Yesterday, On "Murnaghan", Chuka Umunna got it right. He pointed out, as he has in the past, that the last Labour government DID NOT overspend. He repeated the point he has set out before, and which I have described at length, that the average deficit to GDP under Labour, up to 2008, was 1.57%, which is less than half the figure of 3.48%, which was the average under Thatcher and Major between 1979 to 1997! In 18 years, Thatcher and Major only managed to run a budget surplus in just two years, whereas Labour ran a surplus in four years between 1997 to 2001. That is despite having to borrow heavily to invest to repair the nation's roof, from which the previous Tory government had stripped off the lead, and sold it to their friends, the asset strippers.
Umunna was correct to say that the real failure of that Labour government, as I have argued in the past, was not that it overspent, but that it failed to change the economic model that 18 years of Tory government had put in place, based upon low wages, and high levels of private debt, and an over reliance on fictitious capital, blown up in stock market and property bubbles, which also benefited the Tories friends who are the major owners of that fictitious capital. Of course, the Liberal-Tory government over the last five years, has made that problem much, much worse.
Umunna, was also correct to say that there is nothing progressive about running a deficit, for the sake of running a deficit. Large public deficits simply result in money being transferred to those same owners of fictitious capital, without any commodities being provided in exchange. Umunna, like John Prescott and his son David, has pointed out that the last Labour government, in exchange for that deficit had done exactly what the Tories accuse Labour of NOT doing.
For 18 years, the Tories had drained resources from the countries infrastructure with their policy of austerity and privatisation. The country's roads, schools, hospitals and so on were crumbling due to Tory neglect, and even their deliberate policy of selling off the family silver. It was the Tories that failed to fix the roof while the sun was shining. I remember well, having been elected to the County Council in 1997, the relief that was felt that at last, we could start redressing that damage.
It was Labour that began the process of undoing that damage by trebling the investment in the NHS, whose satisfaction rating with the public had fallen to an all time low of around 30%. It was labour that began the process of building schools, and once more putting finance into local government. For 18 years under Thatcher and Major, the ratio of the budget deficit to GDP had climbed because they used the public finances, not for such investment, but to finance their ideological war against the working-class. The deficit rose, because under them the welfare bill soared to cover the huge rise in unemployment they welcomed as the means of undermining the power of trades unions, so as to drive down wages, and undermine workers conditions, to push through their economic model of a low wage/high debt economy, for the benefit of the money-lending capitalists, and the low paying small capitalists that make up the bedrock of Tory support.
But, of course, the correct analysis provided by Umunna was removed from all later news reports of what he said. If you hadn't heard him, you would have thought from the later reports and edited clips that Umunna had said that Labour had overspent, and that the deficit had been a problem, a problem that a future government must avoid. Why is it that the Tory media are so afraid to even allow even the smallest challenge to the idea that Labour overspent?
Its because the Tory narrative depends upon it, and because that narrative is itself extremely fragile. Once the lie that Labour overspent is exposed, once the facts that Labour's deficit was tiny compared to that run by the previous Tory governments, that Labour ran surpluses and so on, is laid bare, then the question has to be addressed of what did actually cause the crisis. Indeed, the question has to be addressed of what was the real basis of the increase in the deficit - which was, as in Ireland, the US, and elsewhere to deal with the mess that the Tories friends, the owners of fictitious capital had created. It was to deal with the fact that over 40 years, huge bubbles had been created in the stock, bond and property markets, which were bursting, and rather than allow that to happen, the owners of those fictitious assets had been bailed out by the taxpayer - only to allow those bubbles to be blown up on an even more massive scale.
In a way, the Tories and their base in the money markets have to deny the truth of the last financial crisis, in order to be able to get away with the even worse financial crisis to come, as those bubbles burst with no means of reflating them.
Jeremy Corbyn was right, therefore, when he appeared on the same programme later to challenge the idea that Labour must make the deficit the centrepiece of its strategy. The deficit is still historically small compared to the period of the accumulation of capital during the Industrial Revolution, or similar periods of accumulation such as after World War II, when the welfare state was under construction. the real issue of debt is whether it is being used to finance investment, or to finance consumption.
Unfortunately, Jeremy, like most of the Left, is stuck in the same statist mindset of the post war period, and earlier, and those solutions are no longer viable. In many ways, they are reactionary solutions. It reminds me of the situation that Marx describes in the Communist manifesto of the socialism of the old feudal aristocracy, which relied upon defending the old feudal and guild monopolies. Those solutions represented a challenge to the inequities of Capitalism, but they were a challenge that looked backwards. For all its inequities as Marx demonstrated, in breaking apart those old monopolies it was fulfilling a most revolutionary, historical function.
In the 19th century, state capitalism under Bismark in Germany, Louis Bonaparte in France, Bolivar in Latin America, and to an extent under the direction of a strong central state in the US, after the Civil War, as well as under the Mikado in Japan, acted to bring about a more rapid industrialisation and modernisation of economies that needed to industrialise to challenge the global power of Britain. Similar Bonapartist regimes, under Nasser, Assad, Saddam, the Shah, and to an extent Gaddafi, undertook a similar modernisation in the Middle East.
Lenin described the situation in Russia after 1917, of an economy based upon state capitalism, under the control of a workers state with bureaucratic deformations. That is probably the closest to a correct analysis of what existed. It was able to modernise and industrialise the economy at a monumental pace. After WWII, Britain using those same techniques of state capitalist planning, used to mobilise resources during the war, followed a similar course, to recapitalise and renovate its economy.
As a means of carrying through that basic function, state capitalism can be very effective. But, as the Stalinist states of eastern Europe showed, and as the failure of state capitalism in western Europe showed, it is pretty useless at going beyond that basic function. Moreover, its not just in the Stalinist states that the bureaucratism leads to corruption and inefficiency. In Ken Loach's "Spirit of 45", the same thing, of bureaucratism, and corruption can be seen, with women offering sexual favours to be able to get more favourable treatment in housing allocation, for example.
Its time for workers to develop their own way forward, and not rely on the capitalist state, or any other state erected above them to provide those solutions. The solution to the problems of inequity, and inequality cannot flow from that state imposing some bureaucratic solution, or reallocation from above. No solution to inequality can come just by trying to rebalance revenues, it can only come from a restructuring of ownership of the means of production, and it is only workers who can bring that about by their own actions.
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