Wednesday, 23 January 2013

Cameron Craters Country's Credibility

For the last two year's I've been pointing out the incompetence of the Liberal-Tory Government. Its not just that they are economic illiterates, whose scaremongering before and just after the election injected fear and loathing into sentiment, or that this was exacerbated by the introduction of austerity measures, which further undermined confidence, and sucked demand out of the economy. It is the fact that they are also simply politically inept.

For example, at a time when they needed the support of the permanent State bureaucracy to push through some of their policies, they attacked their very bureaucracy. Not surprisingly, they were faced with opposition from all sorts of quarters within it, from the police and army top brass, as well as frustration by civil servants. Also not surprisingly, Ministers found themselves presenting duff information to Parliament, provided by those Civil Servants, as happened with Michael Gove's several attempts to get the figures right over Building Schools For the Future. All of that could have been foreseen as indeed, I pointed out in – A Bit Of A Pickle.

Part of the reason for that incompetence is simply that as politicians the Liberal-Tory Government are just not very good, partly its a reflection of the fact of a Coalition Government, but partly it is also a reflection of the fact that the Tories in particular are themselves a disparate coalition, but whose determining feature is their need to accommodate the needs and interests of their membership and electoral base, and the extent to which that is in conflict with the interests of a modern capitalist economy, and of the interests therefore of Big Capital itself. They are continually left having to say one thing for electoral and party political purposes, whilst really knowing that they need to do something else.

That can be seen in a number of areas, but Europe is the most obvious. To give just one other, however, take the issue over Child Tax Credit. It is now fairly common knowledge that when Osbourne made his announcement of austerity measures two years ago, he anticipated that many of them would not actually be needed. The austerity measures were back loaded for that very reason, the heaviest immediate cuts being loaded on to Local Government, so they could take the majority of the blame. The part-time Chancellor hoped and believed that the economy would continue to benefit from the growth that labour's stimulus had created, and that similar measures taken by other Governments were having. He hoped, therefore, to be able when the further cuts, such as those to Child Tax Credits were due, to be able to stand up in Parliament, and say, “We had intended to have to do this, but our policies have been so successful, that I can now announce, that we no longer need to make these cuts.” It was supposed to be an element of his supposed genius for electoral strategy.

But, of course, when the Liberal-Tories scared the shit out of consumers and businesses at the beginning of 2010, by claiming, ridiculously, that Britain was in as bad a state as Greece, they responded accordingly. Consumers began to retrench, and build up their savings and reduce their debts. Businesses did the same thing. The 2.5% growth that Labour left the Liberal-Tories came almost instantly to a halt, even before they had started to implement the austerity measures, as a consequence. That meant, when those austerity measures were introduced, the economy was already weakened, and was simply given another kick in the groin, sending it into recession. The money printing by the Bank of England, and the unsustainably low interest rates introduced in 2009, could not provide any support for the economy.

It was like pushing on a string as Keynes had described such a situation. Low interest rates, and money printing can only stimulate the economy if consumers and businesses want to borrow money, and are encouraged to do so by the easier lending conditions. But, the consequence of the Liberal-Tory policy was that the only people who wanted to borrow, were those people who needed money to stay afloat, and who were, therefore, not likely to pay it back! Nor surprisingly, the Banks trying to rebuild their own Balance Sheets, and increase their profits, had no interest in lending to such people. Rather than stimulating the economy, all the money printing and low interest rates did, was to delay the collapse of huge house price bubble, blow up further bubbles in share and bond prices, and devalue the pound, thereby increasing inflation, and squeezing household incomes that were already under pressure from loss of jobs, and falling or frozen wages. It created the inevitable conditions for a prolonged period of stagflation, and also for rising welfare bills, as payments of in work benefits necessarily rose.

The consequence was that when the time to introduce the Child Tax Benefit cuts came along, Osbourne was left with no alternative but to introduce them, though under pressure from Tory backbenchers, fearful of losing votes, he did raise the level at which they were to be cut off.

The Tory Party, going back to the end of the 19th Century has been riven with divisions over Protectionism, and that at heart is what drives the division over Europe. It was, after all the Tory Party that had introduced, and defended the Corn Laws to protect the interests of the Landlords who made up the backbone of the Part, and its electoral support. When the industrial capitalists became dominant in the second half of the 19th Century, they pushed through Free Trade measures, that benefited British Capital going out into the wider world. At the end of the century the Tories polices were based, as some of them would have it today, on the idea of Empire, and Protectionism for the home industries.

When the Liberals were supplanted as the major force of Social Democracy (representing the compromise of interests between Big Industrial Capital and the working-class) by Labour, the Capitalists became absorbed in the Tory Party. The Big Capitalists could hardly be seen to be members and supporters of a Party largely dominated by workers, and nominally committed to replacing Capital. That, however, is what happened in the US, with the Democrats. But, that meant that the Tories were now necessarily conflicted between one Protectionist Wing, reflecting the interests of the small, usually inefficient, nationally based capitalists, along with sections of Money Capital, the Landlords, and the other social layers attached to them, and a Liberal-Social-Democratic Wing, reflecting the interests of Big Capital, largely efficient, able to cope with higher wages, better working conditions, a reasonable level of social welfare and so on, that continued to support Free Trade.

That is essentially the division that exists within the Tory Party today over Europe. It can be seen in the statements of various sections of Capital. The British Chambers of Trade, which represents the interests of small, nationally based capital, has a far larger proportion of its members – around 45% - supporting the idea of some kind of renegotiation than there is amongst the ranks of the big multinationals. In fact, it is the representatives of the latter, that have eventually begun to recognise the threat to their interests, and started to organise to oppose the eurosceptics. It is to represent the interests of those sections of Capital that we have had representatives of the US State – which far more openly represents the interests of Big Capital – come out and warn against Britain raising the prospect of leaving the EU. There have even been some of these large companies talking openly about leaving the UK, were it to exit the EU.

In reality, Cameron knows that however much he has to assuage the feelings of the core of his party membership and voter base, it is the interests of Big Capital, that ultimately he will have to meet. That is just like, however, much Labour Governments have had to assuage the feelings of the workers that make up its membership and voter base, it has to meet the needs of that same Big Capital. In fact, Labour is usually better placed to do that than the Tories, precisely because Social Democracy is based on a very real compromise, and commonality of interests between workers and Big Capital, that lies at the heart of reformism. The real sharp separation of interest lies between workers and the small capitalists who cannot survive without the low wages, the terrible working conditions and so on.

In reality, of course, workers interests are also closer to those of the Big Capitalists when it comes to issues such as Europe too. A single European State would facilitate workers unity on a wider basis. A true single market would mean that national competition would be reduced. It would mean having a level playing field across the whole market, providing common levels of Pensions, Benefits and so on, as well as common laws on working hours, holidays, health and safety etc. It fundamentally undermines the basis of competition as a race to the bottom.

But, the real divisions within the Tory Party are made manifest on precisely these kinds of issues. It is precisely to defend the interests of the small capitalists who cannot survive without paying poverty wages, without providing terrible conditions, undermining health and safety and so on, that the Tory Party seeks to obtain some protection against the single market. It wants to protect those bad employers by opting out of civilised regulation, just as 19th Century Tory Protectionism sought to protect British Capital against increasingly competitive European Capital.

If you look at the pronouncements of UKIP and of the Tory Right, it is precisely in order to be able to introduce further attacks on British workers rights, and living standards that they want these renegotiations and opt outs, and ultimately withdrawal from the EU. They do not say so openly, at the moment, but the logic of their position is still that of the old style Tory Protectionism, which would see them seeking to defend the interests of the small scale, inefficient sections of Capital they are based upon, by more overt forms of Protection were that needed.

Of course, as the old style Tory Protectionists did, they will cover that in phrases about protecting the rights of British workers against foreign competition, but that will be as hollow today, as it was when Marx and Engels derided it more than 100 years ago. Its only necessary to see how much these people are friends of the workers today, to see how much such policies would be motivated for that reason. They argue these nationalistic solutions for precisely the same reasons that the BNP do. To meet the interests of the backward looking, reactionary sections of British Capital.

But, for these very reasons we can now see just how incompetent Cameron and his Government are once again. On the one hand, the Liberals have been led, as always happens in such coalitions, to concede ground to their Right. In turn, Cameron has been led to concede ground to his Right, in the hope of assuaging the Right Wing of his Party, and to undermine the increasing support for UKIP. But, as again as always happens in such circumstances, all that weakness does is to strengthen those to whom you have conceded ground, and to make them bay for even more blood. The more Cameron has wavered over Europe in the last year, the more UKIP has gained in strength!

I pointed out the historical analogy here with what happened in France in the events leading up to the Coup of Louis Bonaparte – History Repeating As Farce. I don't expect that Britain is going to experience a coup – unless things deteriorate considerably – but, it is quite easy to see how the Tory Part could experience a coup, how the continuing weakness of Cameron's leadership strengthens his Right-wing, and leaves open the door to an even more populist leader like Crapulinsky/Johnson to take over.

In that series, I also pointed out the way that Cameron has effectively mimicked, but under wholly different conditions, Thatcher. It once again reflects their incompetence, and laziness, that thy think they can simply take off the peg solutions – previously Cameron quite clearly modelled himself on Blair – rather than thinking out and developing their own solutions. The issue over the EU is again another example of that. As well as assuaging his Right-wing, and trying to undermine UKIP, Cameron has quite clearly another motivation for offering an IN/OUT referendum.
Two years into her Government in 1982, Thatcher was deeply unpopular under similar conditions to those existing today. She was saved by the Falklands War. The EU is Cameron's Falklands. He hopes to latch on to the same kind of nationalist/populist sentiments that rescued Thatcher in 1982. He knows that, fed by the gutter press, who know their market, and by the failure of Big Capital to argue the case for Europe over the years, and indeed their undermining of that case by relying instead on bureaucratic methods to bring about more Europe, there is a considerable amount of opposition towards the EU. One Tory MP, in PM's Questions today, made it obvious, she said openly “Isn't the difference between us and the Opposition that if the voters want a referndum they have to elect us at the next election.”

That is the real populist motivation in Cameron's gambit. It is, in other words, an attempt at a bribe. It is an attempt to say, no matter how much we have cratered the economy with our economic incompetence, no matter how much we have undermined basic elements of a civilised society with our austerity measures, no matter how many of you we have thrown on to the scrap heap, no matter how much your living standards have fallen, vote for us, and we will give you a chance to leave the EU. Its inept again, because although there is opposition to the EU – and some of it, aimed at the bureaucratism of the EU is justified – it is not such a vital element of ordinary people's concern that they will ignore all those other things that the Tories have done. The only ones who will vote for the Tories on that basis are people who are already Tory voters anyway. At best it will stop a few voting for UKIP.

Of course, as with Gideon's brilliant strategy over Child Tax Credits, what Cameron hopes is that, when it comes to it, he will stand up and argue for Britain to stay in Europe, having been given some sops from European leaders, as happened with Harold Wilson's “renegotiation” in 1975. That is why he has put off any referendum until 2017, and why he will not commit himself to saying what items of this renegotiation constitute red lines, which would force him to argue for a NO vote. Indeed, pressed by Miliband in Parliament today, he refused time and again to even say whether he would call for a YES vote. Faced with the question, if you get nothing from the renegotiation what will you advocate, Cameron has no answer.

But, if Cameron says, I will recommend a Yes vote, even if I get nothing, that undermines his negotiating position. Other EU leaders would simply tell him, if you are going to stay in whether you get anything or not, why would e give you anything? Similarly, if he says he would recommend a NO vote unless he gets this or that concession, he has also tied his hands, because if he doesn't get it, then he is committed to arguing for a British withdrawal. Its reported that the Tory Right are already pushing further Right demanding that these red lines be spelled out, and included in the next Tory Manifesto, so that Cameron can't back out of any such commitment. Both UKIP and Labour are likely to keep pressing Cameron on this for the next 2 years up to the election, and he knows he can never answer that question. By contrast, Miliband has come out openly and said Labour will not offer an IN/OUT referendum, though they will offer a referendum over any new major changes, which seems a reasonable position.

The consequence is that just as Liberal-Tory incompetence over the economy led to it cratering, so Liberal-Tory incompetence over Europe is cratering confidence in Britain. How on Earth can foreign states, or large companies have faith in such an incompetent government, how can they make any kind of long term plans that are needed for large scale investments, if they do not know for the next 5 years whether Britain will be in or out of the EU, and so on. Already, over the last 6 months as this issue has developed, the Yields on UK Gilts have risen by around 30%. Its likely that the UK will lose its Triple A Credit Rating, and the consequence will be that interest rates, including mortgage rates will rise, further undermining the economy.


David Timoney said...

Though Cameron is reluctant to be pinned down, I think we can safely assume that the red lines will include a defence of the City's interests. Cameron, like Johnson, is ultimately the City's man.

Effectively deferring negotiation to 2016/7 is not just a tactical ploy to maximise Tory votes in the 2015 election, by attracting the UKIP-inclined, it also provides further time for the City to strengthen its position vis-a-vis the mooted banking union and the European Banking Authority.

So long as it can secure its own interests (in effect the ability to extract rents from the Eurozone), money capital will ally with big capital. Cameron's calculation appears to be that he can additionally secure enough face-saving gestures, in terms of repatriating powers over employment legislation and immigration, to then buy off enough of the out vote.

Boffy said...

I think that's about right, but I don't think he will define any red lines, because to do so means making himself hostage to UKIP, and the Tory Right, if he doesn't secure them. In the end, Money Capital is transnational, so where its based doesn't matter. Its only the City itself that has an interest in defending itself against alternative Financial Centres.

Moreover, a Banking Union is vital to creating properly integrated European Money Capital, which London based Capital will still seek to dominate - which is why even the City opposed last year's walkout by Cameron.

The tactic seems to be, Cameron gives a nod and a wink to European leaders that he's committed to a vote to stay in, whatever happens in negotiations. Merkel et al then give him some meaningless concessions. He then says, we've renegotiated and got this, so Vote Yes. But, its events dear by, events.

The Tory Right and UKIP will know that, and keep pressing ever rightwards. UKIP is already doing that. In the meantime, the uncertainty will further cripple the UK economy.