May's Elections Will Be The High Point Of The European Right

In the upcoming elections, to the European Parliament, in May, the Right and Far Right will do very well. In Britain, UKIP are likely to come second to Labour, beating even an increasingly conservative and euroseptic Tory Party into third place. The Liberals, particularly after Clegg's abysmal performance against Farage, are likely to be annihilated. It could even spell an early bath for Clegg if not for the Coalition.

In France, the Front National may even top the poll. It has sought to shed its neo-fascist image, to present itself as merely an extreme nationalist party, similar to UKIP. Yet, the history of many of the members of both parties – the BNP has openly admitted encouraging its members to join UKIP – and the underlying racism of both parties, remains.

Similar Far Right parties in the Netherlands, in Austria, Finland and elsewhere look set to benefit from the nationalist bandwagon that short-sighted policies of austerity have generated across Europe. As living standards have dropped, and services been cut, as a result of those policies, the usual scapegoat of foreigners – be it EU bureaucrats, or immigrants – has formed an easy target, facilitating the message of the Far Right.

But, in many ways, all this gives a false picture. The main reason these Far Right parties will do well is that the turnout, in the EU elections, will be low. It is the same reason UKIP, and even the BNP, did well in the last Euro elections. Its why they tend to do well in local elections, where the turnout is usually less than 30%.

Even where UKIP have done relatively well in by-elections, their actual share of the vote, for a normal General Election, has not been that significant. They have done well, in Labour constituencies, only to the extent that the Tories have done appallingly. Compared to the Labour vote, they have continued to lag well behind.

No one seriously believes that in a General Election, Farage and his circus of “loonies, fruitcakes and closet racists” will even win one seat let alone pose any significant chance of winning. The most likely effect will be to take sufficient votes from the Tories to let Labour win. Look at the experience of the BNP. It held many council seats, won in small turnout elections, in the same way it won its Euro seats. Today, it's a busted flush. In the General Election, it went backwards; it lost most of the council seats it had; it's bankrupt politically and financially.

Even the most successful of the Far Right parties, the FN in France, has no chance of winning the Presidency or a majority in the National Assembly. It benefits from the semi-proportional representation system in France, as did the BNP and UKIP in the last Euro elections. But, the success of the Far Right in the euro elections is likely to be part of their undoing. When Jean Marie Le Pen managed to get into the final round of Presidential elections, several years ago, the response of the establishment was to muster against him, in favour of Chirac.

The same could be seen in relation to the BNP, at its height, and to an extent today with Farage – though in part he has been a media created figure in his own right. Capital, particularly big capital, has no need of these Far Right, and certainly not fascist or neo-fascist parties, at the moment. In fact, after their experiences with Hitler in the 1930's, they are likely to have a high watermark before they resort to such measures again.

The Far Right represent a destabilising force that capital does not need when it is secure in its position, entrenched within resilient bourgeois social-democratic regimes. Although the success of UKIP is likely to exert a further centrifugal force on the Tory Party – sending its conservative wing off in the direction of Farage, and its social-democratic wing off towards what is left of the Liberals and towards Labour – the main result will be a further coming together of the interests of big capital, under the aegis of social democracy.

Whether that social democracy has the party label Labour or Tory, SDP or CDU etc. does not matter.

The other reason that May will mark the high water mark for the Far Right is the economic conjuncture. The long wave cycle turned from its Spring phase to its Summer phase around 2012/13. That means that strong global growth continues until around 2025-30, just as it did between 1999-2008, and indeed as it has done, in most of the world, outside Europe and North America, since 2009. But, the conditions under which that growth occurs have changed, and will continue to change. Firstly, the high prices of raw materials that characterised the earlier period, stop rising and begin to fall as large, new sources of supply come on stream. Secondly, the large gains in productivity that reduced the values of commodities and pushed up profits, slow down. Thirdly, the large increases in the supply of labour-power (both new workers and relative surplus population due to productivity growth) slows significantly.

China is already experiencing that and seeking sources of cheap labour in Vietnam, Indonesia, Africa etc. Even Britain is experiencing shortages for some skilled workers, exacerbated by the immigration cap. In the US, it was revealed that the top technology companies have formed a secret cartel so that none of them poach highly paid workers from the others, which would push up wages even further.

The consequence is that countries producing manufactured goods and services find it harder to sell to primary producing economies as the latter see their income fall, as raw material prices fall. Secondly, the latter see their currencies fall as their income falls. This pushes up domestic inflation. Workers seek higher wages, so profits fall. The rash of strikes across South Africa's mining sector is an indication of this process. But, this comes at a time when other emerging markets are seeing their currencies fall and inflation rates climb, in the backwash of the tapering of QE in the US. The result is sharply higher interest rates in these economies to defend the currency and curtail inflation. But, this process plays into and is part of a general rise in interest rates across the global economy.

Thirdly, the slow down in productivity growth means that the fall in commodity values slows down or stops. That is exacerbated by the fact that the world's main manufacturing power – China – has faced rising costs and a rising currency value, which makes the commodities it supplies to the world's consumers increasingly expensive.

In the last thirty years, a massive expansion in the quantity of money tokens and credit-money, pumped into circulation, did not cause consumer price inflation only because the value of those consumer goods was itself being massively reduced. In a world of slowing productivity growth, and rising commodity values, the massive amount of liquidity already in circulation, will inevitably result in sharply rising inflation.

The latest US data already suggest inflation is rising, and the only reason inflation in the UK and EU has fallen (besides the fact the figures are bogus because they do not include rising housing and pension costs) is because the value of the pound and euro have risen against the dollar, reducing import costs.

As interest rates rise across the globe, the money that flowed into Europe and the US, will flow out again, causing their exchange rates to fall, inflation rates to rise, and prompting another rise in interest rates, as bond investors seek to defend their assets against depreciation.

The consequence of this is a weakening of the economic conditions which have strengthened the positions of those sections of capital on which conservative and nationalist parties rely. Low interest rates are the condition for the growth of the “plethora of small capital”, as Marx describes it. It is seen in the 150,000 businesses in Britain described as “zombie firms”, who just about survive being able to repay this low rate of interest, but unable even to produce enough profit to repay the capital sum they have borrowed.

These zombie firms cling to existence on the back of these low interest rates, and on the back of the extraction of absolute surplus value from their low paid workers, who make up many of those on zero hours contracts. Many survive only because the low wages they pay are subsidised, by the state, by a transfer of tax, taken from the wages of other workers, and from the fact that their workers, even then, have to resort to Pay Day lenders, to make ends meet.

These small capitalists are the bedrock of the Tory Party, and what they represent makes up the bulk of votes for the Tories. UKIP simply represents the more extreme, more consistent exposition of those ideas. But, the Tories also draw support from other traditional sources, from the financial and landed oligarchy, and commercial capital. As Marx points out, wherever these interests predominate, the political regime is more reactionary than where industrial capital predominates. The centre for these interests in Britain, is London and its environs, and its there that the Tories have most of their support.

But, the consequence of the change in the conjuncture is that as well as interest rates rising for the reasons outlined, the rate of profit begins to fall, as all those causes of it previously rising go into reverse. A fall in the rate of profit first hits all of that plethora of small capital. The initial effect is likely to be a sharp rise in unemployment, as the zombie firms go bust. The large scale disguised unemployment of millions employed part-time, on temporary contracts, under employed, and on zero hours contracts will then be exposed, along with all of those who are supposedly self-employed, but who are simply scraping a living from underemployment on their own account.

But, ironically, big capital may benefit from this process. Part of the drag on its costs, represented by the taxes on its workers, to subsidise low paying small capitalists, will be lifted. To the extent it picks up capital on the cheap, its rate of profit will rise. More workers will be picked up by this big capital, paid higher wages, and may for the first time become organised in unions. But, in any case, the fall in the rate of profit, at a time when more productive capital will need to be employed as productivity growth falls, and in order to retain markets, means that interest rates will rise, as the supply of money-capital falls relative to its demand. The likely consequence will be in the short term a more serious financial collapse even than that of 2008/9.

It will fatally weaken the power of the financial and landed oligarchy and the merchant capitalists, as workers end their obsession with debt fuelled consumption and property speculation. It will by contrast strengthen big industrial capital and encourage its logical drive to establish a European state. To the extent it does that by mobilising social-democratic forces to achieve it, the power of conservative and nationalistic ideas will be further weakened.

In the second half of 2014, a new 3 year cycle will lead to a slow down in growth that will last until around mid 2015. Survey data is already indicating the onset of that cycle.  In countries like the UK, where austerity has been inflicted, it will give the lie to the idea that those policies have been beneficial. In Britain, where much of the recovery has been built on an encouragement of further debt, and the same kind of state intervention in the property market that led to the US sub-prime crisis, that is likely to be even more acute, particularly considering the huge number of people who now rely on Pay Day lenders, and food banks.

Despite the government throwing everything it could at it, outside London and a few other cities, the property market barely flickered. How could it do any more when in most of Britain around half the working age population now use Pay Day loans, and about a quarter of the population have used food banks.  The Liberal-Tory claims that we are all in this together, suggested again recently by Employment Minister Esther McVey, who said,

"It’s been a tough time for you, for me and everybody in the UK but we’ve now turned that round.” (Paul Mason's Blog)

shows just how remote they are from the real world.

A slow down in the economy, rising unemployment, rising interest rates, and increasing debt defaults will kill the property market. All suggestions that “this time its different” will be shown to be as false as when the same statements preceded the 75% drop in the NASDAQ in 2000!

The denouement in all this financial froth will be the death knell for those conservative and nationalist political forces that rose on the back of it. We should say good riddance to both.