Sunday, 5 December 2010

CPGB Cuts Strategy Falls Between Scylla And Charybdis - Part 1

In an article in the Weekly Worker, Mike McNair discusses the strategy needed to defeat the Cuts. He sets this strategy within his analysis of the conditions, which he believes have caused the Liberal-Tories to pursue them. The problem is that this analysis places his strategy in the position of falling between Scylla and Charybdis.

The CPGB is one of those organisations, common on the left, who have a catastrophist view of Capitalism, though they deny it. They are stuck with a theory that Capitalism long since ceased being capable of any progressive development, and so their analysis is hidebound within an overall conception in which Capitalism is either in some permanent state of malaise, or else is going through, or about to suffer some severe crisis. Some time ago, in a discussion on this, I argued with Mike McNair, that their view that global Capitalism was going through some such crisis, their refusal even to recognise that since WWII, Capitalism had experienced a remarkable growth, was untenable. See: In Defence of The Long Wave. A couple of weeks ago, the CPGB's Anne McShane, wrote,

"Ireland is a tiny part of a world capitalist economy in deep crisis. We are completely and totally bound up with this crisis. The reason the [European Union and International Monetary Fund] are so desperate to impose a bail-out is because our insolvency is contagious and has seriously destabilised the euro - with Portugal and Spain looking like they will be the next to experience economic failure."

But, as I wrote in reply, there is no such crisis. Globally, Capitalism is in rude health. Even within Europe, Germany which accounts for more than 30% of EU GDP, is booming! Its not surprising then that the CPGB, whose analysis basically starts from this dogma, rather than a study of the facts, is from the beginning based on a false premise. Mike McNair, starting from this idea, that there is a global crisis of Capitalism, argues that the reason the Liberal-Tories are implementing the Cuts, is because Capital needs them. Global Capital needs to make someone pay for the crisis, and that can only be the working-class. I will argue that this position is wrong. But, if this is the Scylla that sits on one side of the CPGB's small craft, the Charybdis which threatens it from the other side is Comrade McNair's argument that only a Communist solution is adequate. He rightly rejects the idea that such a solution could be implemented on a national scale, and also rightly rejects the idea that some form of Left Workers Government, implementing an Alternative Economics Strategy could provide a solution. But, the reality then is that either he is offering a Council of Despair, or else he is, in reality, calling for a European revolution now, or in the near future! Quite honestly, it is difficult to see in practice the difference between the two.

He writes,

“What is missing is a communist alternative policy, a Marxist alternative policy, which tackles head on the fact that these cuts are the product of an international crisis of capitalism and that they are a product of the choices which capital has made.

I stress capital because the cuts are not merely the choices of David Cameron and George Osborne. They are not about ideological blindness, nor are they simply about contributors to the Conservative Party wanting to do well. There have been enormous losses in the global financial sector and now the question which is posed after the numerous governments have carried out large-scale nationalisations, printed and borrowed huge quantities of money and bailed the banks out is: who is going to pay?”

If he is right that the Cuts are being implemented because, to quote a phrase, “There Is No Alternative”, because Capital has to throw the burden on to the back of the workers, as it did in the 1930's and 1980's, then, in reality, he's right, short of a revolution, there is no way that workers can defeat them. If workers were strong enough to prevent the implementation of Cuts, under such conditions, then Capital would be bound to have to respond accordingly, as it did in the 1930's and 1980's. At the least, it would have to use the power of the State to crush the workers, at worst it would have to rely on extra-Parliamentary forces to achieve that. Workers would either carry through the revolution or go down to a historical defeat much worse than they did in the 1930's or 1980's, in Britain. Unless you are absolutely confident that workers and the organised Labour Movement are in a position then to carry through such a revolution, pushing forward such a perspective would be complete adventurism. It would be better to organise a tactical retreat, and wait for more propitious conditions. I don't think even the fantasists of the various sects really believe that British workers are in any condition to carry through such a revolution any time soon, and certainly none of the leadership of the Labour Movement, even that which sees itself in waiting, can fill anyone with confidence.

I think that Mike McNair's strategy is wrong on both sides. Let me begin by once again looking at the idea that Global Capitalism is in some kind of crisis. I have written enough on this in various places that I only intend to restate the basic salient facts to show that the idea of a global crisis is nonsense. In 2007, I wrote a blog setting out that for the first time in several decades, i.e. since the last Long Wave Boom, not one single economy in the world was in recession - Prepare To Dust Off The Sliding Scale. In it, I commented that some countries such as Azerbaijan, Angola, and Mauritania were growing at rates of more than 20% p.a., which put into the shade even the 10% p.a. Growth of China. It was a part of the growing economic development of the next wave of developing and industrialising economies, in Africa and Latin America. As I commented the other day - More Dominoes Get Lined Up, they are part of an alphabet soup of acronyms, created by financial analysts, to describe the next 11 or 15 economies to follow on from the BRIC's.

In summary, China continues to grow at more than 10% p.a., India is growing at more than 8% p.a., other Asian economies such as Korea, Taiwan, and now Vietnam and others are also growing rapidly. Russia is growing strongly, as is its BRIC partner Brazil. Emerging economies as a group are producingmore than 40% more than they were just 5 years ago in 2005. In Latin America, Colombia is one of those new tier of developing economies, but on the back of massive and increasing global demand for raw materials – itself a function of a booming global economy – many Latin American and African economies are growing rapidly, by satisfying that demand, and by their own industrialisation. The other strong area of growth is the Middle East, and again another of those economies seen as being in the next tier after the BRIC's is Turkey alongside Egypt.

And although there is clearly a crisis in the peripheral Eurozone economies, as a whole, it continues to grow, with Germany, which accounts, in any case, for 30% of Eurozone GDP, growing at more than 3%, and remaining the world's second largest exporter after China. In the second quarter of 2010 Germany grew at an annualised rate of 9.5%, and 3.9% in the third quarter. It was not alone. Austria grew at 3.6%, whilst Poland grew at 5.3%. Sweden put in a performance more like an Asian Tiger with a rate of 6.8%! The UK itself has been experiencing stronger growth than was expected on the back of the fiscal stimulus and monetary expansion conducted by the previous Government. And, as I commented in my post Tomorrow Could Be A Big Day, economic activity in the US has begun to increase quite strongly on the back of a huge fiscal and monetary stimulus. Incidentally, if Mike McNair is right that the Cuts are needed, due to the fact that Capital has no alternative, other than to throw the cost on to workers, then no one seems to have told Capital in the US, or its political representatives, who continue to resolve the crisis by huge amounts of Keynesian intervention, the extension of Welfare Payments for the unemployed and so on. Moreover, given the importance that Mike McNair gives to US Imperialism, in shaping the global response of Capital, it is odd that he neither points to these solutions being adopted there, nor to the fact that the US has spent months trying to get its European partners to adopt similar policies of fiscal and monetary expansion!!!!

Mike McNair says,

“There has been an international capitalist crisis with massive sums of money lost in the financial markets. The question follows: who is going to pay for these losses? In the first instance, it is the masses in Iceland, Greece, Ireland and elsewhere who are going to pay. We are seeing a process by which the central imperialist powers use their control of the financial system (plus, lying behind that, US power and the implied threat of military action in the case of a default) to offload the crisis onto the masses of these peripheral countries."

Well, its hard to deny that in 2008/9 there was a serious financial crisis that extended to large parts of the globe, but most of what he says here is not true. Its true that some investors in several large financial institutions lost large amounts of money. But, apart from a few banks such as Lehman's, most of these institutions did not go bust. The State intervened to bail them out, and although we talk about these institutions being nationalised, the reality is that they nearly all remain publicly listed companies. Their share values collapsed under the conditions of the Financial Meltdown, and under the conditions of the huge dilution of their shares as the State bought up newly issued shares in them. But, the reality is that at the moment the losses of investors in these institutions remain largely only on paper. The Banks themselves remain highly profitable, and cash generative businesses. At the beginning of 2009, I pointed out in one blog that there having been rumours in the market that RBS was to be completely nationalised its shares had fallen to just 10p. But, I argued that the rumour was almost certainly untrue, and that anyone who bought the shares at 10p would stand to make significant gains i.e. the big institutions buying millions of shares would make billions in a short period of time. Within months its shares had risen 6 fold! Ultimately, the State will sell its shares in these institutions, and will do so gradually. It is likely that the Banks themselves will buy back the shares and destroy them, thereby raising the value of the outstanding shares.

Moreover, its important to consider what the loss of money amounts to. What in reality it amounts to is the fact that the underlying assets of those institutions were revalued to something approaching their true value as opposed to the inflated paper value that they were recorded at on the Banks Balance Sheets. If it is a loss of money, it is in reality a loss of money that did not really exist to begin with. Marx did not refer to such Capital as “fictitious Capital” for nothing. It is not like the kind of Capitalist crisis in which huge amounts of productive Capital are destroyed, because of overproduction. If you wake up one day to find that your house's market price has doubled you might delude yourself into believing that you are in some way better off, but in reality nothing has changed. Its still the same house it was the day before, and if you wanted to exchange it for another you would have to face the reality that all other houses had risen in price too. In fact, these kinds of gains and losses occur on the Capital Markets every day, perhaps not on this scale, but certainly on the scale of tens of billions of dollars. Yet, in reality it is little different from the gains and losses made in any other Casino, some people gain, and others lose over a period of time. The main damage to the economy was not these initial paper gains for some being wiped out, but the fact that the effect was to seize up the supply of Money Capital as a result of the panic, which caused the Credit Crunch, and the transmission of that into the real economy. It was as though, someone received a severe fright, which caused their heart to stop momentarily, and then to beat irregularly for a time.

Finally, although these sums seem very large, in reality compared to even global financial flows they are not that large. There is no reason to believe that Capital has to try to recover these sums by attacking workers, especially in a time of global boom, and where doing so is likely to cause Capital unnecessary economic, social and political problems. Indeed, in the immediate aftermath of the Financial Meltdown, the response of Capitalist States was not to try to recover this money by attacking workers, but was to launch large scale programmes of fiscal and monetary expansion, to introduce new programmes to prevent workers from being evicted from their houses, to slash mortgage interest rates, to extend unemployment insurance coverage, and so on. If Capital really wanted to throw the cost of the crisis on to workers, if Capital really had no alternative, but to introduce Cuts, because Keynesian stimulus and Monetary Easing were no longer capable of resolving its problems, then it would have adopted that strategy in 2008, when the conditions for such a strategy were more propitious. It didn't.

Forward To Part 2

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