The New Worker

The Weekly paper of the New Communist Party of Britain

Week commencing 17th October, 2008

Protesters clash with police in the City of London

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Please feel free to use this material provided the New Worker is informed and credited.




by Daphne Liddle

THE STOCK markets are falling again in London and New York after rallying for just three days.

 The new policies of governments buying shares in banks to rescue them and putting up billions and trillions of pounds/dollars/euros to guarantee depositors’ money seemed to be working for a little while. Governments heaved sighs of relief; Armageddon had been postponed and Prime Minister Brown had come out of it like a banking super-hero who had, by pointing the way forward, delivered capitalism from its self-inflicted wounds.

 But they had underestimated the greed and arrogance of the banking shareholders. After the Government had used billions of pounds of taxpayers’ money to rescue them, the banks reported that the terms and conditions that Prime Minister Brown had imposed were deterring shareholders.

 The bankers criticised the Government for its decision to stop dividends being paid out and asking banks to resume lending and called on Gordon Brown to water down the terms and conditions of the bail out in line with the package unveiled by George Bush.

 Bush and his Treasury Secretary Henry Paulson had followed Brown’s example and taken a £250 billion stake in vulnerable American banks, apologising as they did so.

 The semi-nationalisation is totally contrary to their free-market dogma. “This is not what we ever wanted to do,” said Paulson, “but there is a lack of confidence in our financial system.”

But Bush set friendlier terms for the bankers on Wall Street than Brown had done. The American taxpayers must foot the bill but Bush has no intention of imposing the sort of conditions that would defend their interests.

 Bush’s rescue package was announced after the weekend’s meeting in Washington of G7 finance ministers and banking chiefs from the US, Canada, Great Britain, France, Germany, Italy and Japan. The 15 heads of the Euro Group, plus Gordon Brown, met immediately afterwards in Paris.

 Once again the leaders of the rising economic powers: China, India, Russia, Venezuela, South Africa and so on were excluded.

 The G7 powers agreed a five-point plan involving colossal sums of money but without setting precise figures or estimates. They pledged to prevent any bank going to the wall and to guarantee that financial institutions have access to liquidity and capital through the governments buying shares in the banks.

 Even while the rest of the stock markets were enjoying a brief recovery, shares in the banks RBS, HBOS and Lloyds TSB were still falling.

 Then on Wednesday the National Audit Office released figures showing that unemployment is rising steeply and the enormity of the coming recession swept away all remaining confidence on the London stock exchange and the FTSE started to nosedive again.
similar fears

Wall Street was also falling amid similar fears of the coming recession. And many of the speculators who bought two days previously with prices at rock bottom were selling again to pocket a profit.

 The problem with the G7 rescue plan is that it sends a signal to speculators that they can freely start runs on any bank or financial institution they like and the taxpayers are sure to bail them out.

 It leaves the governments hostage to spend every pound and dollar they can scrape together – and the speculators will not stop until all the coffers are empty. As Peter Schwarz, writing in Global Research put it: “Governments have literally handed over the keys to their treasuries to the banks. The massive redistribution of wealth from the working layers of the population to the rich elite during the last three decades is to be continued and accelerated in the course of the current financial crisis.”

 This is the madness of capitalism. The media is blaming the banking chiefs for their reckless lending and lack of control over recent years. But if any banker had refused to chase the easy profits that behaviour yielded and insisted on a more sober and cautious approach, they would have been sacked.

 It is a system in which the greediest and most venal always rise to the top.

 This is why semi-nationalisation cannot work; it must be full-nationalisation with full government control and democratic accountability.

 The billions that have been stashed away by the profiteers during the last three decades must be taxed at the highest possible rate to return the stolen wealth to the workers who created it.                                           



History was happening

SELLING the New Worker in Lewisham last week all the regular readers and sellers of other lefty papers were walking several inches above the pavement with beaming smiles. History was happening; capitalism was dying; after decades of unrewarding campaigning, battling to raise class consciousness against the dead weight of inertia, a real point of dialectical change was there.

Capitalism was eating itself, without any help from us, dying of internal contradictions. We could dust off our dreams of a real change; hopes were raised – even though we knew the capitalists would probably find a way out and for certain they would do their best to make us pay.

We knew there was pain ahead but there was one important change that will endure a bit longer – the myth of the free market had exploded; bankers and speculators had become the least popular people on the planet.

It was a breakthrough in popular perception but it was not a revolution. Gordon Brown has nationalised some big banks and other capitalist leaders around the globe have followed suit and the panic in the stock markets seems to have eased. It is not a measure the capitalists wanted to take; they fear democratic control and being made accountable to the people they exploit day-in and day-out. But it was a concession they had to make to survive – they had to make the taxpayers, mostly the working class, foot the truly huge bill for their disaster.

They are hoping this is a temporary measure and that in a few years the banks will be restored to the private sector and things will go back to the way they were before the crash.

But the real pain is still to come: the job losses, falling consumer spending, cuts in public spending, cuts in welfare, deferred house building and so on.

The Prime Minister has had to borrow hundreds of billions to bail out the banks and that will have to be repaid. Keynesian techniques of government borrowing help in the short-term, they get a country out of a crisis and get people back to work and things ticking over again. But the debts have to be paid – with interest. Every time a government borrows and thereby puts more money in circulation, the value of money decreases; there is inflation.

Eventually once again a point is reached where a new crisis of overproduction arises and the government has to borrow again. It has to borrow to service old debts. It becomes an expanding cycle as the real debt gets bigger with every turn. In the end there is again a collapse of credit.

The collapse we have just witnessed would have happened about a decade ago if Brown, then as Chancellor, and others like him in other capitalist powers, had not urged consumer deficit spending. Ordinary citizens were pushed into taking on as much personal debts – mortgages, credit cards and so on – as they could bear, and more. This was a form of micro Keynesianism with consumers, rather than the government, taking on the strain of debt with interest payments, the long-hours culture and personal misery associated.

Meanwhile bankers were trading in hedge funds, futures and other ephemera. They traded in debt, forgetting it was not real money but froth. The froth grew into giant mountains. But when the low paid workers could sustain no more debt and started to default, the bubbles burst and the froth collapsed. It had to happen sooner or later.

Now the bankers have come cap-in-hand to the taxpayers. Potentially the working class has some power in this situation but we are still living under a capitalist state machinery.

We must use the situation to push for a reversal of public utility privatisations, now that all can see how risky the private sector economy is. We must resist all attempts to re-privatise the banks, indeed we must call for them all to be nationalised.

So far a few bankers have lost their bonuses and their jobs. But they are still far richer than we will ever be. They must be taxed to the hilt. We must never allow them to regain the full wealth and power they have grown accustomed to. And we must never allow them to claim they know what they are doing with our economy. We must keep the political momentum swinging against them – and one day we really will have a revolutionary situation.
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