Saturday, 31 December 2011

Northern Soul Classics - Do The Temptation Walk - Jackie Lee

Absolutely classic dancer from the Torch days. Jackie Lee, aka Earl Nelson, the Earl half of Bob & Earl, was responsible for some classic dance tracks, many like this one, based around different dance crazes.

Wednesday, 28 December 2011

UK Prepares to Seal Its Borders!!!

RT, today has a report that the UK is drawing up plans to seal its borders in the event of a deepening of the crisis in the Eurozone.
The Treasury is reported to be working on plans to introduce full-blown Capital controls, to prevent the draining of funds out of the country, whilst plans to seal the borders are intended to prevent a mass influx, at a time when, in any case, millions of British ex-pats may be seeking to return home. The Government is already known to have been working on plans to bring back up to 1 million holidaymakers and ex-pats in a huge airlift, as any Euro crisis caused a large scale closure of European Banks, and a consequent inability to access individuals bank accounts, the closing down of cash machines etc., and, of course, the possible losses caused in any return to the old national currencies. One of the reasons that many of the Greek super rich, have been getting their money, yachts and other valuables out of Greece, is the prospect that their Euro Bank accounts might be frozen, and that the exchange rate they might get for a new Drachma, when they are unfrozen, would be extremely poor. Its likely that a similar process would unfold in other countries where such a return might be likely i.e. Portugal, Ireland, Spain, and possibly Italy.

As the report states, British banks could not avoid the financial deluge. They have at least €170 billion of exposure to these banks, but the real exposure is likely to be much greater than that as no noone really knows the extent to which all of the complex interaction of financial derivatives extends across the global financial system. What is clear as I showed previously is that the Credit Crunch is already upon us, demonstrated by the huge increase in Banks short term borrowing costs. The ECB has provided half a trillion Euros to European Banks in the hope that they would use the money to buy the Sovereign debt of their particular countries. Some hope. In fact, around €300 billion went to cover their existing exposure, whilst the rest has been used to shore up their own Balance Sheets. In recent days that has meant record amounts of over €500 billion being deposited overnight with the ECB by those Banks, who are too scared to lend it to each other.

What the action by the ECB does show is that the argument about whether it will act as lender of last resort, for the sovereigns, is over. Clearly it will. This was merely an attempt to achieve that by the back door. When push comes to shove it will step up to the plate itself.

Meanwhile, recent economic data shows that even without a Euro crisis, the UK economy is in deep trouble. It now looks like GDP will have shrunk for the fourth quarter of 2011, by between 0.25% - 0.5%. The services data for October, showed a 0.7% contraction. Given that Services account for two-thirds of the UK economy, and given that other survey data show the rest of the economy flat on its back, its clear that the economy is already back in recession. That is likely to be confirmed technically as the first quarter of next year looks likely to see a further contraction of growth.

Orthodox economists, not to mention the Government and Bank of England, are pinning their hopes on a fall inflation coming to the rescue as next year progresses. That is unlikely. They hope that depressed economc activity will cause prices to fall. But, this analysis of inflation, as being due to demand-pull or cost push, is faulty. Inflation is a monetary phenomenon. It is caused by excessive printing of money tokens, and provision of credit. That was seen in Weimar in the 1920's when severely curtailed economic activity did not prevent hyper-inflation. On a lesser scale it was seen in the stagflation of the late 1970's and early 1980's, when growth cratered, but inflation rose to 25%!!!

With official interest rates at near zero, with massive money printing via QE - the UK is likely to increase QE from £250 billion to £400 billion in February - it is inevitable that this will feed through into higher prices. Despite the claims of the Bank of England, that is why inflation, even on the rigged official bases, has been more than double its target rate for most of the last three years. For one thing, it reduces the value of the pound, which means that the cost of imports rises. With demand for raw materials still strong due to the continued high levels of growth in Asia, Latin America and Africa, with rising wage costs in those countries driving up the prices of their exports, it is inevitable that the UK will face higher not lower inflation in the coming year, though statistical anomalies might cause drops during January and other months.

In the meantime unemployment continues to rise sharply, and seems headed inevitably to the 3 million mark, whilst the Chartered Institute of Personnel Managers is forecasting that the number of jobs themselves will fall sharply too. They are also warning of what they call a sigtnificant rise in passive-aggressive sentiment amongst employees. In other words, workers are feeling screwed but powerless to do anything about it, and so manifest it through a lack of co-operation, sullenness, and so on leading to a sharp reduction in productivity levels.

2012 looks like being another interesting year!

Friday, 23 December 2011

Northern Soul Classics - You've Been Cheating - The Impressions

Another brilliant sound from the Impressions. This time my favourite, "You've Been Cheating". Great dancer. I've posted two versions, because the second has footage, but the music cuts off short. Everybody have a great Christmas, Saturnalia, or whatever.



Saturday, 17 December 2011

Northern Soul Classics - I Can't Satisfy - The Impressions

The Chicago Sound of The Impressions (Curtis Mayfield, Gene Chandler, Jerry Butler) was a foundation for many of the artists that were to follow. The Impressions, collectively and individually, were responsble for many great Northern sounds, as well as many other songs that have since been covered by pop artists like Rod Steward. There is an old piece of VT somewhere from an early 1960's "Ready Steady Go", where the Beatles were being interviewed, and commented that the Impressions were an influence on them - though listening to this classic track it makes you wonder how they could then produce Yellow Submarine!

Friday, 16 December 2011

Three Important Charts

Newsnight a couple of days ago had a discussion with Gillian Tett, Ann Pettifor, and Louis Cooper. Linked to the discussion were a dozen charts by top economists, which they thought described the current situation. I want to highlight three of these charts.

The first chart is that, which Ann Pettifor focussed on. It shows the extent of Private Sector debt in the UK. For nearly two years, all we have heard from politicians, and from the media is a discussion about how bad Public Sector Debt in the UK is. In fact, as I pointed out a long time ago - UK Debt The Facts - at around 70% of GDP, Public Sector Debt is not at all at historically high levels. During other periods, when the economy needed to invest large amounts to build infrastructure – for example during the Industrial Revolution, when it was necessary to build roads, canals, etc., and after WWII, when it was necessary to nationalise core industries, and set up the NHS – the Debt to GDP ration rose to 250%, and was paid back out of the subsequent growth of the economy.


What Pettifor's chart shows is that the real problem is not Public Debt, but Private Debt. The Chart shows total private debt standing at 450% of GDP. It is divided into three components. It shows the debt of non-financial companies as equal to around 100% of GDP. In other words this is the debt of companies producing goods and services. Given that large companies tend to raise most of their requirements for longer term Capital via the issue of Shares and Bonds, and given that many large companies actually have built up considerable cash balances on the Balance Sheets over the last couple of decades, we can guess that most of this debt is owed by small and medium sized businesses, who will be the first to get squeezed as the economy contracts under the weight of austerity measures, and rising inflation due to excessive money printing by the Bank of England.

Secondly, the figure for household debt also stands at around 100% of GDP. This is debt built up in mortgages, Student Loan debt, Credit Card Debt, Store Card debt, and it seems increasingly debt owed to usurers involved in providing Pay Day Loans. As with the non-financial business debt, this hides a division. At the same time that there is this huge amount of debt, there are other households with savings. The average household savings in the UK is around £30,000, and approximately 30% of the population have net wealth of more than £500,000. Of course, it is possible within a single household for their to be both debt and savings. A household may have a mortgage, and yet have savings in ISA's etc. Yet, its likely that a large part of this debt will be held by people who have little in the way of savings, as a buffer to use if the need to cover this debt arises. In fact, given that its reported that around 3.5 million people are likely to resort to Pay Day Loans to cover their expenses over Christmas, and many are known to roll over these loans at rates of up to 4,000% p.a. we can also guess that a much larger number than this are barely managing to cover their expenses using more normal forms of credit. The data on the number of people whose income runs out before the end of the month, backs up that assumption.

Its clear to see then why the Government has been so keen to keep interest rates low. A huge overhang of household and small company debt threatens to engulf the economy. In the same way that Greece faces insolvency, because its assets and income is not sufficient to cover its debts, and because austerity is making that worse rather than better, as it causes the potential for income growth to fall, so a huge number of households and small businesses face insolvency for the same reasons. But, the debts of the latter make the debts of Greece pale in significance. The only thing preventing these households and small businesses collapsing into insolvency, is the fact that the majority are holding on to some income, and because the interest rates they face on their debts are at unsustainably low levels, and in part, this is made possible by borrowing against property, whose real value is also in a massive bubble. Any change in any of those factors threatens to create an unstoppable avalanche of debt. I have already set out in previous blog posts why the property bubble is set to burst. House prices could fall by anything up to 80%, when it does. Indeed, if IMF Chief, Christine Lagarde is right, in her recent pronouncements that, if current policies persist, the world faces a 1930's style Depression, then they could fall even more than that.

Once house prices start to fall dramatically – selling prices are already about 30% below asking prices, and have themselves fallen by around 10% in the last year – then Banks will stop being as lenient on arrears as they are currently. Forced selling will produce a rapid collapse as it has done in the US, Ireland and elsewhere, where prices fell by more than 60%. Any possibility of borrowing against those assets will cease. But, also given the size of that collapse, and the amount of debt outstanding, it will be the Banks and Building Societies themselves that will find that they are simply unable to recover the money lent. That is why, the Credit Ratings Agencies almost every week bring out another list of Banks that they are downgrading, as they have done in the last couple of days. The importance of that can be seen by the third component of the chart, which is the debt of the financial companies themselves.

Again, this has a two fold character. On the one hand the debts of the household and non-financial business sector will show up as assets of those Financial Companies, but in the modern economy, the lending undertaken by the latter is not done out of deposits by savers. In previous decades, in order to get a mortgage, it was necessary not only to show that you had sufficient income to pay back the loan, but that you were able to save from that income. To be granted a mortgage Building Societies required that you had saved with them for several years, and had a reasonable amount of around 20%, via such savings to put down as a deposit on the house you were buying. After the deregulation of Financial Services by Thatcher in the 1980's, that all changed. In order to compensate for falling wages, as a means of keeping up the level of consumer spending, people were encouraged not to save, but to borrow. Thatcher's Government, from the late 1980's on, began to print large amounts of money to satisfy the demand for all this credit. A policy that all subsequent Governments continued, and which stoked the current property bubble. But, the other side of this is that without large amounts of savings out of which to provide these loans and mortgages, the Banks and Building Societies are themselves dependent upon borrowing money in the Money markets in order to be able to lend it out again. This is what brought down Northern Rock, and then the US banks during the sub-prime crisis.

As the chart shows this debt amounts to around 250% of GDP. The cascade effect is clear. If households and businesses begin to default on their debts, then the Banks and Finance houses that have made these loans, will then begin to default on their debts too. Yet, as Ann Pettifor said, this much greater threat to the economy from Private Sector debt is rarely mentioned by Government or the media. The focus on Public Sector debt is clearly ideological. In fact, rather than attempting to reduce this Private Sector debt, the Government is busy trying to bolster it. It is encouraging students to take on vast amounts of debt, which current patterns of Graduate employment, and unemployment, suggests they will never finish paying back. The Government's recent measures in relation to housing are also designed not to address the real problem of the housing bubble, to encourage first-time buyers to go into further debt in order to buy massively over-priced houses.

The other two charts show just how significant this is. The second chart shows that one of the fundamental requirements for people and businesses to be able to pay back that debt is missing. Just as Greece, and other economies need strong economic growth, to be able to have any chance of repaying their debt, so, individuals and firms need strong growth in order that they can see their incomes rising. But, contrary to the Governments assurances that its austerity measures would see a rush of Capital into the private sector, creating rapid economic growth, the reality is that, as in most other economies where austerity has been adopted, the opposite is the case. The only economy where growth looks likely, where austerity measures have been implemented is Ireland. But, its growth is despite the austerity not because of it! The austerity measures there also tanked economic growth. Growth is now recovering in Ireland for the simple reason that it has a reasonably large sector of its economy that has been modernised, that is involved in high-tech, high-value production that is globally competitive. Had it not already had that, it is unlikely that investors would have flooded to establish such businesses, in a climate of economic retrenchment.

In fact, what this chart put forward by Andrew Lillico demonstrates is that the trend growth rate of the UK Economy looks set to decline sharply even from its historic average!

Lillico comments that the message of the chart is that the UK economy will struggle to grow by more than 1% p.a. over the next decade. If that were to be the case, then the consequences are pretty dire. Historically, productivity in the UK has risen by around 2% p.a. In addition, we know that the UK population is rising. If the economy were to grow by only 1% p.a. then unemployment would be set to rise by more than 1% p.a. over the next decade! But, such a low level of economic growth would mean that large numbers of those small and medium sized businesses with large debts, would find it impossible to grow their earnings at anything like the rate necessary to service them, given the inevitability that rising inflation, will at some point mean that interest rates have to rise. More immediately, not only will sharply rising levels of unemployment mean that large numbers find their household debts rising quickly – I saw a headline recently that said that the City Council's Rent Debts had doubled! - but, such slow growth will mean that household incomes will be severely restrained, meaning that a further downward twist in bursting the property bubble is inevitable.

The final chart, demonstrates just how imminent that might be.



This chart put forward by Louise Cooper from BGC Partners shows that Credit Crunch 2 is already upon us. As she says, it shows that it is now costing Banks a full 1% more to borrow short term in the markets than it was in the Summer, up from 0.2%. Yet, as she continues, even at these rates, many banks cannot find anyone to lend to them. So, whatever, the bank of England, or other central Banks decide in relation to official interest rates, the reality is that the Banks and finance Houses themselves are facing a Credit Crunch. That is at a time when they are also being told that they have to bolster their Core 1 assets, which means that they will provide less liquidity to households, and businesses, and will sharply increase the interest rates on the loans and mortgages they have already provided.

So, both households and businesses, who are both massively in debt, and whose debts make the Public debt look minor, are facing a double whammy. Increasingly squeezed income as a result of the effects of austerity, and higher interest rates on those debts, as a result of the Credit Crunch, and level of indebtedness of the banks and finance houses themselves. Moreover, as I have pointed out before the nature of private debt is much more serious than Public debt. State's own printing presses, which mean they can simply print money tokens with which they can repay their debts – and at some point, the markets will force the ECB to do that too, whatever Merkel's current opposition – but households and businesses cannot do that. Their only alternative when they can't pay is to go bankrupt, which then threatens to bankrupt those to whom they owe the money.

In his analysis of the crises of 1847 and 1857, Marx demonstrated that the crises were being caused by the implementation of a wrong and damaging policy by the Bank of England. That policy determined by the 1844 Bank Act, once suspended saw the crises quickly ended. It is quite clear that the austerity policies being adopted in the UK by the Liberal-Tories, and foisted upon the economies of Greece, Spain, Portugal, Ireland, Italy and elsewhere, as well as being proposed by the Republicans and Tea Party in the US, are equally wrong and damaging. Even in the terms of Capitalist rationality they are irrational. As Lagarde says, if the current policies are continued then, at least Europe, including Britain, faces a 1930's style Depression.

It is no task of Marxists to advise the Capitalists on the policies they should adopt. Whether, they adopt Keynesianism or Monetarism, fiscal expansion or austerity, the basic contradictions of Capitalism will remain, and a crisis resolved or avoided today will re-appear as a more severe crisis at another time. Our solution is neither form of Capitalist solution, but the overthrow of the existing chaotic, and crisis ridden system of capitalism, and its replacement with Socialism, based upon a Co-operative Commonwealth in which the means of production are directly owned and controlled by the workers, who organise production to meet the needs of society rather than for the sake of profit. But, until that time, we are not indifferent as to which solutions the capitalists adopt. Marx and Engels described this approach in their writings on the question of Free Trade v Protectionism. In his Introduction to the pamphlet they wrote on this issue, Engels wrote,

“That was the time of the Brussels Congress, the time when Marx prepared the speech in question. While recognizing that protection may still, under certain circumstances, for instance in the Germany of 1847, be of advantage to the manufacturing capitalists; while proving that Free Trade was not the panacea for all the evils under which the working class suffered, and might even aggravate them; he pronounces, ultimately and on principle, in favor of Free Trade."

As Marx makes clear, the best conditions for workers, is when Capital is expanding. It is during those times that the demand for Labour Power rises, and where, therefore, workers are able to secure higher wages, are better able to focus and rebuild their organisations and so on. These are vital conditions for workers in preparing to put forward their own forms of property, their own democracy, their own State as an alternative to those of the bosses. We cannot, therefore, be agnostic in these issues. Our focus has to be to help the workers to resist austerity, and thereby make that option less appealing to Capital, and the bourgeois politicians. At the same time, we should illustrate that the bourgeois politicians claims that “There is no alternative” are wrong, even within the terms of the existing system. That does not relieve us of the duty to explain to workers that such solutions are only palliatives, it does mean we are not left in the position of mere revolutionary phrase mongers, whose only solution is always “Revolution Now”.

Saturday, 10 December 2011

Northern Soul Classics - Do Unto Me - James & Bobby Purify

Absolute monster sound from J&B. Great brass, great vocals. Brilliant.

Friday, 9 December 2011

Cameron Relegates Britain To Third Division

Anyone who believed that the crisis in the EU was not political should have been disabused of that belief over the last 48 hours. What stands in the way of a deal which would create the kind of political and fiscal union, and from there the issuing of EU Bonds backed by the ECB, is political wrangling between the member states, each of which has attempted to look after its own national interests – which should not be overestimated because the national interests of each country depend upon a resolution of the financial crisis and the promotion of a strong EU economy – and has had to have an eye on its own Party members, and electoral support. That has been one of the main constraints on Frau Merkel agreeing to the kind of measures necessary to resolve the situation. But her problems were as nothing compared to those faced by Cameron. One TV reporter described Cameron's position as being like someone turning up to a wife-swapping party without a wife!

Cameron had absolutely nothing to bargain with. From the beginning Britain has had a stand-offish attitude to the EU, of which it is nominally a part. British politicians of all parties except the Liberals, have reflected the continuation of Little Englander, Nationalism in their attitudes to Europe. That is one reason that, the gutter press have been able to whip up their ridiculous anti-European stories, and stoke Nationalistic sentiment. Britain was outside the Eurozone already, and Cameron had even taken the British Tories outside the umbrella of the Centre-Right, European People's Party group. Instead he had linked the Tories up with all sorts of weird politicians from Eastern Europe that in Britain would have been on the neo-fascist fringe.

The extent of Britain's isolation was demonstrated by the fact that of the 27 EU members, 23 had signed up to the deal whilst, 2 more said they would consult before signing. That left just Britain and Hungary refusing to sign the deal. This morning it now looks like even Hungary will sign. As one commentator put it, its not so much that we now have a two-speed Europe, but that we have Europe occupying one large house, and Britain being consigned to the attic like some relative everyone wants to ignore. Britain's influence has been gradually on the wane, anyway, now Cameron and the Tories have ensured that it will be completely marginalised.

But, it was again politics not economics which determined that. In reality, Cameron was put in a vice. If he agreed to the deal, then it was clear that the Tory right-wing would have demanded a referendum. If Cameron had refused that, then the backbenchers would have forced a vote as they did recently. Cameron would have had to rely on Labour and the Liberals. The Tories may well have split with an increasing number defecting to UKIP. The Liberals are already dead as a political force as a result of their Coalition with the Tories, and their abandonment of their positions on Tuition Fees, Cuts etc. that necessarily flowed from it. Such a split in the Tories would have saved the Liberals, as the Liberal MP's would have then merged into the rump of the Tory Party, but such a split would have largely destroyed the Tory Party too. The other side of a split of the Right to UKIP would have meant that the right-wing vote would be split in a similar way to what happened to Labour after the SDP was established.

But, having vetoed the deal, Cameron has now just further isolated Britain, and given further encouragement to the Eurosceptics to press further for Britain to leave the EU, which is their ultimate goal. What is also interesting is that Cameron and the Tories have emphasised their intention to rebalance the UK economy by reducing dependence on the City, and encouraging growth of the manufacturing sector. But, Cameron's position has exposed the fraudulent nature of that. At the first opportunity Cameron has been forced into defending the interests of the City and Financial Capital at the expense of British manufacturers. It was on the basis of protecting the City that Cameron refused to sign, and that means that Britain will be increasingly sidelined. Decisions that affect the ability of British manufacturers to compete in Europe will be made without Britain having a say. If that simply affected British Capitalists there would be no reason for workers to shed any tears. But, it will necessarily work to the disadvantage of British workers too. Once again, the Tories put the interests of British bankers ahead of the interests of British workers.

In the meantime the deal itself, agreed by EU members other than Britain, is still not sufficient to deal with the crisis. The real problem is this. The economies of Greece and Portugal are fundamentally uncompetitive. They do not have a large enough sector of their economies, which is globally competitive and able to sell goods to cover the costs of the goods and services that they need to import. That is not the fault of Greek and Portuguese workers, as is often portrayed in the media. It is the fault of Greek and Portuguese Capitalists, who for years were prepared to sit on their existing Capital, and make profits from low paid workers. When these countries joined the Eurozone, cheap money meant that they could raise their living standards through borrowing. Instead of using the access to cheap credit to invest in new machines, industries etc. the Capitalists in these economies simply continued in their old ways, making larger profits as workers borrowed to buy their goods. But, this problem also affects other Eurozone economies in a less acute way. The same lack of a sufficiently large competitive sector also affects Spain, Italy, and a number of other economies.

This problem is not unique to the Eurozone. In Britain for instance, there are generally speaking the same wage rates paid to workers in the North-East, as in the South-East. Certainly, workers in one area receive the same Benefits, and pay the same rate of taxes as in any other. Yet, area like the South-East are rich in high-value, profitable industries, whereas the North-East has a deficiency in such industries. The South-East is like Germany, whilst the North-East is like Greece. This is one reason the Liberal-Tories are now looking at trying to abolish National Wage Bargaining so that workers in the North-East would get lower wages. But, at the moment that is not generally the case. Because Britain is a fiscal as well as a political union, taxes collected by the central State, are then used to pay benefits to everyone wherever they live. Because, there is more employment, and higher value production in the South-East, which pays higher wages etc. the State collects more taxes from there, and pays out less Benefits. There is an automatic fiscal transfer to the North-East, because in that area, there is higher unemployment, less high value production, and therefore, less high incomes. In the North-East it is the opposite to the South-East. The State collects less tax from there and pays out more in Benefits. But, no one in Britain generally argues that the North-East should have to pay its way, or that this fiscal transfer should not occur. On the contrary, there has been Regional Policy to try to put even more State Capital into these areas to stimulate employment. Government departments have been relocated there etc.

This is how the Eurozone should work, and if it had worked like that the current debt crisis would not have arisen. As unemployment in Greece, etc rose, there would have been an automatic fiscal transfer from the Central Budget. So borrowing would not have risen to cover these payments. Moreover, under such conditions, a Central State would have had a direct incentive to try to minimise these payments by adopting growth policies that help stimulate employment within these economies. Ultimately, in order to deal with the fact that economies go through cycles of boom and bust, States do not attempt to cover all of this expenditure out of taxation. They borrow money on Capital markets to smooth out their costs. This is what the Eurozone needs to do. It needs a fiscal union, whereby each economy has essentially the same level of taxation, certainly for the main taxes such as Income tax and VAT. That tax would be collected by a Central Treasury. This Treasury would then be responsible for paying out Benefits. But, that would mean that benefits throughout this union would also have to be harmonised. All of that means that you cannot have a Fiscal Union without a Political Union. The American Colonies after all fought a War of Independence on the principle of “No Taxation Without Representation”!

And, in order to ensure that these costs were smoothed out over the longer term, it would be necessary for such a union to borrow on the Capital markets via Eurobonds. But, as has been seen in recent weeks, a condition for such Bonds being effective is that a Central Bank stands behind them, prepared to buy them up, to prevent their prices falling, and interest rates rising too sharply.

But, so far the EU leaders have still not come to accept the need for such a resolution. The leaders seem to have made a number of decisions needed to set up a fiscal union, but its not clear how extensive those measures are yet. It does not seem that there will be any central Treasury, or harmonisation of tax and benefits any time soon. Even were that to be agreed, it would take up to a year to put the necessary administrative mechanisms in place. Moreover, Merkel is still opposing the central planks needed for such a resolution – the creation of Eurobonds, and the ECB acting as lender of last resort. Yet, in the absence of those two measures, there can be no resolution, because it is impossible for Greece and other PIIG economies to pay their way, and it is probably political impossible, for Germany to raise the taxes needed for a fiscal transfer of the size needed to cover their debts, and deficits.

In the absence of that the only temporary solution is for the ECB to buy up the Bonds of Eurozone countries when they come under attack. That is what it has been doing in relation to Spain and Italy in recent days. But, as Britain found out with the ERM crisis, the markets have so much money that if they decide to attack a single country it is pretty impossible to resist for ever. Moreover, the ECB is restricted in its actions by the requirement to sterilise any money printed to buy the Bonds of Eurozone economies, by withdrawing money from elsewhere in the system. Not only is their a limit to that, but it threatens to cause a credit crunch elsewhere in the Eurozone at a time when such a Credit Crunch is developing already as foreign banks and investors withdraw funds from Europe. On top of that, the new head of the ECB Mario Draghi, said at the press Conference yesterday that the ECB would NOT be stepping in to act as lender of last resort to Eurozone States. As a result the Yields on Spanish and Italian 10 Year Bonds soared yet again.

His comments should not be taken too much to heart maybe. What he emphasised several times was that the ECB could not act in that way because the current Treaty prevents it. But, of course, at a time when Treaties are being amended on a range of subjects that does not mean that if the Treaty under which the ECB operates were amended, he would not be free to act as lender of last resort to a new European State! The markets have so far reacted cautiously to the events in Brussels. In the past it has taken them a few days to absorb the full contents of what has been done. On the basis of what I can see so far, I'd expect the markets to resume their attacks again next week. The Euro is bound to fall one way or another. If no further progress is made it will fall as markets price in its demise. If the ECB intervenes to print money to support the Bonds of sovereigns – which is a very expensive and ineffective tactic compared with issuing Eurobonds – then markets will price in inflation and a devaluation of the currency resulting from an inflated money Supply. If a settlement is reached and Eurobonds are issued, then the ECB will have to print money to backstop them, and to cover the repayments.

But, Eurozone countries will not worry too much about a falling Euro. A report from Eurocredit the other day said that many European financials were looking to inflation as a means of reducing the debt. A lower Euro would also boost competitiveness, benefiting France and Germany in particular as against Britain. Given that Cameron has now made Britain an outsider at the Party, that is something they will welcome all the more.

Thursday, 8 December 2011

The Great British Property Scandal – The Real Scandal

This week, Channel4 has been running a series of programmes entitled The Great British Property Scandal, dealing with the fact that there are 1 million empty homes in Britain, 350,000 of them for more than 6 months, a figure equal to the number of homeless people in the country. That is indeed a scandal. That a rich country like Britain – and Britain is a rich country despite what the Liberal-Tory Government tries to convey with its austerity agenda – should have ANY homeless people, should be an indictment of the Capitalist system, and a source of shame for all UK politicians. However, the programme does not deal with this. On the contrary, it is based upon the same false premises that every other TV property programme has been based upon during the whole period that the current housing bubble has been blown up. The real scandal is that many of the people in these series of programme, are the same people who for the last ten years or more have helped blow up the current unsustainable property bubble, which is, in reality the main reason why both these homes are empty, and why so many people cannot afford a home, and in turn why so many people are homeless. In fact, what the programmes do is not address that fundamental problem, but perpetuate it.

For example, one of the proposals is to establish an “Empty Homes Loan Fund”. The premise of this was demonstrated in a programme, in which George Clarke looked at some empty homes, where the owners were not renting them out, because they needed money spending on them to bring them up to rentable standards. The idea was that such Landlords would be able to get cheap loans from this Fund to do the work so they could be rented out. He examined one house in particular where the owner had re-married, and moved into the house of his new wife, leaving his old house empty. He was paying, and had been paying for some considerable time, £500 a month mortgage on this empty house. The obvious response of an economist in such circumstances, and in the current economic climate would be something along the lines of “What a muppet! Sell the house for what you can and save yourself £500 a month!!!” To be fair Clarke did ask why the owner was not selling, to which the answer came back, “Its not the right time to sell!” This presumably means that the owner is under the delusion spread by papers like the Daily Express, and fostered by all those TV property programmes over the years, that the price of houses always goes up except for temporary set backs, and so house prices are likely to rise sharply in the future.

But, of course, they are not. Not only are house prices in an historic bubble, but even if they were not, then in conditions where the economy is facing at best no growth, and more potentially a severe recession, its likely that house prices will be falling significantly. The delusion of the owner is typical of that held by people towards the end of such a bubble going back to the Tulipomania and beyond. But, surely a programme which claims to be dealing with the Great Property Scandal, should have been setting him straight, surely it should have been attempting to undo some of the damage all those TV Property Programmes have done over the years in helping to create the current situation! But, no.

Instead, what was proposed was a continuation of the very things, which have created the current scandal. It was proposed to provide the owner with a cheap loan to do up the house so that it could be rented out. In other words, a relatively well-off property owner is further subsidised by the provision of cheap credit, in order that they can exploit some future tenant, rather than have to face reality, and sell their property at a more reasonable price than that they expect to receive. But, it got worse from there. Having made the house suitable for renting, a new tenant was found. This was a young woman with several kids, who was living in terrible conditions. Unfortunately, she seemed to have no visible means of support, and was considering going to University, where she would no doubt have to run up, further huge debts, as with other students.

Herein, of course, lay the reason she was living in sub-standard accommodation in the first place – inadequate income to be able to rent somewhere decent. But, given that the owner of the property was paying £500 a month mortgage, BEFORE they took out the additional loan to do the house up, how on earth was this unfortunate woman expected to be able to pay a sufficient level of Rent to cover the costs of the owner? It was inevitably setting up the woman to either go into serious debt, or be evicted when she could not pay, or else for the owner of the house to have to be making a monthly loss on the rental income received compared with the mortgage paid out!

This was a similar story in another example, in which Phil Spencer did up some empty properties, and flats over shops, into which were moved a number of homeless people, who had been living on the streets etc. But, again, the real reason these people were homeless was because they did not have a sufficient income to be able to rent or buy somewhere to live! It is like the situation with famine. The reason that people in parts of the world die from starvation is not because there is insufficient food. On the contrary, the world is able to produce, and does produce, far more food than is required to feed all of its population. The reason people starve is because they cannot afford to buy the food they need. The same is true with homelessness, and the inability of other people to buy a house. It is because house prices are too high. If these programmes wanted to deal with the Great British Property Scandal they would be doing everything they could to crash house prices, rather than perpetuate the current bubble.

More than 80% of the properties that are empty in Britain are privately owned. The reason the owners do not sell them is because they are under the delusion that prices will not fall drastically. If they felt that prices were going to fall by 70-80%, which is how much I believe they will fall, and is consistent with the kinds of falls we've seen in the US, Ireland, Spain etc. where similar bubbles were blown up, then the owners of these properties would be likely to rush to sell them tomorrow. It would mean, at those kinds of prices that many people now unable to buy would be able to do so. It would put strong downward pressure on Rents as current renters, would be able to buy. That would mean that many of the homeless would then be able to move into these rental properties at more reasonable levels of rent. Moreover, it would put strong downward pressure on land prices, meaning that a large component of the cost of building new houses would be reduced. It would also be an incentive for those builders holding on to large land banks in the expectations of rising land prices, to sell them, or get houses built on them quickly.

It would also mean that ordinary workers could begin to form their own housing Co-ops to build houses for themselves to be owned and controlled Co-operatively. It would mean they could begin to provide employment for some of those within their communities, who are unemployed, with work building those houses, even if only initially in unskilled work. It would prove the basis for setting up proper training and apprenticeships for young workers in these communities, and so on.

But, of course, its unlikely that any TV property programme is going to advocate such measures. It would call into question all those other programmes they have made that helped blow up the current bubble, which in turn has caused the problems of so many millions of people. And, of course, no doubt they too hope that the current falls in prices are only temporary. Then they can get back to their old ways concentrating on those programmes that fool people into the belief that rising house prices are a good thing rather than a cause of misery.

Tuesday, 6 December 2011

Merkozy Proposals Will Not Resolve Euro Crisis

Recent days have seen massively intensified pressure to bring about a resolution of the Eurozone crisis before 9th December. Sarkozy said the other day that he and Merkel intended to "frog march" their proposals through, such was the urgency of bringing about a resolution. The deadline itself set a week ago in terms of "9 Days to save the Euro" itself puts pressure on politicians, bureaucrats, and Central Bankers to reach an agreement. If that were not enough, S&P have come out and threatened to downgrade the credit rating of virtually all Eurozone economies including Germany! But, the proposals put forward by Merkozy cannot resolve the crisis.

Those proposals are still based on the idea of pushing through the kind of austerity measures which have already collapsed the Greek economy, sent Ireland into a sharp contraction over the last year, and are having the same consequences in Portugal, Spain and probably shortly Italy. There is a reason the proposals are framed in these terms at the moment. Elections are due shortly in France and Germany. In Germany, in particular, any suggestion that Merkel was about to sign up to a deal whereby German taxpayers wrote a blank cheque for every Government in Europe, would be electoral suicide. Anyone who has been involved in politics at any kind of administrative level, or involved in Trade Union negotiations will see through much of the rhetoric, to understand that the participants real positions are not those on public display.

The proposals put forward by Merkozy argue for establishing in law the 3% limit for deficits as a proportion of GDP, that was originally formulated at Maastricht. Every state would have to put into law something along the lines of a Balanced Budget requirement. For now, Merkel continues to oppose the idea of Eurobonds, and of the ECB acting as lender of last resort. But, in reality, this week the ECB has already been forced to intervene to buy up the bonds of peripheral economies in Spain and Italy, because the Yield on those Bonds had risen to unsustainable levels. In theory, it has to sterilise this intervention, by withdrawing funds from elsewhere. But, ECB intervention is now becoming so great that this sterilisation will become impossible. Already, the argument is being put forward that it would be possible for the ECB not to sterilise this money printing, on the basis that its mandate to control inflation justifies it due to the threat of deflation.

Greece has already demonstrated that without growth, it becomes impossible to repay debts, and growth can only arise through stimulation of these economies, promoting investment. The only rational means for that to happen is either through fiscal transfers from surplus economies within the Eurozone i.e. Germany, or through borrowing. But, if each Eurozone economy is to be constrained in its deficit then this is doomed to failure. Greece and other economies cannot borrow at anything approaching sustainable levels to achieve that. Unless, therefore, Germany is about to make a huge fiscal transfer to Greece and other debtor economies to cancel out their debts, and provide the resources for investment to bring about the necessary growth, the only option is the issuing of EU Bonds i.e. to borrow on global Capital Markets the money required, and backed by the fiscal power of Germany, and the Monetary power of the ECB.

Its doubtful Merkozy do not realise this, and certain their advisors have pointed it out to them if they didn't. Its likely then that all we have seen so far is the opening steps in a diplomatic dance of European politicians prior to them bringing about a solution based on the above. If that is not the case then the Euro is dead, and we are looking at a huge financial, economic, and political crisis. Without such a resolution the markets will attack the Bonds of all Eurozone economies, as the S&P potential downgrading shows. It would mean Greece exiting in short order, followed by a collapse of its economy, and a knock-on effect to international Banks that would put Lehman's in the shade. It would be quickly followed by the exit of Portugal, Ireland, Spain, and probably Italy and most of the other smaller economies.

Because of the seriousness of those consequences its doubtful that EU politicans will fail to come to the necessary conclusions. It is also why Cameron has been left powerless. He cannot stand in the way of Eurozone leaders implementing a resolution with or without him. If he stands aside to avoid upsetting his backbenchers and their demands for a referendum, so that an agreement of only the Eurozone 17 is made, then Cameron and Britain is marginalised, cut out of all future decision making in that regard. He cannot concede to a referendum that would delay a new Treaty, because he can't guarantee he'd win it, and the delay would be sufficient to destroy the potential for a deal anyway.

The Liberal-Tory policy on Europe has hamstrung them, but the real problem arises from Britain's stand-offish attitude towards Europe over decades, including the decision not to join the Euro in the first place. It means that Britain is now, and for the foreseeable future merely a by-stander when it comes to European decision making. That will be welcomed by the Nationalists. The Tory eurosceptics and their co-thinkers in UKIP and the BNP, will welcome such a development seeing it as a step on the way out of Europe altogether. They will be joined in that approach by the National Socialist Left in the CPB, and other such organisations. That would, of course, be even more disastrous for British workers.

The idea that Britain could prosper outside the EU is mad. It could not have the same kind of relation that Norway or Switzerland have to the EU, as some of these nationalists often argue, because Britain is a much larger economy than either Norway or Switzerland. With its continuing links to the US, and Imperial history, Britain would be seen as a competitor to an EU State, and would be treated as such. But, its inevitable that these bourgeois politicans should end up in this situation, because they continue to see things in Nationalist terms themselves. Only workers armed with a revolutionary, socialist, internationalist programme can begin to provide workers in Britain and the rest of Europe with a solution to their problems.

The basis for that has to be the building of a European wide Labour Movement, a single European Trade Union Movement, a single European Workers Party, fighting for a consistent democracy throughout the EU, fighting for common Trade Union Rates of pay, Benefits and conditions across the whole of Europe, and opposing the current policies of austerity that are driving Europe into a severe crisis.

Saturday, 3 December 2011

Northern Soul Classics - Tell Her - Dean Parrish

Top stormer from the man himself. Dean Parrish at his best. I've done some backdrops to this at the Torch over the years.

Thursday, 1 December 2011

The Egyptian Revolution - Part 9

The final group that should be mentioned here, is of course, the bourgeoisie proper. In a society like Egypt, where the Capitalist Mode of Production is established, and where the State is a Capitalist State, but a Capitalist State under the control of a military-bureaucratic elite, the bourgeoisie proper does what it has always done – it adapts. The Bourgeoisie's most prized possession is the Capitalist State. As Lenin, argues the best political shell for Capitalism is the democratic Republic, but where the bourgeoisie is weak either absolutely because economic development is at an early stage, or relatively because of the strength of other classes – the Landlords, or the Proletariat – then the State bureaucracy is able to rise up above the contending classes, and exercise control over the State, forced to protect the Mode of Production, and to ensure the conditions of its reproduction, but doing so in a way so as to ensure its own narrow interests. In France, it did not take long, after the Nazi occupation, for the French Capitalists to adjust so as to continue exploiting French Labour Power under a different political regime. In that respect, the position of the Egyptian bourgeoisie is little different to that of its foreign brethren. A Bonapartist regime, that is always prone to severe and unanticipated disruption, that is corrupt, and therefore, presents Capital operating under its remit with additional and unknown costs, which drains considerable sums, from the pool of Surplus Value, into unproductive consumption, as huge revenues, appropriated by the bureaucratic elite, and which can change its allegiances at a whim, is not a preferred option for Capital. But, even such a Capitalist State is better than no Capitalist State, it calculates. For the domestic bourgeoisie, limited in the extent to which it can simply relocate its operations overseas, and for sections of multinational Capital, which because of its sphere of operation can or has little choice, but to do business with such a regime, the options are limited. The domestic bourgeoisie are, even in a developed economy, a relatively weak force in terms of their numbers. They can only effect changes if they can win over, or attach themselves to, larger social classes. Despite the fact that some “anti-imperialists” seem to believe that “Imperialism”, has some God like power to install whatever, political regime it desires, the same is true. It is impossible to install bourgeois democracy on a society where the basic requirements for its existence – a reasonably developed economy, a secure bourgeoisie, and a sizeable middle class – are missing.

In fact, the differing parts of “Imperialism” understood properly respond in different ways. A Multinational company whose main operations are related to mineral extraction, or to commerce might well be able to operate within the confines of such a regime quite happily, because it is the kind of regime such Capital has grown up with from the days of Mercantilism. Large multinational firms, producing industrial products may be more than happy to do business with such a regime in so far as selling goods to it, or into its markets, but may fight shy of actually locating production within its borders. Yet other companies, for example Telecom companies, may look to locating most of their production outside its borders, but will have to conduct some production and other activity within its borders in order to establish communication networks etc. which they seek to sell to the regime. But, Imperialism is not just made up of Capital. Imperialism as a global system of Capital, also implies the existence and operation of all those other necessary elements of the Capitalist Mode of Production – states, be they national or supra national, and quasi state bodies - and in an age of multinational corporations, and transnational finance, the old coincidence between Capital and the nation state is broken, as many Marxist economists such as Radice, Lipietz, and others have long since demonstrated. Ford in its operations in Britain, Belgium etc. does not look to the US State to protect and further its interests. Under modern Imperialism, it is able to look to the British State, or the Belgium State, or the EU proto state to look after its interests just as adequately as the US state will look after the interests of British, Belgian, or EU capital invested in the US.

But, in turn these state formations, no longer have interests synonymous with multinational Capital. Indeed, they may have contradictory interests. Multinational companies, and transnational banks, may well look to the establishment of wider international bodies that better serve their interests in operating on a global scale, whereas the nation state has other interests. It has to continue representing the interests of Capital as a whole within its own boundaries. And, as a consequence it also has to take into account wider considerations, such as the integrity and defence of the state, its longer term strategic interests in relation to its own economic development and welfare, its secure supply of energy and raw materials etc. As a consequence, whatever the interests of various multinational companies, nation states will continue to have diplomatic relations, and strategic alliances with all kinds of states, in order to further these interests. And, of course, in addition to the longer term view, and strategic policies of the State, has to be taken into consideration the shorter term limitations and regulation of such states imposed upon them by the political process within every bourgeois democracy i.e. the point made by Paul Mason that unlike State officials, politicians have to get elected!

In short the bourgeoisie as a whole has a clear and historical incentive to see Bonapartist regimes replaced by bourgeois democracy, particularly where it has space to be able to buy off a sufficiently large section of society, but it will only act decisively to bring about such change, where and when it is confident of success. That is why in Egypt, its preferred method of transition is to be able to persuade the existing military-bureaucratic elite that its time is up, and that its privileges can be largely protected under the new regime. In fact, if it is unable to do that, if the Bonapartist regime attempts to cling to power, then as I have written in my blog Egypt – What Is To Be Done, the concept of Permanent Revolution, may become applicable. Under those conditions, the nature of the revolution will be much more thoroughgoing, and reach down deeper into the social relations of the society. The elite, could then only be overthrown by a mobilisation of the workers, and under those conditions, the workers would necessarily have to push forward their separate interests, and the divisions between the workers and the bourgeoisie and petit-bourgeoisie would be forced wider. It is under those conditions that the bourgeoisie would take fright, throw its support behind the regime, and a new clampdown would begin. In the last few months, and over recent days, we have seen those divisions begin to open up inside Egypt, as it has become clear that the Generals do not intend to simply hand over power, and have sought to establish new social support, by doing deals with the Muslim Brotherhood, which represents the most organised bourgeois political force within the country.

Back To Part 8

Wednesday, 30 November 2011

N30 In Stoke - Video & Speeches (1)

This is one of the speeches from the N30 Rally in stoke today. It was a moving speech by the daughter of the late John Urwin, who died in September. John was a good comrade who I first met just before the beginning of the 1984 Miners Strike. He was an electrician at Hem Heath Colliery, and I was with him in Hem Heath Club on the day that Miners there voted to come out on strike. Later after going to University, he became a lecturer in the TU Studies Department at Stoke College, where I met up with him again as a UNISON Branch Secretary, when I was trying to ensure that all of our stewards were properly trained. In fact, John's son was also one of my members, and even as a young man, he showed the same commitment to standing up for his rights.

In another speech I will be uploading soon, one of John's fellow lecturers, Ron Foulkes, who had been T&G Convenor at the local Rists factory, and who was also a Councillor from my old LP Branch, takes up this idea in a quote from Robert Tressle's "Ragged Trousered Philanthropists", talking about the role we all have to play in acting to make a difference.

Tuesday, 29 November 2011

The Egyptian Revolution - Part 8

In January 2008 Mahalla workers drew up a new list of demands. As well as higher wages, bonuses and allowances, it included a rise in the national minimum wage from 35 Egyptian pounds (£E) to £E1200 (£140) a month. It had not gone up since 1984! They announced a strike on April 6th if their demands were not met.

Several weeks later a group of campaigners against the Mubarak regime called for a General Strike on that day. The call was not made by organised groups of workers but was supported by some small opposition parties, intellectuals, some youth and radicals. The General Strike call spread rapidly through the Internet and text messages. Around 65,000 people signed up to a Facebook site promoting the strike. This represented a movement of largely middle class youth inspired by the growing displays of working class power.

The Interior Ministry warned that there could be violence and that people should stay off the streets. Thousands of workers did take strike action but a General Strike did not take place. In Mahalla, some of the workers’ leaders, who had played a leading role in the previous strikes, called the strike off after the monthly food allowance was doubled on April 5th. The strike had been due to start at 7.30am but at 3am hundreds of plain-clothes security moved in to the factory and arrested anyone who tried to speak out. Despite this many stayed away from work.

April 7, saw more battles with the police in Mahalla. A demonstration of 2,000 started at 4pm and grew to several demonstrations with up to 40-50,000 involved. Chants went up against the government and for the release of those arrested the previous day. It was reported that children were “throwing rocks, in a scene similar to the Palestinian intifada, against Central Security Forces officers and soldiers, while chanting ‘The revolution has come! The revolution has come!’”

On April 8th, Prime Minister Ahmed Nazif went to the factory and announced a bonus of 30 days wages! "We know Mahalla is suffering and you have passed through many crises," he told workers. The regime has balanced between repression and concessions whenever powerful workers’ movements have occurred. After Mahalla, the regime was less confident to crack down on workers in the way it did on students, community or democracy campaigners.

The April 6th Youth Movement, one of the initiators of the “Day of Anger” on January 25th 2011, took its name from these events. It attempted to repeat the success on May 4th 2008, Mubarak’s 80th birthday. However, no significant strike action took place that day and street protests were largely prevented by the security forces.

In fact, what we see developing is something that is quite common in revolutionary upheavals. Firstly, we see different social groups having different objectives. The workers who began the movement, were concerned with immediate economic concerns. Looking back to when these disputes began around 2006, it was precisely at that point, around 7 years into the new Long Wave Boom, where the economic tide had had long enough to begin to significantly raise the demand for labour-power. Trotsky, who had begun to analyse the effects of trhe Long Wave as described by Kondratiev – though Trotsky disagreed with Kondratiev in terms of method and detail – spelled it out,

“But a boom is a boom. It means a growing demand for goods, expanded production, shrinking unemployment, rising prices and the possibility of higher wages. And, in the given historical circumstances, the boom will not dampen but sharpen the revolutionary struggle of the working class. This flows from all of the foregoing. In all capitalist countries the working-class movement after the war reached its peak and then ended, as we have seen, in a more or less pronounced failure and retreat, and in disunity within the working class itself. With such political and psychological premises, a prolonged crisis, although it would doubtless act to heighten the embitterment of the working masses (especially the unemployed and semi-employed), would nevertheless simultaneously tend to weaken their activity because this activity is intimately bound up with the workers’ consciousness of their irreplaceable role in production.

Prolonged unemployment following an epoch of revolutionary political assaults and retreats does not at all work in favour of the Communist Party. On the contrary the longer the crisis lasts the more it threatens to nourish anarchist moods on one wing and reformist moods on the other. This fact found its expression in the split of the anarcho-syndicalist groupings from the Third International, in a certain consolidation of the Amsterdam International and the Two-and-a-Half International, in the temporary conglomeration of the Serrati-ites, the split of Levi’s group, and so on. In contrast, the industrial revival is bound, first of all, to raise the self-confidence of the working class, undermined by failures and by the disunity in its own ranks; it is bound to fuse the working class together in the factories and plants and heighten the desire for unanimity in militant actions.

We are already observing the beginnings of this process. The working masses feel firmer ground under their feet. They are seeking to fuse their ranks. They keenly sense the split to be an obstacle to action. They are striving not only toward a more unanimous resistance to the offensive of capital resulting from the crisis but also toward preparing a counter-offensive, based on the conditions of industrial revival. The crisis was a period of frustrated hopes and of embitterment, not infrequently impotent embitterment. The boom as it unfolds will provide an outlet in action for these feelings.”


Flood Tide

This is a potent antidote to those who operate with a crude theory, which comes to the strange conclusion that it is only by the impoverishment, and demoralisation of the working-class via some apocalyptic crisis that it can raise itself up to be fit to rule, and to challenge for power!

But, the workers, being very practical people were mostly concerned with their immediate economic condition, rather than any wider issues. But, we then see another common feature of revolutionary upheavals. The banner passes to another social group. The revolution is characterised by combined and uneven development too! The petit-bourgeoisie, and middle classes are drawn in behind the workers, drawing their own confidence from them. But, although, many of the middle classes, particularly the unemployed professionals, the young graduates that find changed circumstances have left them with an uncertain future, that Paul Mason referred to above, have immediate concerns too, their means of voicing those concerns, their means of addressing them are markedly different from the workers. The workers are brought together in frequently large conglomerations, such as the textile workers at Ghazl al-Mahalla textile mill with its 28,000 workers. Their traditional means of redressing its concerns is via industrial action, which by its nature is focussed on the place of work. But, the petit-bouregoisie and the middle classes have a quite diferent relation to the means of production. In the case of the peasantry and small artisans, they own their means of production, and depend upon their own economic activity to make a living. Although, strikes by such petty property owners are not at all unknown, they occupy a completely different role than for workers, who in striking hit at the owners of Capital. The professionals too where they have immediate economic concerns look to different solutions to them. They lack the collective economic muscle of the industrial workers. The solution to their immediate economic concerns is seen coming from a different route, from economic reforms, and liberalisation that takes the weight, particularly of a corrupt and inefficient State, off their backs, nad gives them a greater say in decision making, in order to be able to effectively press for such reforms, and for the kind of meritocracy they believe their status should be rewarded by. Their immediate frustrtations, therefore, tend to be reflected not by industrial action, but via popular protest, and the focus is not the workplace, but the Public Square. As Lenin, points out in his “Two Tactics of Social Democracy”, then we see that these different forms of protest, not only reflect the different social position of the different social strata involved in the revolution, not only reflect their differing concerns, but also provide us with a forewarning of the contradictory interests of these temporary allies, because the concerns of the petit-bourgeoisie and middle classes for the introduction of bourgeois democracy within which they seek to increase their voice, has as its aim the kind of economic reforms, the introduction of meritocratic principles, which are alien to the interests of the workers.

Back To Part 7

Forward To Part 9

Monday, 28 November 2011

The Egyptian Revolution - Part 7

Unlike 1848, the bourgeoisie across MENA are not attempting to overthrow the political regime of some other ruling class. In 1848, the political regime was still under the control of the old landed aristocracy. Across MENA today, the Capitalist Class is the ruling class, it is its State which rules society. The struggle it is waging is against the military-bureaucratic elite that controls that State, and which has become powerful relative to the class whose interests it ultimately serves, just as indeed the Stalinist, Bonapartist military-bureaucratic elite became powerful in the USSR and the other Stalinist States. But, as Trotsky spelled out in relation to the Stalinist bureaucracy in the USSR, the more that elite becomes entrenched, the more the Political Revolution, required to remove it, takes on a more thoroughgoing social character. In relation to the USSR, there was no other healthy, Workers State in existence, which could have pressed down upon the Soviet bureaucracy, and provided assistance to the Russian workers. The Russian working-class existed as a ruling social class in complete isolation, which is what made their rule so weak, so dependent upon the State bureaucracy, and which, in turn provided the strength of the position of the State bureaucracy. But, the Egyptian ruling class does have lots of support from ruling Capitalist classes throughout the globe, and those Capitalist Classes have every incentive as set out above for wanting to establish their “best possible political shell for capitalism” across MENA.

To that extent, in Egypt, the Capitalist Class may be able to effect a fairly stable transition from the political regime of Bonapartism to bourgeois democracy in the same way it has done across much of Latin America, and those parts of Asia, which have experienced rapid economic growth in the last 30 years. What is more, just as this rapid economic growth in Asia and Latin America, has facilitated the adoption of the kind of strategy that was outlined by Engels, i.e. the adoption of some form of Social Democracy as a means of buying off and incorporating the working-class – Lula is probably the best example of that – so the Egyptian ruling class, especially with the assistance of its international brethren via the establishment of some of Marshall Plan For MENA, as I set out recently, may be able to accommodate workers demands for better wages and conditions. The Capitalist Class of today, is much more savvy in how to achieve such things than was its 1848 counterparts.

Under those conditions the strategy set out by Marx and Engels after 1850, and by Lenin in his “Two Tactics Of Social Democracy”, seem even more appropriate. The development of the working-class in Egypt within the context of the unfolding revolution gives considerable hope for the success of such a strategy.

In reality, in Egypt over the last few years there have been increasing signs of worker discontent, just as there have been in other parts of the world such as China, where the State has attempted to control workers demands via State run unions. According to Socialist Alternative,

“Two million workers have taken part in 3000 strikes and industrial actions since 2004, the largest movement of the working class in the Middle East for decades.

Although virtually illegal, strikes increased from 222 in 2006 to 650 in the first nine months of 2007, involving 200,000 workers. In August 2007, alone, there were 100 industrial actions.”


They detail a number of workers disputes such as,

“when Ghazl al-Mahalla textile mill (with 28,000 workers the biggest in the Middle East) became the centre of workers’ militancy. A strike and occupation forced the bosses to make big concessions. Women workers played an important role. Five thousand workers tore up their membership cards of the official union in March 2007 and a new organisation emerged, the Textile Workers’ League.

By September 2007, the workers had still not received the bonus agreed as part of the settlement, worth 150 days pay. A mass meeting of 10,000 workers decided to strike and occupy. Despite threats of police, army and prosecution 10,000-15,000 slept on the premises. During the day, over 20,000 workers were present, organising their own security guards and food deliveries.

The strikers demanded pay rises in line with inflation, affordable housing and the resignation of the official trade union leaders. “We want a change in the structure and hierarchy of the union system in this country,” said Mohammed El Attar, one of the strike leaders. “The way unions are organised is completely wrong, from top to bottom. It is organised to make it look like our representatives have been elected, when really they are in fact appointed by the government.”


Workers in Kafr al-Dawwar textile mill near Alexandria struck in solidarity for several hours and Grain Mill workers demonstrated. Workers organised collections across Egypt. After a week the Mahalla workers won a stunning victory.

In fact, these developments, reflect the kind of transformation of the world working class movement as a result of the progress of the Long Wave Boom after 1999, that I had previously outlined. In my post, Prepare To Dust Off The Sliding Scale, I wrote in 2007,

“As the economic expansion of the upswing begins this demoralised and weakened condition is not easily shaken off. Confidence has to be restored, organisation rebuilt, new leaders developed. It takes time, and with new more productive technology the demand for labour may not rise quickly, and may rise in new unorganised industries. Indeed each Kondratieff upswing has tended to see the emergence of a new economic powerhouse that challenges and replaces the former dominant economy – in the present case China appears to be fulfilling that role, and that may require the development of a whole new Labour Movement

I think all of these elements can be identified in the present conjuncture, and that should give confidence to Marxists that once more the conditions are developing for militant working class struggles. How these struggles manifest themselves will differ. In China wages are rising by 10% plus per year, and there are clear signs that Chinese workers are beginning to become more organised. The same is true of workers in South Korea and other rapidly growing Asian economies.”


That was manifest in Egypt too.

“During the summer of 2007, the movement broadened to include white-collar employees, civil servants and professionals. The single largest collective action of the entire strike movement was the December 2007 strike of 55,000 property (real estate) tax collectors employed by local authorities. After three months of strikes, a 13-day sit-down protest in front of the Finance Ministry by 5000 workers a day ended with a great victory. The strike committee continued to meet together and a year later formed Egypt’s first independent trade union.

Abd El-Kadr Nada, Assistant General Secretary of the new union, told the CWI in 2009, “There haven’t been free trade unions in Egypt since the 1920s. The government philosophy has been to build unions to control the workers and so they’ve not allowed independent unions to start. They are scared more independent unions will succeed. They are scared a revolution will happen.” (op.cit.)


Of course, Marxists have to warn workers that independent Trades Unions, are not a solution to their problems either. The whole strength of bourgeois democracy is based upon the idea that contending interests are able to struggle for their interests on something approaching a level playing field. But, no such level playing field exists. The whole basis of the Trades Unions is to continue to assume the continued existence of Class Society, and, therefore, the dominance of Capital. That dominance of Capital is itself sufficient, as Lenin points out to ensure that even “independent” Trades Unions will act as conveyor belts of bourgeois ideology, or continuing the idea of simply bargaining within the system, and will as the British Bosses soon recognised even be useful means for conveying into the working-class the kinds of “sound economical doctrines” that Engels refers to above.

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