15.10.2008
Responding to the crisis
Mike Macnair examines possible outcomes of the present economic crisis and outlines how the workers' movement needs to respond with a programme of defence. Taking power in Europe must be our strategic goal
Global stock markets bounced back up on October 13 and 14 after last week’s crash. The two-day bounce was, of course, in response to the news that ministers in the euro zone had agreed a coordinated bank rescue package along lines similar to that already adopted in Britain. The euro zone states are to put money into banks to recapitalise them, and to guarantee inter-bank lending. Surprisingly, the announcement of a similar package in the US as part of the $700 billion bail-out fund already agreed led to a fall in US markets, and east Asian and European markets followed suit on Wednesday October 15. The FTSE index closed down 130.91 points - a 3% loss.
The reason for the end of the market bounce is that it is already clear that there will be a recession of some sort in connection with this crisis. The bail-out, or ‘partial nationalisation’, of the banks is a recognition that the underlying problem is not one of liquidity and ‘panic’. It is that there have been real losses, of an unknown extent, arising from bank lending and ‘derivatives’. So the banks’ solvency has been in doubt. These losses do not disappear merely because the state buys up the devalued assets (the original Paulson plan, which the new plan partly replaces) or pumps money into the banks to replace their lost capital. Few people reckon that the property market - the original trigger - has yet bottomed out.
The question is where the money losses will go. If they fall on people in the US, etc in the form of increased taxation, demand will be squeezed, sharpening the recession. If the intervening states merely cover this money by borrowing, they will create new credit money, thus increasing inflation (which is already high relative to the recent past). Holding down wages to prevent a ‘wage-price spiral’ in inflation would go back to squeezing consumer demand and worsening the recession.
In the last three financial crises, the money losses were dumped overseas. To simplify, the US and Britain adopted a soft-money Keynesian demand-stimulus policy, while using US political leverage to hold other governments to a hard-money policy. The result was mild recessions in the US and UK, more severe ones elsewhere and acute crises in some countries (eg, Argentina in 2001). Meanwhile, the existing financial bubble and misallocation of material resources continued. The banking bail-out, including the euro zone initiative, shows that the existing form of this policy has reached its limits.
But it is still possible that the US and its UK offshore centre will find means to pursue the policy in another form, offloading the losses onto the ‘developing countries’ and some ‘developed’ countries further from the US-led imperialist core. State bail-outs depend on the countries concerned borrowing large sums of money. The extent to which they will be able to do so will vary, leading to problems in the currency markets. Thus Iceland has asked for loans from the IMF and Russia, and both the Brazilian real and South Korean won are reportedly under pressure on the currency markets. Eric Toussaint argues in the Mandelite International Viewpoint that even a ‘mild’ recession in the imperialist countries, coupled with the tighter lending conditions which are universally expected to follow the ‘credit crunch’, may trigger a new ‘third world debt crisis’ as in the 1980s and early 90s.[1]
It is most unlikely that state bail-outs will stop with the financial sector: in the US, leading car manufacturers GM and Ford were threatened with bankruptcy last week after the US guaranteed $25 billion of new loans to them. It is politically unlikely that they will be allowed to go bust.
The workers’ movement is being invited to support (or call for) nationalisation. The fact that the free-market right wing is representing nationalisation as a ‘socialist’ threat is part of the sales package: the carrot. The stick is the threat of a rerun of the ‘great depression’ of the 1930s if nationalisation does not succeed: a wipe-out of working class and middle class savings, long-term mass unemployment, welfare cuts and all the rest of it.
The problem is that the crisis is one of global credit money. Nationalisation within the framework of capitalism does not tend to overcome this global crisis. Rather it tends to transform the contradictions in the capitalist system, which have produced the crisis, into contradictions between capitalist states. A very small-scale example is Brown’s use of anti-terrorism legislation to seize the UK assets of Icelandic banks.[2] As I noted in my October 2 article in this paper, the medium-term inner logic of nationalisation is thus towards the formation of trade blocs and alliance systems and towards global war[3].
If nationalisation as a form of bailing out capitalism is not an answer the workers’ movement should support, what is? In my October 2 article, I argued that the only way we could get rid of the cycle of boom and bust was through the working class taking power on a global scale and beginning to socialise the economy. But I concluded that the workers’ movement is now too weak to pose the question of power. Hence, now, “the working class needs to organise itself for defensive struggles under capitalism. That means primarily organising at the base, in trade unions, cooperatives, etc, and an independent workers’ political party which breaks with the dictatorship of the labour bureaucracy, its constitutionalism, class-collaborationism and nationalism: a Communist Party.”
This answer is, of course, anodyne. In this article I hope to make the positive argument a bit more substantial.
Imagine
In Imagine, Alan McCombes and Tommy Sheridan asked us to conjure up in our heads an independent ‘socialist’ Scotland, with an economy broadly Scandinavian in character supporting a more generous welfare state and trade union rights, and a more democratic polity, than in actual Scandinavia. The idea was a manifest utopia. Attempting to implement it would result in reactionary consequences, as in Stalin’s ‘socialism in one country’ or - a nearer analogy - Pilsudski’s ‘Polish socialism’.[4]
This reactionary utopianism is equally true of attempts to create a socialist or an imagined left social democratic order in an isolated Britain. Britain imports vast quantities of food, since its agriculture cannot feed the population. The balance of ‘visible trade’ is in structural deficit, as it has been for decades. The food imports are - at the end of the day - paid for by the ‘invisible earnings’ of the City. This role is reflected in the fact that income tax on City earnings represents a very large chunk of the income side of the budget. City earnings are redistributed to civil servants, NHS workers, local government workers through block grants, and in various forms of subsidy to other capitals.
The reactionary utopianism of both Scots and British ‘national socialisms’ reflects their authors’ claimed realism, just as Stalin’s ‘socialism in one country’ claimed to be more realistic than the alternative - proletarian internationalism. This ‘realism’ is, however, actually acceptance of the existing international state order and attempts to obtain marginal advantages for particular national groups within it.
Instead of imagining a ‘socialist’ nation-state, what we need to imagine is a unified international workers’ movement, based on solidarity in fighting for the common interests of the working class across national boundaries. Such a movement could aspire to take power away from the capitalist class globally and begin the global construction of an alternative to capitalism.
Between continents, we can offer moral solidarity, but only very limited practical aid to one another’s struggles. Within continents, however, common working class political action is possible, and capitalism itself has set up supra-national institutions: the European Union, North American Free Trade Area, Mercosur in part of South America, the ASEAN economic community project in south-east Asia and so on.
Still imagining: a unified workers’ movement across Europe could take Europe away from capitalist rule. This would only be a first step to the global overthrow of capitalism. But it would be an immensely powerful first step, both because of the sheer scale of Europe - with a population of 822 million - and because it contains imperialist and other ‘core capitalist’ countries with highly developed material infrastructure and technical assets, as well as other countries whose economies have historically been subordinated to the capitalist core.
The scale of Europe, and the fact that it includes part of the capitalist core, means that the overthrow of the capitalist class would be less immediately vulnerable to war, blockade and financial ‘sanctions’ from the surviving capitalists than Russia was and third-world countries generally have been, or than any individual ‘advanced capitalist’ country would be (except perhaps the US, which as the biggest global exploiter of all is unlikely to lead the way in overthrowing capitalism). The high degree of capitalist integration through the EU, which effectively imposes its rules even on non-member states, makes it more transparently obvious than it is in other continents that workers need common action on a European scale. The historical strength and traditions of the European workers’ movement (although these have been gradually undermined by bureaucratic and nationalist leaderships over the last century), make workers’ power in Europe a serious project.
If we took power away from the capitalist class Europe-wide, what would that mean?
Under capitalism, social production is coordinated through money and credit. Human access to material goods and services is regulated through wealth in the form of money holdings. The crisis is a symptom of underlying disproportionalities in production, generated by the earlier boom, given the fact that money regulates access to material goods and that the supply of money must be limited. The present crisis takes the particular form that in order to escape earlier crises in the 1980s-90s without a crash of the material economy, too much credit money has been produced. This now falls to be devalorised: ie, if the money mechanism is to continue to function to coordinate social production, a lot of apparent money wealth has to disappear into thin air. People have to be made worse off, whether directly (savings evaporate, pension funds are worth less) or indirectly (reduced demand leads to factory closures and lay-offs; the state borrows a lot more money and hence has to raise taxes and/or cut expenditure to pay its debts, etc).
The communist alternative is to take collective control of production and regulate production decisions and access to material goods by direct democratic decision-making. The implication is unavoidably that people who are presently wealthy in money terms will become less wealthy: no-one gets more than a decent living and the right to participate in social decision-making. The capitalists and managerial and bureaucratic middle class also lose their privileged access to decision-making. This is true whether this privileged access is simply through control of private property, through ‘careers’, and forms of patronage, or through control of money in the form of corrupt donations to political parties, advertising expenditure and corrupt control of the media, or corrupt ‘free market’ payments to lawyers.
Democratic decision-making is fundamental. What we need is a superior alternative to coordinating our affairs through the capitalist market system. As the Soviet Union and its satellites showed, bureaucratic-hierarchical decision-making is not such a superior alternative. Workers’ power as an alternative to capitalism therefore necessarily begins with the struggle for radical democracy against the mechanisms of capitalist political power - the bureaucratic hierarchies of the nation-states and the capitalist corporations which imitate them, and, in the EU, the supranational bureaucratic hierarchy of the commission, court of justice and council of ministers, and the anti-democratic treaties.[5]
It also immediately means taking into public ownership under democratic control not merely shares in the banks, but the whole financial services sector. This relation between the financial sector and the state is one of the fundamental political mechanisms by which the capitalist class has political control of the state.
Without radical democracy, public ownership is merely ownership by the bureaucratic-hierarchical state and the individual officials and managers: either a prop to capitalism or, if it replaces capitalism altogether, a regressive regime like Stalinism, destined to give way to capitalism. With radical democracy, the internal management as well as the ultimate control of publicly owned economic institutions has to be democratic: abolition of commercial ‘confidence’ and secrets, of state secrecy laws, of intellectual property rights, of the right of managers and leading committees to ‘confidentiality’ for the sake of ‘candour’ and so on, and the election and recallability of managers and their subjection to term limits.
Responding to the crisis
If we took power away from the capitalist class Europe-wide, how would we respond to the economic crisis? The first thing to be said is that the decisions about what to do would have to be the decisions of the working class as a whole, not some schema imposed by the enlightened communist cadres against the will of the majority. We cannot predict with certainty what the majority would decide. We can, however, have proposals.
What follows assumes that the working class taking power in Europe does not mean the immediate abolition of money or ‘war communism’, but the creation of a contradictory relationship of collective production and small to medium-scale market production, in which the working class as a class is politically dominant.
In a crisis or recession, material production is shut down, as capitalists and smaller savers ‘dash for cash’, attempting to preserve as much as possible of the disappearing money value of their assets. The starting point of a communist alternative is that - on the contrary - material productive capacity has to be preserved until we collectively decide whether it is needed, or should be scrapped. For example, the majority might well end up deciding that there are too many car factories and some of them should be scrapped or converted to make something more useful.
The implication is that factories, etc which are to be closed because they ‘cannot be run at a profit’ should instead be taken into public ownership or converted into workers’ cooperatives. The former owners should in principle only be compensated to the extent that failure to compensate them will leave pensioners or people with disabilities in hardship. (Non-pensioners who have been living on investment income can get jobs.) That said, the extent of compensation is at the end of the day a tactical question: at one end it may be appropriate to expropriate without any compensation to punish attempts by individual capitalists to coerce the majority; at the other in some cases generosity may be desirable for political reasons.
There is also no reason to retain private ownership in economic sectors which are either already monopolistic (mainly in infrastructure) or highly oligopolistic (the manufacture of cars, consumer durables, etc). The flow of profits to the private owners in these sectors is largely a rent charged on the rest of the economy.
The housing problem and its concomitant, property price bubbles in the US and elsewhere, is at the centre of the present crisis. With the collapse of the bubble come defaults and foreclosures.[6] Public ownership of the financial sector automatically implies public ownership in the large majority of cases of the mortgagee’s interests in mortgaged property. This should be extended to all mortgages. Within this framework, it is possible in an orderly way to cut the capital and interest liabilities incurred at the height of the property bubble down to levels consistent with needs (ie, the replacement and repair costs of buildings, etc).
Engels argued back in 1872-73 that renting was more in the interests of the working class than freehold-mortgage.[7] The enormous expansion of freehold-mortgage since World War II has been the product of deliberate state policy aimed at creating the “property-owning democracy”: its outcome is the property bubble of recent years and the pain of growing numbers of foreclosures affecting US workers (and soon, probably, British workers).
But for the alternative - renting - to be attractive, we need to replace both private landlords and bureaucratic-hierarchical public landlords. As far as the private landlords are concerned, their interest, like that of other monopolists, needs to be replaced by public ownership. In relation to public landlords, what is needed is democratically controlled public ownership housing; and a housing system which also respects the genuine human need for individual and group self-expression in relation to housing: ie, does not rely on bureaucratic micromanagement.
This aim requires - as Marx says of a post-capitalist economy generally - “continuous relative overproduction”.[8] That is, there is a need to plan for a permanent oversupply of a substantial range of housing types (and, consequently, for staffing to maintain vacant housing) in order to achieve flexibility. Hence, while money values in housing are falling, the common interest of the working class requires the opposite judgment: that more resources should be put into housing.
I could go on at length to a range of other issues. Several are discussed under the heading ‘Immediate demands’ in the CPGB’s Draft programme.[9] But I think I have said enough to make the point. With common action of the workers’ movement across Europe, for the working class to take power on a European scale, we could get rid of capitalist rule on this continent, on the road to getting rid of it worldwide. Getting rid of capitalist rule implies replacing it with radical, extreme democracy, through which Europe’s hundreds of millions can take common decisions about our common future. To do so opens the way to fundamentally different approaches to the questions posed by the economic crisis, like - in the examples given - banks, bankrupt companies, and the house price bubble and foreclosures.
I began this discussion of Europe with Alan McCombes, Tommy Sheridan and Imagine. It was appropriate because we are nearer to workers’ power in Europe - which is possible, but needs imagination to think about it - than we are to an ‘independent socialist Scotland’, which is a utopian delusion. I have not presented an elaborated ‘vision’ of a workers’ Europe, like Imagine’s vision of an ‘independent socialist Scotland’. That is partly a matter of space. It is partly the difference between Marxism and utopian socialism: Marxism is about the working class as a whole taking the fundamental decisions, and that means - as I have said above - that the detailed shape of the future society is not predictable.
But we do still need to imagine the goal of a workers’ Europe on the road to the global overthrow of capitalism. If it is nearer to us than an ‘independent socialist Scotland’ or a ‘socialist Britain’ (or the Eurosceptic economist-Trotskyists’ ‘British workers’ state’), it is still some way away. The workers’ movement, from the trade union and Labourite tops to the economistic far left, remains dominated by national horizons.
We have to overcome this domination. But in the meantime the present crisis is unlikely to be the occasion of the workers taking power in Europe or elsewhere. The crisis will therefore play out in ways dominated by the choices made by the capitalists and their governments. The immediate tasks of the workers’ movement are therefore to organise itself for defensive struggles against attempts by the capitalists and their governments to make the global working class pay for the losses of the crisis.
This is not a task separate from the goal. By organising itself for defensive struggles, the working class can strengthen its collective power within capitalist society. It can build up an organised movement sufficiently that when - at some point in the future - not merely the capitalist financial system, but also the capitalist state order, falls into crisis, the workers’ movement will be in a position to challenge for power.
Recession externalised?
The nature and scope of the defensive struggles which will be posed depends on the choices made by the capitalists and their states and the resulting shape of the recession.
In the event that the impact of the recession is largely externalised from the US and UK, the changes in the current dynamics of the class struggle and politics in the UK will be quite limited: that is, we can predict continuing public expenditure cuts and struggles over wages and working conditions mainly in the public sector, and a large-scale Tory victory in 2010, which will result in considerably sharper partial struggles, both as the Tories go on the offensive and as the Labour right is weakened by the loss of government office and Labour is forced to swing, at least to some extent, to the left.
The growth of the BNP will be cut off by the revival of working class Toryism. A Labour swing to the left will produce a return of some left groups, which now insist Labour has become a purely bourgeois party, to entryism and tailing the Labour official lefts.
This option will imply further deep crises in several semi-colonial countries and some of the weaker developed capitalist countries. There is a substantial likelihood of further military adventures by US, with the UK tagging along, in spite of the effective failure (to establish a stable pro-US regime) in Iraq and Afghanistan. Rising unemployment in the recession phase will at least partially overcome armed forces recruitment problems (and the Tories are likely to expand the armed forces, so that one aspect of the recession will be working class youth paying in blood spilt in imperialist adventures. For precisely this reason, creating a better anti-war movement than the failed Stop the War Coalition model will be an important task, and not a diversion from ‘real issues’.
The fundamental task remains rebuilding the organised workers’ movement at the rank and file level. The fundamental obstacle to this task remains the political ascendancy of the labour bureaucracy (from the Labour and trade union tops, through the ‘official lefts’, down to and including Socialist Workers Party full-timers). This ascendancy results in forms of organisation which disenfranchise the ranks and the localities and silence internal dispute for the sake of diplomatic unity.
The result is inability to sink effective roots in the local masses, which requires high levels of local and sectional initiative and a lively internal life. In reaction, bureaucratic dominance produces sectionalist responses (SSP, localism and ‘movementism’) and apolitical splits (SSP in 2006, Respect in 2007). Both sectionalism and splits give the impression to broad masses that the left (and hence by extension the workers’ movement) is too divided and incoherent to pose an alternative.
This is a paradoxical result, all too evident in today’s politics. The far left in general is dominated by the idea that it is necessary to go to the masses, in collaboration with bureaucratic lefts, as opposed to what they call the ‘sectarian’ idea of unifying the existing far left on the basis of open politics and democracy. But the idea of going to the masses in collaboration with bureaucratic lefts precisely prevents an effective turn to the masses.
Serious recession or crisis?
The second alternative possibility is that the US-UK and other imperialist centres fail to externalise the recession, leading to a more serious recession than we have seen since the 1970s - early 1980s or to a real and prolonged depression like the consequences of 1873 or 1929, with the present state of underemployment and large numbers on the sick, on training programmes, etc replaced by real mass unemployment, mass-scale foreclosures and so on.
Under these conditions not merely the will of the capitalist state to pay for social security measures, but also its ability to do so, will be seriously affected. The workers’ movement will have to reconstruct the basics of social solidarity - support for the unemployed, pensioners and the sick, education and so on - on the basis of its own resources. If it fails to do so, this role will be played - as it is already beginning to be played - by the churches and other religious organisations.
At the heart and centre of the British workers’ movement are the trade unions. These will have to take on a much more extensive welfare role. It is most unlikely that a role of this sort can be managed through subs paid by deduction from payroll or bank standing order: it needs personal face-to-face relations of solidarity between the employed and the unemployed. The role of the branches will need to increase, and the unions will have to pay serious attention to organising the unemployed.
Trade union sectional negotiating power in relation to wage demands and working conditions will be, for a while, extensively weakened. It will be necessary to work out the limits of retreats, while preserving as far as possible the fighting power of the union. There will be a desperate need for cross-sectoral united action - however illegal and however much it has a ‘protest’ character.
The crisis of capitalist production will mean a need to emphasise building forms of cooperatives - whether created on a small scale by the unemployed, or by workplace occupations, or as a result of development of the existing bureaucratised cooperative movement. Credit unions and local mutual associations are part of the same question.
A recession on this scale will very probably produce some form of mass fascist or far-right movement seeking an escape from crisis through ‘national unity’ and strong leadership. It is doubtful whether the BNP is capable of playing this role, because it is insufficiently English-nostalgic and Christian in its political character. But it might form part of a broader physical-force petty bourgeois nationalist movement. The workers’ movement will need to begin to take organised, united, physical-force self-defence seriously.
Party
The working class needs to rebuild its movement - most fundamentally, at the base, in the localities. This is true whether the coming recession is externalised onto other countries or becomes severe in the UK. A severe recession does not alter the basic tasks, but alters their urgency and relative priorities.
Paradoxical as it may seem, in order to do this, the working class needs not merely to build trade unions, cooperatives and so on, but also to build a political party which aims for working class power, grasps the international unity of the working class and the class struggle and fights for proletarian internationalism, and fights for radical democracy both in the workers’ movement (against the labour bureaucracy and bureaucratic centralism) and in the society (against the capitalists’ bureaucratic-hierarchical state).
The reason is two-sided. First, the trade unions and other forms of workers’ organisation are, precisely, sectional. In order to knit these sectional forms of organisation together so that they can effectively resist capitalist attacks, we need to organise from the starting point of the interests of the working class as a whole. We need to be working with the masses door to door and on the streets, not just in the workplaces, to organise class solidarity. The alternative is that social solidarity will be organised not on a class basis, but on the basis of religion and nationalism, and expressed in the growth of far-right politics.
Secondly and on the other side. The working class has a mass workers’ party. It is called the Labour Party. But this party is, in reality, a party of the labour bureaucracy and the relationship of this bureaucracy to the capitalist state - through the unions’ ties to the state, through Labour MPs and councillors, and so on. This character of the Labour Party is politically expressed in its constitutionalism and nationalism: its subordination of working class solidarity to the interests of the British state.
The political and organisational traditions of Labourism are deeply connected to this bureaucratic-nationalist and class-collaborationist character. They are fully reflected in the ‘official lefts’ both in the Labour Party and in the trade unions, and in their pale political shadow, the Morning Star and its Communist Party of Britain.
As I have already argued, bureaucratic control produces an inability to organise the broad masses of the working class for self-defence. It does so because it sterilises the local and sectoral life of the bureaucratically controlled organisation. It does so because - conversely - purely local and sectoral organisations are necessarily and visibly too weak to offer a serious alternative to national-scale bourgeois politics. It does so because in organisations which are not state-backed it tends to produce unmotivated splits and disintegration. (The Labour Party itself is backed by the capitalist state; the old ‘official communist’ parties were backed by Moscow.)
Neither setting up a new, ‘more left’ version of Labourism nor attempting to recreate the old Labour Party from within is a road to rebuilding the mass workers’ movement to face up to the capitalist crisis. Both are, in fact, obstacles to rebuilding the mass movement: because they buy the bureaucratic package, they will sterilise local initiative and produce pointless splits. We need to rebuild the class movement at the base; but as part of doing so, we need to break with the political and organisational conceptions of Labourism, and build a different sort of party: a Communist Party.
Notes
1. ‘Is another debt crisis in the offing’ International Viewpoint October.
2. Criticised in The Financial Times October 10.
3. ‘From boom to war’ Weekly Worker October 2.
4. More in Jack Conrad’s articles in the Weekly Worker.
5. This is very much an outline. More in Jack Conrad’s Remaking Europe (2004) http://stores.lulu.com/cpgb
6. ‘Foreclosure’ is a term of art of Anglo-American law, technically obsolete outside some US jurisdictions, but convenient traditional shorthand for the process by which the defaulting borrower is evicted in the interest of the lender.
7. On the housing question: www.marxists.org/archive/marx/works/1872/housing-question/index.htm
8. K Marx Capital Vol 2, p469; Theories of surplus value Vol 1, pp359-360.
9. http://www.cpgb.org.uk/article.php?article_id=1002562