I haven't bothered watching any of the Tory leadership hustings. Its an irrelevant sideshow. In the end, we know that Bojo is going to be elected leader, especially now that Raab is out, and Steve Baker didn't stand. Only a No Deal Brexiter is going to be selected by the Tory rank and file, 80% of whom actively want a No Deal Brexit, and, according to recent surveys, that includes more than 60% of whom want that even if it means that very serious harm is done to the UK economy, and even if it means that the UK itself breaks apart, with Scotland and Northern Ireland becoming separated from it. That is why, other than for Rory Stewart, who has no chance of being selected by the members, even were he to get into the last round, all the other candidates are now vying with Bojo to appear diehard No Dealers, promising to leave the EU on 31st October come what may.
Of course, that too is a fantasy. The only way of taking Britain out of the EU by 31st October would be via a crash out. There is no time to renegotiate a new deal before 31st October; for one thing there will be no one to negotiate with in Europe until after 1st November, but there is no chance, in any case, that the EU is going to reopen negotiations on the Withdrawal Agreement, without Britain scrapping its existing red lines that determine the nature of the political objectives. Long before any potential for such a crash out arises, the financial markets will have crashed the Pound, and the London stock market, UK Gilts will have crashed sending gilt yields and other interest rates soaring, which will crash the UK property market, which is one of the main fantasies that Tory voters, particularly elderly Tory voters, have been clinging to for the last 30 years.
No Tory Prime Minister could push through such a crash out, and they know it. What is more important, the EU knows it. Its all posturing, simply for these hustings. The only way a Tory Prime Minister can carry through anything like the No Deal Brexit the Tory rank and file, and the majority of core Tory voters, demand is if they frame it in terms of a negotiated No Deal Brexit, as I suggested at Christmas. The reason the Tories need such a Brexit stems from the nature of what the Tory party is, and whose interests it represents. The common idea about the Tory Party is that it represents the interests of the very rich. In part that's true, but for the main part its false. The reality is that the Tory Party represents the interests of the not so very rich. It represents the interests of the owners and families of the 5 million small private businesses in Britain, which range from the window cleaner, through the back street garage owner, to the owner of the small to medium sized engineering company, and so forth.
In the various vox pops with members of local Tory associations over Brexit, you get a glimpse of these people. They are not the world's super rich. Often, they are not particularly bright, but they are motivated, by whatever reason, to make money. The reason they are not particularly phased by the prospect that Brexit might cause serious damage to the UK economy is that they know that what happens to the economy, as a whole, does not have particular bearing on their own immediate fortunes, which, ideologically, as individualists, they see as being determined by their own endeavours, if only the state, and especially the EU, would get out of their way. They might not be the sharpest tools in the box, but they are bright enough to understand that the economy's fortunes are not identical with the fortunes of all the people within it. Indeed, they have enough experience to know that when the economy does well, it is usually the large companies that do best, and those companies can pay better wages, and provide better conditions for workers, which are crippling for the small private company. The idea that this class of people are flag-wavingly patriotic is only true in the sense that they see themselves, and their interests as identical with those of the nation.
For the last forty years, the Tories, starting with Thatcher, have represented the interests of that class fraction, which itself represented a break with the stance of the Tories in the post-war period, and arguably for much of the last century up to that point. But, they were able to construct a coalition of support that also included those elements that popular perception usually associates with the Tories. The period of low and falling interest rates that started after 1982, meant that asset prices rose astronomically. In the 1980's, the Tories, actively intervened to help house prices to rise phenomenally, even in addition to the boost they received from falling interest rates. In the 1980's house prices quadrupled.
That was a massive boon to all those Tory voters, for whom their home was their main asset, and whose price they naively equated with their wealth and status. But, it was not just house prices that the Tories massively inflated, the falling interest rates meant that share prices also rocketed, and when in 1987, the first bursting of that huge bubble occurred, the Tories, and their co-thinkers in the US, acted immediately to reflate it, by the first round of money printing. The high priest of sound money, and devotee of Ayn Rand, Alan Greenspan, abandoned his previous religion, and became a devotee of the heresy of loose money, and initiated what became known as the Greenspan Put. Together, Thatcher in Britain and Reagan in the US, introduced the deregulation of the banks and financial markets, which effectively removed all regulations and controls over credit, so that all of this money could flow into inflating these asset prices, and each time that led to another financial crash, such as in 1994, 1997, 2000 and 2008, they responded by printing even more money so as to reflate those unsustainable asset prices, whilst simultaneously depressing the real economy with austerity measures, so as to hold back the inevitable rise in interest rates, and wages that would cause the bubbles once more to burst.
Unlike the small private capitalists who, in varying degrees, still undertake the function of capitalist, in their respective business, and even, in the case of the smallest, have to undertake labour itself, the really rich, the dominant section of the global ruling class, have no such constraints. Their wealth comes not from owning real capital, or from getting their hands dirty in business, but purely from their ownership of fictitious capital, i.e. of shares, bonds, and of property. It is in that form that the vast majority of their wealth is held, and they hold these assets across the globe. They are the true citizens of nowhere, to coin a phrase. As asset prices soared, from around 1982, as interest rates fell, so the owners of these assets saw these capital gains as their most important source of increasing wealth and power.
The initial cause of the rise in asset prices was the continued fall in interest rates, as rapidly rising profits in the 1980's, created a massive excess supply of money-capital. But, similarly, any rises in interest rates or threat of rising rates, such as happened in 1987, with the twin deficits crisis, or in 1994, as economies began to grow again following the recession of 1991, or as happened in 2000, and then again in 2007/8, as rapid economic growth, and rising wages caused rates to rise, causes these asset price bubbles to burst. The central banks have responded by printing money, and using it to buy up these assets to reflate their prices, which itself acts to drain money from the real economy in search of these speculative gains, but, in 2010, they also had to combine that with imposing austerity on economies so as to limit economic growth, in the hope of preventing another rise in interest rates. Even so, in the last couple of years, as the underlying economic reality has seen resumed economic growth, particularly manifest in rising levels of employment, global interest rates began rising again. As they did so, the US financial markets, last year dropped by 20%. Pressure was again put on US Federal Reserve Chairman Jerome Powell to cut interest rates, and print money.
But, the trouble is, as Marx described, in A Contribution to the Critique of Political Economy, when these additional money tokens or credit is thrown into circulation the state loses control over where they go. That is why central banks had to try to control that, by themselves directly buying financial assets with the additional currency. But, with growing levels of global employment, and thereby growing pressure on wages, and growing demand for wage goods that individual firms then feel compelled to satisfy, for fear otherwise of losing market share, the tendency increasingly is for this money to flow into financing real investment in productive-capacity, so that the result is again rising interest rates, alongside rising consumer price inflation, and rising wages.
In the last six months, the US Federal Reserve has not cut interest rates, having raised them several times last year. It has not reduced its policy of reversing QE. In addition, the ECB has also ended its policy of QE. Yet, global sovereign bond yields have been falling sharply, and asset prices rising. The reason for that is quite simple. Trump's global trade war has seen swingeing tariffs imposed on Chinese, Asian, and European imports to the US, as well as his tariffs and other measures imposed on Russia and Iran, and on any country that continues to trade with them. China has responded in like manner. It has been aided and abetted by Brexit. Together, Brexit and Trump's trade war acts as a huge dose of economic austerity imposed on the global economy. Yet, as I set out at Christmas, even that has not sent the world economy into a recession let alone a slump. The slow down, can mainly be attributed to uncertainty – why make big investment decisions now, when the situation could change drastically in a matter of weeks – and to the fact that where decisions on the reallocation of capital are being made, this involves new trade relationships being established. In other words, it is a temporary condition, whose end result will mean higher costs and lower growth than would have been the case without the tariffs etc., but does not mean that there will be any kind of recession let alone slump. The current falls in interest rates will be reversed, and when that happens, asset prices will again fall sharply.
In other words, the foundations upon which conservative social-democracy has rested for the last 40 years has been undermined. It is that conservative social democracy that held together the conservative alliance, which combined the interests of the Tory party's true core base within the ranks of those small private capitalists, with the interests of the dominant section of the ruling class, the owners of fictitious capital, and landed property, whose wealth and power seemed to magically stem from annual rises in asset prices, removed from any relation to the profits of the large-scale industrial capital. Low interest rates inflated the asset prices of the global elite, as share and bond prices soared, and of the large landowners, who saw land prices soar, as another consequence of soaring property prices. It saw the house prices of elderly Tory voters, similarly soar, which they managed to separate, in their minds, from the fact that their children and grandchildren were, by the same process, priced out of the housing market, though the Tories were there to help them use their existing equity, alongside the Help To Buy scam to get round that problem, which also thereby acted to prop up house prices at taxpayers expense, as the National Audit Office report has shown.
Its not just the Tories that have been affected by the collapse of the economic conditions that enabled conservative social democracy to utilise this model of borrowing against rapidly rising asset prices, and liquidation of capital gains. Blair and Brown continued the same approach after 1997. Its what effectively means that there is no solid foundation for those politics of the centre-ground any more. The conditions mean that the problem can only actually be resolved by an abandonment of conservative social democracy, and an adoption of progressive social democracy, or socialism. For the Tories, and the class fraction they represent, that solution is not possible. It is why they are in crisis. The only solution for the Tories is an overturning of the social relations that have existed now for a century. They must essentially carry through a social counter-revolution, overthrowing the existing social-democratic social relations, and the social-democratic state that rests upon them. They must try to restore an order in which the economy is dominated by a plethora of small private capitals, with a small state, unfettered free market competition, and the scrapping of all rights and protections that stand in the way of it. The trouble is that in the current world, a world that is characterised by imperialism, by a global economy dominated by large-scale, socialised industrial capital, no such reversion is possible. It would mean the British economy would be ruined, and ravished by those forces that dominate the global economy.
But, as seen from that 60% plus of Tory party members and voters who do not care that the UK economy would suffer serious economic damage from Brexit, such concerns do not figure in their immediate calculations. They are not the most intelligent segments of society, and nor are they typically noted for their longer term perspective, as opposed to their focus on short term gain. So, the Tory Party, force marched by its core support, rushes headlong for Brexit, and to the extent that it does not march fast enough, Farage and his Brexit company are there to crack the whip over their heads, ready to dragoon them into his own battalions, for a charge out of the trenches.
Bojo's only route to a No Deal Brexit is to pursue a negotiated No Deal, but, as things stand, he cannot get enough support for such a position. He will then have to call a General Election, with the intention of obtaining a working majority of pro-Brexit Tory MP's. But around half of Tory MP's, somewhere between 120-150, do not support any such No Deal solution. They reflect the conservative social-democratic wing of the party that recognises that the fate of the UK economy depends upon the fortunes of large scale capital, and that, in turn depends on Britain's relation to the EU. Some of those MP's will bite their lip to hold on to their seats, but others, already marked for deselection by the local associations will have an increasing incentive to jump ship.
Listening to some of the elder statesmen of that wing of the party, like Heseltine, Patton, and Clarke, in recent days, they repeat the usual stuff about never leaving the Conservative Party, but it becomes more apparent by the day that if the Tories push No Deal, then this wing of the party will be more and more attracted to the Liberals, who Corbyn's own disastrous pro-Brexit stance, has resurrected and restored to health. If the Tory parliamentary party splits, and around 100 Tory MP's find their way into the ranks of the Liberals, their momentum, gained during the European Parliament elections, will become more or less unstoppable.
As Corbyn, even now, after the party has made clear its objection to his reactionary pro-Brexit stance, continues to obfuscate and delay, they could be joined by around 150 Blair-right Labour MP's, and their entourage in the Lords, the European Parliament, and Council Chambers across the country. It would represent a far more significant break than was seen with the SDP in the 1980's. It would mean a cleaner realignment of British politics with reactionary nationalists on one side, facing progressive internationalists on the other.
The reactionary nationalists be they those of the Right such as Farage, or those of the Left such as the Stalinists of the Morning Star, or the “anti-imperialists” of Counterfire, and the SWP, and Socialist Party would face the same kinds of contradictions that are being seen in the Brexit Party itself already. Such an unprincipled formation would be unlikely to hang together for long. But, in similar fashion, on the other side, the forces of progressive internationalism would face a less acute, but nevertheless fundamental contradiction between those for whom this progressive internationalism means only a continuation of the ideas of conservative social-democracy, and those for whom it necessitates an inevitable drive towards progressive social-democracy, entailing not only a greater commitment to a more integrated EU, but also to a more social Europe, to an increase in the role of planning and regulation at a macro level, to greater industrial democracy and workers rights etc.
In other words, if Labour persists with its current stance on Brexit, rather than committing openly to opposition to Brexit, and to revoking Article 50 – the time for simply committing to another referendum is now gone, and what would Labour do if such a referendum came out again for Leave? – the trajectory ahead is clear. The Tories unable to simply crash out of Europe, will have to call a General Election on the basis of a No Deal exit. Their party will then split massively strengthening the Liberals, as these MP's defect en masse. With Labour still unclear about stopping Brexit, and its voters deserting wholesale to the Liberals, a majority of Labour MP's will also go over to the Liberals. In effect, a National Party will have been created, in a similar manner to the way Macron in France was able to recruit from both sides of the aisle.
As I wrote at the time of his election. Macron has no answers for France. It is an attempt to simply continue the policies of the last thirty years. A Macronite party in Britain would also have no answers, for the same reason. But, as Macron demonstrated, that does not mean that such a party cannot get elected. The question, both in France, as in Britain, is what does the progressive, internationalist Left do in such conditions? The answer must lie in siding with progressive internationalism, and opposing reactionary nationalism. The stronger the voice of the progressive social-democrats, and of socialists in any such new formation, the better able we will be to shape it.
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