The New Worker

The Weekly paper of the New Communist Party of Britain

Week commencing 28th November, 2008

Woolies? Not at any price it seems

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Darling’s economic package 


by Daphne Liddle

CHANCELLOR of the Exchequer Alistair Darling last Monday delivered his eagerly awaited Pre-Budget Statement. It was aimed to protect Britain from the worst of the economic crisis that is rolling around the world but it seems unlikely it can have much impact.

 Nevertheless, it is far better than the only alternative offered by the Tories – back to the days of “unemployment is a price worth paying” and swingeing public spending cuts.

 Darling began by reporting that the economy had shrunk and will continue to do so for the next two years – and many believe that is wildly optimistic. Inflation is expected to be replaced by deflation.

 Government borrowing will rise to record levels: £78 billion this year to £118 billion next year. But this compares with a current level of personal debt on loans and credit cards of £220 billion.

 Prime Minister Gordon Brown and Mervyn King, the Governor of the Bank of England are now pressuring the banks to use the Government bail out money they have been advanced to revive the housing market and pile on yet more consumer debt.

 The consumer is still expected to do the lion’s share of risky borrowing to get the economy going again, in spite of the associated evils of long working hours and stress that go with it.
sharp cut

Three billion pounds-worth of capital spending will be brought forward from 2010 and 2011 and used to build motorways, secondary schools and improve homes as a way of creating jobs. But generally there will be a sharp cut in the rate of public spending – so probably more jobs cut than created.

 VAT is to be cut from 17.5 per cent to 15 per cent to encourage consumer spending. This will reduce an item priced £100 to £97.50 – hardly enough to tempt consumers when they are already overburdened with debt and doubt about their jobs.

 Darling is going to tax the rich – but only a little bit more and only after the next election. The higher rate of tax will rise from 40 per cent to 45 per cent, applied to incomes over £150,000-a-year. Interestingly this is just above £141,866 – the annual salary of Cabinet members. It will take an upper rate of 95 per cent to make a real impact.

 The poorest pensioners will be a little better off as the pension tax credit level for a single person rises from £124 to £130 and from £189 to £198 for couples. And all pensioners will get a one-off payment of £60 in January. But no news about raising the basic rate of the state pension or restoring the link with average earnings.

There is talk of building more “affordable houses” but not council houses. And since no houses are being built right now, a handful amounts to “more”.

 There will be a project to fill 500,000 job vacancies by speeding up training and recruitment. This will not create a single job. It will help some people to get the jobs, meaning that others won’t.There will some measures to help “small businesses” – but big businesses are in as much trouble as their smaller cousins. On Wednesday two high street giants – Woolworths and MFI – both called in the administrators.

 More big names are expected to follow as, in spite of Gordon Brown’s best efforts, consumer spending continues to plummet. There will be no Government bail outs for these companies and thousands of jobs will be lost as they crumble.

 Union responses to the package were mixed. The civil service union PCS was suspicious that “efficiency savings” were likely to translate into cuts in jobs and services – with tens of thousands of civil service job cuts already in the pipeline.

 Though PCS did welcome the creation of 6,000 new posts in Job Centres to cope with the rising tide of benefit claims, the union voiced suspicions this would be met by cutting other posts with the Department of Work and Pensions.

Derek Simpson, joint general secretary of the giant union Unite, said the Pre Budget Statement “gives Britain a reason to be optimistic this Christmas and beyond”.

 “This is a welcome warm up exercise after 30 years of inaction and neo-liberal economics. Gordon Brown has thrown-off the shackles of new Labour to reveal the real Labour,” he said, with more optimism than realism.

 But he and his co-general secretary, Tony Woodley, went on to compare it with what the Tories would have done. In that light, their praise has some justification.

 The GMB response was also an attack on the Tories’ “hair shirt policy of ‘if it isn’t hurting it isn’t working’ policy, which led to four million on the doles in the 80s.”



Compassion for the workers or saving capitalism?

THE PRE-BUDGET statement delivered by Alistair Darling, the Chancellor of the Exchequer, on Monday marks a full return to classic Keynesianism – Government borrowing on a massive scale in an attempt to lessen the worst effects of the coming global recession, using the borrowed money to put more spending power in the hands of the general population to stimulate the markets and create jobs.

The Daily Mail described the measures as “The Death of New Labour” – meaning the end of monetarist policies. We can only hope that it really could be the end to the “privatise everything” dogma of New Labour – but it seems unlikely. What we seem to be getting now is something of a merger between the functions of government and the biggest banks and companies – which is potentially very sinister.

The theory is that this Government borrowing should generate enough economic activity that will in turn generate taxes to pay back the huge loans.

Historically, in practice, it never works quite like that. Effectively it puts more money in circulation and so undermines the value of that money – leading to inflation (is a falling pound part of a Gordon Brown plan to get Britain hitched to the euro?). And invariably – capitalism being capitalism – the next downturn arrives way before the debts are paid off. So borrowing has to be increased even more and the system goes into an ever decreasing spiral of debt and inflation and eventually there is no more credit – back to square one.

Capitalism cannot escape its inherent nature; only socialism can provide a real way out of boom and bust.

John Maynard Keynes formulated his theories in the aftermath of the Great October Socialist Revolution, and though it has – in the short term – a more humane face than monetarism, its real purpose has always been to rescue capitalism. After the First World War and the October Revolution the global capitalist ruling class began to grow scared of the “political chaos” – world wars and revolutionism – that followed in the wake of huge economic crashes.

Make no mistake, the global ruling class is seriously worried now and divided into contending factions and interests.

One of those factions – the one currently being led by Gordon Brown but with supporters around the world – may try to sell us Keynesianism as  “social justice” – it worked in the 1950s – and breathe life into social-democracy.

The problem they have is that the Keynesian measures taken in the 1950s and 60s relied heavily on income from colonialism and neo-colonialism. Western manufacturers needed colonial markets to buy their goods and loans to third world countries generated vast amounts of interest. This is where much of the money that the western governments were able to borrow came from, via the World Bank, IMF and so on.

The palliative measures to improve the lot of western European and North American workers were at least in part at the expense of increased exploitation in the Third World.

Now the “Third World” is no longer so passive and the countries of Africa, Asia and Latin America have other powers they can trade with on much better terms: China, Venezuela, Russia, South Africa and India.

It will not be so easy to buy off the workers of the “Third World” who are experiencing the reality of the most extreme forms of super exploitation.

Meanwhile Mervyn King, the Governor of the Bank of England, is urging Gordon Brown to pressure the big banks to use the billions they have received in Government bail-outs to revive the housing market by granting mortgages. The banks have been sitting on it, using is to plug the black holes in their resources instead of putting it into the “real” economy. But what does Brown do if they refuse? Who really rules Britain?

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