘the flight of capital’ could be ruled out. … I sympathise, therefore, with those who would minimise rather than maximise economic entanglement between nations. Ideas, knowledge, art, hospitality and travel – these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible; above all let finance be primarily national. … the retention of the structure of private enterprise is incompatible with that degree of material well-being to which our technical advancement entitles us … economic internationalism embracing the free movement of capital and of loanable funds as well as of traded goods may condemn this country for a generation to come to a much lower degree of material prosperity than could be attained under a different system.”
Keynes is often described as a liberal, but calling for “a different system” doesn’t sound much like the modern Liberal Party. Keynes said that we needed “a somewhat comprehensive socialisation of investment”. But he breezed over how to do this. How could we socialise investment without taking power from the capitalist class?
Imports
The Observer recently quoted an investment banker, no less, who said, “Many industries are so big and important that long-term, central planning is essential.” The chap who used to be the World Bank’s chief economist, Joseph Stiglitz, agrees: “development … requires long-term thinking and planning.” So we need to think and plan. Stiglitz also says that imports destroy jobs. So we need to control imports.
Stiglitz points out that “migration of unskilled labor leads to lower wages for unskilled workers in the developed world”. So we need to control immigration.
He notes that “the European Central Bank pursues a monetary policy that, while it may do wonders for bond markets by keeping inflation low and bond prices high, has left Europe’s growth and employment in shambles.” So we don’t need the EU’s Central Bank. The Maastricht Treaty, which set up the Bank, prevents EU governments from investing for recovery.
What are we to do? All too often, people agree with Thatcher and say there’s no alternative. But there is and it’s blindingly obvious – an economy based on making here the goods we want, an economy with jobs for all who can work, an economy with decent, well-funded services, an economy that educates and apprentices young people, an economy where resources are invested not gambled away, an economy where labour uses capital and industry uses banks, not vice versa, an economy based on equity and cooperation.
We need to develop all our energy industries. We need coal (we have 200 years’ worth left), oil, gas, wind, solar, tidal e.g. the Severn barrage, nuclear power, and energy conservation measures, new technologies like carbon capture and storage (which power stations in Canada and Germany are using already).
Some people disparage coal, but our civilisation is built on fossil fuels. It has been said, “With coal we have light, strength, power, wealth, and civilisation; without coal we have darkness, weakness, poverty and barbarism.”
The Institution of Chemical Engineers says that we must quickly replace our aging nuclear plants. We should demand that British workers using British technology build the new generation of nuclear power stations, not a French firm using east European labour. British workers should be doing all the work preparing for the Olympics.
Make it in Britain
We should be demanding that all that we need to build our new high-speed rail network be made in Britain, with British-made steel and British-constructed rolling stock. We should be building decent-sized new houses, with good insulation and domestic solar heating. We should involve unemployed young workers in all these projects, alongside skilled workers who can pass on their skills. In Chicago, trade union organisers marched skilled, jobless workers to building sites and demanded jobs. If site managers refused, the workers shut them down. In three years, they won jobs for 455 workers.
We could fund the work by using the state’s controlling interest in RBS, Lloyds and Northern Rock to form a new investment bank. All these proposals could and should become demands of the trade unions in those industries and of the TUC.
To survive, capitalism must have free movement of capital, goods and labour. So for workers to survive, we must plan to stop the export of capital, control imports and control our borders. We need our troops in Dover not in Afghanistan. We need capital and trade controls to rebuild and protect our national industry. For this, we must have national independence and sovereignty. For Britain’s sake, workers need to run Britain.