For whom the bell tolls

The mini-budget fiasco and the humiliation of Liz Truss and Kwasi Kwarteng holds sobering lessons for the national socialist left, argues Paul Demarty

Whatever else the British financial crisis of the last couple of weeks was, it was certainly a wild ride for spectators.

It is not accurate to describe as ‘political theatre’ a series of events that exposed deep problems in British political economy and state capacity, pitted No10 and No11 against the whole civil bureaucracy, and resulted ultimately in a humiliating climbdown for the government. Yet there was a certain suspiciously coherent narrative thread to it all. Somehow it all took place on the 20th anniversary of Black Wednesday, and in the wake of the queen’s death - a perfectly neat moment for a government to announce a bold new era of hyper-Thatcherite prosperity. The gods, however, were irritated by man’s hubris, and the cruel blows of fate were duly dispatched.

Not that the mode of affairs was primarily tragic, however serious the consequences, but rather comic, in the most cringe-inducing way. Observing Liz Truss undertake the same awful interview half a dozen times with different local radio DJs, you almost felt you were watching a deleted scene from The thick of it. Kwasi Kwarteng’s inability to understand how screwed he was passed over into the realm of farce. We are left with the impression that these two have been rather over-promoted - like The Hudsucker proxy but without the happy ending.

Opportunity knocks

Given this fiasco, many on the left spot an opportunity - and why not? A fairly useful ‘explainer’ article in Socialist Worker concludes with this assessment of the situation:

She’s alienating wider sections of the ruling class which destabilises her rule. That gives us - the left - the space to put forward our own alternatives from below.

For example, many people will welcome the fact there is an energy price cap, but think it would be much better to seize the profits of the energy firms and use those to reduce costs. There’s lots of talk about controlling wage rises to tame inflation. But we should reply that the answer is not to control wages, but to control profits and prices.1

A Morning Star editorial of September 29, meanwhile, noted that

For a budget, mini or otherwise, to … paralyse the housing market, bring the pensions industry to the point of collapse and take the pound to a historic low, is a mark not just of the ineptitude of the Tory right, but of the crippling weaknesses of British capitalism.

The solution is “Investment in infrastructure, public services and skills … not tax cuts and the wild political zigzagging which has become a Tory speciality.”2

There are always opportunities, of course, and last week’s events are most illuminating. The problem is that what is exposed is not quite what we all think. It has been an odd experience, I think, for leftwing observers to be of one mind with the International Monetary Fund. Both Socialist Worker and the Star refer in withering terms to the capitalist class’s contempt for this “charge of the lightweight brigade”, as the Star put it, while referring to the need for a working class response, as opposed to mere bourgeois blackmail. While this solves the problem at a basic level, a certain cognitive dissonance remains - as well it should: Truss and Kwarteng’s anti-honeymoon period augurs ill for the left as presently constituted.

To make this clearer, we need to re-narrate the mini-budget saga. Having announced a substantial package of energy bill relief, Truss and Kwarteng took the opportunity to announce a raft of tax cuts for the very richest. The figures routinely quoted by broadly leftwing voices say that the benefits of the package would have accrued to the ‘top 5%’, but it is worth noting that this may understate the case - after all, the 45% tax rate does not even kick in until upwards of the 98th percentile of income in this country.

The amount of money forgone by this tax cut is, on its own terms, trivial. So what spooked the markets? Merely the hint of travel in the ‘wrong’ direction, it seems. Two years of Covid-related emergency budgeting had given way to a further one - this time driven by economic war with Russia. With signs of fiscal retrenchment and inflation running out of control (with no real prospect of getting it under control), pressure on the pound was inevitable, exacerbating the problems, and the Bank of England had to wade in to ensure there was not a generalised financial collapse among pension funds. Thus a fairly trivial tax handout turned into a near miss for a 2008-level financial extinction event - if a local rather than global one this time.

This all seemed to come as an enormous surprise to Truss and Kwarteng. Why? It is not (or not only) that they are morons. They come from a tribe - Tory MPs - who are accustomed to getting away with such things. The bourgeois media will let their ‘fiscal irresponsibility’ slide, while conversely no Labour PM is ever quite ‘responsible’ enough. Large institutional investors typically have substantial holdings of sovereign debt, and stand to lose in the event of a default; this incentivises ‘calming’ behaviour, to a point. Under the usual rules of the game, they should have got away with it. That they did not makes Black Wednesday the clearest historical analogue, when currency speculators succeeded in forcing sterling out of the European exchange rate mechanism.

The wider circumstances are, of course, runaway inflation and worsening energy shortages as a result of war. The bourgeoisie’s only available response to inflation these days seems to be central bank interest rate nudges, and the Bank of England base rate has been creeping upwards. Extreme rate hikes tend to induce recessions, which will tend to ‘solve’ a wage-price spiral by throwing people out of work and thereby depressing wages; we are clearly not in a wage-price spiral, but - again - it is the only tool available, and if all you have is a hammer, everything looks like a nail. As the situation deteriorated last week, the Bank hinted at substantial rate hikes, which caused chaos in the mortgage market and led estate agents to warn of a 10%-20% hit to house prices soon. At this point, the ‘independent’ BoE had ensured that Truss and Kwarteng were aiming a knife at the heart of the core Tory vote - homeowners and petty landlords.

This is a very ‘British’ crisis. It is born of de-industrialisation, financialisation, substantial trade deficits and so on. We are very vulnerable to global market price swings, in energy and much else. No candidate for government can afford to forget these background conditions: as our esteemed incumbents have now discovered, they certainly won’t forget you.

Take our friends at the Morning Star, whose prescription of “investment in infrastructure, public services and skills” we cited earlier. In more dramatic form than a mere Star editorial, such proposals were the bread and butter of the Jeremy Corbyn and John McDonnell regime in the Labour Party. These are all nice things to have; they are also vastly more expensive than a mere income tax cut for high earners. (The total cost of the HS2 rail investment alone - before it was ratfucked by Boris Johnson, at any rate - was projected at nearly £60 billion, dwarfing the £45 billion cost of the mini-budget tax cuts.) Where, sneering newspaper editors ask, is the money going to come from? The 2019 Labour manifesto promised to “slightly” increase income tax for people on more than £80,000, tax capital gains as income, and “the biggest ever crackdown on tax avoidance” - in British history, of course - this is, as William F Buckley once quipped, a bit like being the tallest building in Topeka Kansas, but leave that aside.


Indeed, we leave aside altogether the question of whether this is all ‘fully costed’ - I take it there is an Excel spreadsheet somewhere on Andrew Fisher’s laptop, where all the numbers add up correctly. The problem, rather, is political. This paper has tended to emphasise the constitutional (and indeed extra-constitutional) obstacles to a Corbyn government, both when it was a hypothetical possibility and in hindsight - the ability of the British state to carry out legal or even military coups to ensure nobody as untrustworthy as him would ever sit comfortably in 10 Downing Street. Yet the mini-budget farrago highlights the kinds of economic discipline available to the capitalist class - runs on currencies, raising the price of government debt, and ‘hostile’ interventions by ‘independent’ central banks, to which we might add punitive tariffs and sanctions, flight of capital and other weapons held (so far) in reserve.

Most importantly, it highlights that this economic power is international. A country like Britain, with its trade deficits, modest natural resources and dismal industrial base, is in a poor position to negotiate with the power of global capital. Corbyn and co might have abolished central bank ‘independence’ and other such things, but they could not stop currency speculation or capital flight without strict capital controls, rationing of basic goods - in other words, autarkic ‘barrack socialism’. The conclusion is inescapable: no plan escapes direct contact with the enemy, but Time for real change was so obviously doomed that standing on it was, in a certain sense, ‘irresponsible’.

The point is an old one - socialism in one country is impossible, and likewise weak-tea social democracy in one country is impossible. To this it may be objected: not all countries are Britain, surviving on what big capital leaves, as we help it avoid taxes, and on kitsch tourism. There are countries, indeed, with vast natural resources, with trade surpluses, and so on. Yet the reality is that everyone is in a poor negotiating position with regard to global capital, in some respects including the hegemon (which, in a twist of the master-slave dialectic, must itself submit to the system that accords it the determining role, for fear that someone else should occupy the top spot).

Britain could re-industrialise; but it would be dependent on extractive industries mostly in the global south to feed its factories. Those countries in the global south could try to get further up the value chain; Bolivia, for example, could try to start manufacturing batteries from its lithium mines, rather than shipping raw materials north to Elon Musk; but to do so requires access to a world market in fixed capital and machinery (and other resources), and thus ‘responsible’ behaviour from the point of view of the relevant institutions. The economy just is global. It need not be quite as global as it is, of course - from an environmental point of view if nothing else, physically shorter supply chains are probably a good thing. To suppose that such reconfigurations can be accomplished unilaterally by progressive or even revolutionary governments in single countries is wholly fantastical. It would require planning at the very least on a continental, preferably on a global scale.

Thus the hopelessness not only of recent Labour manifestos, but - in reality - of most of the proposals of those formally to Corbyn’s left. The Star and its Communist Party of Britain supposes that a socialist society can be built on the basis of British national sovereignty and supported Brexit on that basis; but Brexit has left us no more ‘sovereign’ in reality. The SWP supposes that energising the masses into action will itself solve all problems; but no movement of the masses just as such gets us where we need to go, so long as it is confined within the nation-state. You cannot eat mass strikes.

Only conscious, coordinated political action across borders can repel the revenge attacks of global capital.


  1. socialistworker.co.uk/features/whats-driving-the-new-economic-crisis.↩︎

  2. morningstaronline.co.uk/article/e/truss-faces-calls-sack-kwarteng-damage-his-neoliberal-zealotry-spreads.↩︎