Britain and the Brown Stuff

by Ian Griffiths, February 2009

In my document 'What is Happening?' I briefly described the course of economic and connected political events in Britain from the 1970s onwards which brought us to the sorry state in which the country now finds itself.

In this late period of capitalism all political expressions must arise from either a desire to maintain the status quo - i.e. reactionary - and thereby uphold and defend the profit system in crisis no matter the human cost, or serve to challenge its existence - i.e. revolutionary.

It was this force majeure that vanquished the notion of European social democracy - i.e. reformism – that now, despite all its guises, exists in name only. This is particularly true of the deceitful masquerade deployed by New Labour politicians.

Social democratic political parties were always a compromise, a halfway house sitting between, on the one side, the legitimate demands of the working classes for an adequate share of the spoils of their labours and, on the other, the self-perceived 'inalienable right' of capitalists to amass profit by any means necessary – a definition of the so-called 'class war'.

In times of prolonged economic boom reforms can be negotiated. Then the ruling class are willing to display a tactical benevolence in the knowledge that ceding some of their abundant wealth will pacify the majority and so better facilitate their continued co-operation in creating profit.

In times of crisis, however, the mask is cast aside. Reformist politicians are challenged by the reality of economic circumstance and either move in one direction or the other, towards reaction or to revolution.

This was the case in 1931 in the bowels of the Great Depression when Ramsay MacDonald's Labour government attempted to manage capitalism on behalf of the capitalists.

Following the collapse of the Austrian bank Credit Anstalt, a loss of confidence in the government's ability by foreign investors and the subsequent withdrawal of foreign bank funds from London the Labour government and party disintegrated.

MacDonald and four other cabinet members merged into a 'National' government with the Tories and Liberals, the Independent Labour Party split moved towards a more extreme left position whilst former Labour minister Oswald Mosley and others marched off to establish the British Union of Fascists a year later.

In the General Election of October 1931 the Labour vote collapsed to thirty percent with the Tories taking fifty percent.

Despite its right-wing leadership this was a Labour Party worthy of its name, its ranks filled out with genuine working class representatives many of whom sincerely desired social change, but most believing that they could gradually transform capitalism by parliamentary decrees. At that time, their contemporary Labour Party member, Prof. R. H. Tawney warned his comrades, "You can peel an onion leaf by leaf but you can't skin a live tiger claw by claw."

The basis for reformism and the fertile soil for social democratic politics did not emerge until the end of the Second World War when the ruling class themselves realised that they would have to initiate reforms to education, health, welfare etc. in order to defuse a potential for revolution. It was based on Liberal William Beveridge's 1942 Report and Tory Rab Butler's 1944 Education Act, both preceding any evidence of a reformist Labour government.

The culmination of the 1930s economic conditions, the war siege experience on the home front and the effect of war slaughter on the fighting forces deeply changed the consciousness of not only the British working class but a large section of the middle and officer class. This was reflected in social composition of the Labour M.P.s in the post 1945 parliament. Only one third of the total 393 members were now trade union sponsored whilst a flood of professionals - lawyers, doctors, journalists, teachers and dons - filled out their ranks and a section of the membership.

The landslide victory for Labour and, more importantly, the post-war boom laid the basis for parliamentary reformism and the part nationalisation of industry within a 'mixed' economy.

Today, the most recent historical events are different but the outcome will be just as dramatic.

The current Labour incumbents made desperate attempts to re-brand themselves as being distinct and far removed from the founding fathers of the party. None of these careerists, however, will be marching towards revolution as most have had two feet firmly planted on the road to reaction for the duration of their political lives.

'New Labour' is a chimera with no resemblance to any vision of Ramsay MacDonald never mind Keir Hardie. Most of these professional ‘worthies’ arose from the university societies and political clubs of the 1970s and 1980s where they had developed an avowed purpose - the eradication of socialism.

Many had wandered into Labour Clubs with joint and primary membership of other political societies. In the eighties they were recruited and marshalled by right wing Labour politicians into groups with ambiguous names such as Clause IV, Solidarity and Democratic Left none of which were either left or democratic. Even so they had to carry on with this nomenclature charade.

Once they had control of the party machinery they still could not eradicate all of the old party title for fear of electoral annihilation before their intended careers had time to flourish.

Many politicians of the modern period reflect the same motivational participation in politics as employed by those individuals who stood for parliament two hundred years ago in days of the Whigs and Tories, the products of the 'rotten boroughs'.

For them, politics wasn't a means to an end, i.e. improving the conditions of society, but an end to a means, i.e. improving the condition of themselves.

In the summer of 1858 the Houses of Parliament were enveloped in the stench arising from the open sewer outside the building, also known as the River Thames. The event was called the Great Stink but it is from the completely different direction that a current odour emanates.

Today's politicians are steeped in an ocean of legalised corruption, able to enrich themselves through a flow of parliamentary expenses and privilege. In both Houses members from all parties flaunt their ability to influence legislation and contracts through their 'consultancy' rather than constituency work. By their conspiracy, therefore, they are loath to raise concerns.

Those who have been former government ministers behave as though they have been 'licensed' to make vast sums on the back of their position, experience and contacts.

By such means, the war criminal and the main facilitator for big business to plunder public funds, the Right Honourable Anthony Blair, is currently harvesting millions of pounds. His political endeavours allowed unbridled access for bankers and businessmen to amass their profits and they are now rewarding him with appointments to lucrative positions and engagements.

Another exemplar is David Blunkett who last year declared earnings additional to his M.P.'s salary in excess of £250,000. Some of it was paid directly to his wallet as a result of journalism and media appearances but the larger balance resulted from other ‘services’ and was paid into a holding company, Hadaw Productions and Investments Ltd., of which he is the Director.

He is not alone in this agriculture nor the highest paid ‘share cropper’ as members from both sides of the house gorge on the fruits of company directorships, consultancy and advisory fees, journalism, celebrity, travel and after dinner speaking.

What the current crisis exposes more than anything else, however, is that they are theoretically inept, their knowledge of social history partial and their understanding of economics totally inadequate. They exist on the backs of an array of unelected policy advisers and research ‘go fors’. Like rabbits frozen in headlights, politicians of all shades - blue, pale blue or pink - are bereft of any policy or action that will positively impact on the economic situation or provide long-term benefit to the lives of ordinary people.

Not only do they face the crisis of all crises with little understanding of its morphology and evolution but also they were instrumental to its inception and intensity. For them its developing impact will have a political dynamic and personal implications beyond their imagination whether it be initially through the ballot box or not.

The sequence of events in 1931, which scuttled the MacDonald government, was not unusual. When a new, critical, economic trigger point escalates into a political crisis there will be a re-alignment of 'bourgeois' democracy in Britain.

Currently, Gordon Brown's government sits precariously in the opinion polls and should a General Election be called in the near future a Conservative victory would seem assured.

This would be a victory like that of 1979 with the electorate voting more against what they don't want rather than voting for what they would like. But nothing in times of crisis is so clear-cut.

When New Labour vied for power in the mid-1990s they were not confident that they could achieve a victory with a working majority. They went to the polls with a coalition 'Project' under discussion and in progress. The New Labour policy architects had a ready construct that embraced most issues - those that would sit cheerfully in the manifesto of any centre right political organisation.

Their preliminary dealings took place with Paddy Ashdown's Liberal Democrats but they also initiated talks with the 'left' of the Conservative Party that was then coalescing around Europhile Ken Clarke. The aspiration was one of a 'Grand Coalition' and, eventually, on the back of its success a new party.

The 1997 landslide victory consigned the 'Project' to the deep freeze and it was the emerging New Labour that, over the subsequent parliament, independently claimed and implemented the intended coalition policies as their own with little dissent from the parties opposite.

Now Ken Clarke is back occupying the opposition's front bench, holding a portfolio opposite to that of the equally resilient and restorable Peter Mandleson. At the same time the Liberal Democrat economics spokesman Vince Cable has said much to ingratiate himself with 'middle England'.

The ruling class recognise the gravitas that - distinct from the motley crew occupying most of the seats in the House of Westminster - this triumvirate would bring to a situation of national 'concern' so that a twenty first century ‘National Government’ fronted by them should not to be ruled out of our perspectives.

Regardless of any immanency of such developments it is clear that Gordon Brown's role as a premier has a limited sell by date.

In the meantime a division has opened up amongst the strategists of capital between those who proffer interventionist 'quantitative easing' - Labour here, the Democrats in America - and those who believe in the freedom of market forces, tax reductions and the targeting funds towards favoured entrepreneurship - most Conservative spokespeople here and most Republicans in America.

We dealt with the particular causes and similarities of the slump in both the USA and Britain in our original document. The further consequences of this development will be dealt with in separate articles on the world economy, however an indication of events here are pertinent.

Since the autumn a clearer picture and several forecasts regarding Britain have emerged which are now edging closer to our position of slump. Brown himself let slip the ‘D’ word (i.e. depression) on the floor of the Commons and his former side-kick in the Treasury - and the husband of his current side-kick in the Treasury - Ed Balls has declared we are in the worst economic conditions that have prevailed for 100 years.

In truth, an absolute disaster is facing the world economy and there is a growing consensus that Britain's share of the pain will be far more acute than that of many other developed nations.

Despite the concentration on falling output as an indicator of a recession the fundamental cause of this problem remains the debt overhang. At each point of the economic debate we must forcefully reiterate this fundamental truth: the expanding output that the world experienced, particularly over the last ten years, has to a large degree been financed by fictitious rather than earned capital.

By the end of 2008 British household debt stood at a record 185% of disposable income. The accumulated personal, private business, corporate and total public (i.e. government) debt has been the driver of most of the former economic activity whether that was consumer spending, local and national government initiatives and public works financing, corporate and financial expansion, company mergers and acquisitions or investment speculation.

The banking crisis has turned off the flow of this easy money at a stroke and it is not likely to return at any point in the near future. If it does it is unlikely that the populace, already burnt so badly by their experience of profligacy, will again adopt credit so readily.

This is particularly marked by the current return to cash and debit card spending widely reported by retailers and supported by the banks' report that there is a decline in credit card usage.

There are serious organic determinants that weigh against any upturn in credit financing.

Firstly the banks are so heavily indebted themselves and have yet to secure a floor under their own recklessness. The activities and liabilities of the different forms of banking - high street, investment, commercial etc. - have become enmeshed and intertwined into a financial Gordian knot. The level of their own cumulative debt exposure has been so creatively hidden across the globe that it has become unquantifiable. Tax payers’ money has flooded the banks' vaults yet much of it has vanished into a void. Further their debt is not a static mass. It is growing at an alarming rate as individuals, small businesses and large companies lose the ability to service their debts. This is hardly the comfort zone for further lending that the government would have us believe.

Secondly the credit worthiness of individuals and businesses is not assessable. An individual in work one week could be made redundant the next. Likewise, a company barely trading this month could be reduced to a financial ruin the next.

At the time of writing it has been announced that the once bankable, celebrity chef Anthony Worall Thompson has seen his restaurant chain put into administration following his bank's unwillingness to continue financing his £200,000 overdraft facility. His experience is being repeated a thousand fold across the country.

Furthermore, falling property prices, both private and commercial, no longer provide adequate collateral for previously negotiated advances.

The barrage balloon of credit was predated on rising property prices and before the housing and credit bubbles became reciprocal, interdependent and intransigent. There is no alternative, viable or tangible security to underpin loans during a period of crisis such as this. Only if and when there is a period of marked and consistent economic growth will the conditions for bank lending return, particularly at the level necessary for sustained consumer credit demand.

Whilst this crisis deepens people's anger is at fever pitch with concerns about the administration of their personal bank accounts and savings. Not only are bankers seen to be responsible for generating the slump but they then have the affront to award themselves and their high fliers massive bonuses for creating this mess in the first place.

Several governments, seeing the explosive nature of this issue, have issued decrees limiting the amount of these handouts and setting limits on chief executives pay. Gordon Brown is so fearful of chasing bankers from the City of London, causing a collapse in the value of sterling or a potential avalanche on the Footsie that he has been seen to be sitting on his hands.

In an industry that is already partly nationalised there should be no bonus payments except those that contractually go to make up the meagre salaries of high street branch counter staff, many of which earn less than £16,000 per year.

There was enough evidence weeks ago to show that the British banking system was unfit for purpose. It should be nationalised lock, stock and barrel. That is not to say that small investors and pensioners who hold bank shares should not be compensated but this should be done only on evidence of each individual's proven need. There should be no compensation for fat cats.

Neither should we allow those who have administered this mess to remain in their positions as banking directors and managers. The whole layer of executives should be swept away with administrators appointed in their place, recompensed by reasonable salaries.

On a capitalist basis there is little that can be done to save the rest of the economy at this stage. Manufacturing and retailing can only attempt catch-up with the collapsed credit based demand.

Any assessment of the fall in economic growth needs to be re-evaluated just days later. This month, the International Monetary Fund (IMF) forecast that the economy will shrink by 2.8% this year but this was surpassed, just days later, by the Bank of England prediction that GDP will contract by 4% within the twelve months ending at the end of June 2009.

Estimates, by there very nature, are hit and miss affairs but it is always the intention of such 'august' bodies as these to underplay the problem for fear of the panic that the truth would engender. In the Great Depression, British GDP fell by only half that of the US. Yet, at 6%, this was sufficient to wreak so much recorded damage to employment and incomes of so many.

We live in a very different economy to that of the 1930s but although we have become finance industry dependent there also remains an important manufacturing sector and the decline in both areas is sufficient to cause real concern about their resilience.

Workers "by hand and by brain", white collar and blue collar, professional, skilled and semi-skilled will all have to look around to their colleagues, compatriots and related workers abroad if they are to mount any resistance to the devastating loss of employment that is about to take place. Ownership and control of the means of production is the key to survival.

When employers announce a closure and walk away, handing the factory, office and shop door keys to the receiver, all that remains in situ is prepared for an asset stripping fire sale.

The only course of action for the workforce is for them to assume security of tenure before that process occurs, i.e. by occupying, claiming squatters’ rights and thereby declaring their temporary ownership of their own workplace.

Recently this was the tactic of the glassware workers at Waterford Crystal in Ireland. On getting wind of their bosses’ imminent plans to wind up production they rushed from their homes to invade and occupy the factory just before the receivers' security guards had an opportunity to seal the gates.

The move secured the workers' own right and intent to determine their futures and be part of the discussions that the receivers would hold with potential buyers of the business. The Waterford occupation has become an inspiration for other Irish workers facing a similar fate.

Without any alternative buyer coming to the rescue of failed businesses and with the means of production and available raw materials under the workforces' control they, in theory, can determine the production and profitability of the enterprise without the necessity of creating the overarching profits needed to satisfy the greed of owners, directors and shareholders or the responsibility to service their unpaid bank loans.

In such cases, production can continue. Should, as is likely in this economic downturn, the same tactic be employed by other abandoned workforces along the same chain of production - supply, distribution and sale - then a new form of economy will be established. There is no reason to determine that a market cannot be found albeit at a lower but more competitive and affordable price.

The experience of the Caterpillar workers at Tannochside in Uddingston, Scotland in 1987 offers a marvellous example of ingenuity and enterprise. Though an isolated incident in a period of generally more favourable trading conditions than today, these workers, together with the support of their community and the broader labour movement were able to maintain their occupation for a considerable time.

The dispute arose when the American company decided to close production in Scotland and relocate in the US. Thus this was not a time of economic retraction and generalised closures as now when it could be possible for one part of industry to link with closure victims elsewhere in support, solidarity and co-operative production.

Nevertheless, the Caterpillar workers were able to consolidate their action and gain widespread support. This support gave them enough time to continue production. With available materials on site they were able to construct an earth moving machine that, when their cause finally failed, they donated to a developing world country.

(It is hoped that a first hand account of their struggle and experience will be added to this site under the contents' heading Workers' Struggle.)

There are other developments that demand attention. Britain’s' economic position is precarious in what is a very precarious world. A weekly record is required to keep pace with events and developments. Red Writings will attempt to keep its readers informed.

Red Writings © Mid February 2009