So, Britain is to get its first British-Indian Prime Minister in the form of Rishi Sunak, or Rishi Rich, as his friends might know him. It is further testament to the growth in the role of the British-Indian bourgeoisie, and of the role of Indian imperialism, in the British economy, via Indian multinationals such as Tata, and so on, that now own large chunks of the British economy. Not surprisingly, Indian imperialism welcomed his appointment, talking about the reversal of imperial fortunes, and looking forward to deals that emphasise the rising power of Indian capital, and the rapidly declining power of British capital, outside the EU. We might spend time asking what his economic policies might be, but the reality is that there is no point, because, as the experience of Truss has just shown, it really doesn't matter, because it is the laws of capital, and the power of global financial markets that will dictate what he is forced to do. He may be led to try his luck, or be pushed around politically by the continued divisions inside the Tory Party, but that will only lead to further instability and chaos.
In fact, as one Tory financial backer, Guy Hands, has set out, the Tories are not fit to govern, and unless they drastically change course, in relation to Brexit, and their attitude to the EU, their problems will continue to get worse, leading to some kind of economic crisis, and them going begging to the IMF. At the weekend, Northern Ireland Secretary, Steve Baker, tried to insist, as he put his backing behind Sunak, that the position on Brexit, and, in particular, the Northern Ireland Protocol, would be unchanged, i.e. the Protocol would be scrapped, meaning an increasingly fractious trade war with the EU, at the very time, Brexit Britain is going deeper into crisis, and is more than ever dependent upon good relations with its biggest trading partner, the EU. That is as insane, and detached from reality, as was the policy of his former boss, Liz Truss.
Truss and Kwarteng were actually right that the solution to Britain's economic problems lies in a significant increase in growth. Much more rapid growth, would, if not accompanied by even greater liquidity injections, soak up the existing excess liquidity, and, thereby, rapidly reduce inflation. It would also increase revenues, including tax revenues, so that all of the current budget deficits could be reduced, and government borrowing reduced, taking some of the pressure off rising interest rates.
However, none of Truss and Kwarteng's policies led to such growth. They only led to higher levels of unproductive consumption, bigger deficits, larger borrowing, higher inflation and higher interest rates. What is more, the ruling class does not want higher economic growth, (or, at least, it only wants it if it does not also mean higher wages and interest rates) precisely because it would also lead to higher wages, and a squeeze on profits, an increased demand for capital, and so higher interest rates, with a consequent crash in asset prices. As the ruling class owns all its wealth in the form of these assets, its such a crash that they, and their state, have been trying to avoid for the last 30 years, and, particularly, in the last 12 years, using austerity, trade restrictions, and lockdowns to achieve it.
What the ruling class would like is to be able to hold back the rise in wages, and enable profits to expand, as inflation continues to push up prices. That is also why pro-capitalist Blue Labour MP's like Rachel Reeves also implore workers not to push for “excessive” wage rises, but instead to put their faith in a Labour government, and why Starmer sacks Labour Ministers for supporting workers on picket lines, and uses the machinery of the Right to deselect them.
What the ruling class seeks is a new round of austerity, which would reduce government borrowing further, encourage a recession, and thereby, undermine the growing power of workers to obtain higher wages. It would also reduce the demand for capital, so that interest rates fell, and so asset prices could again be inflated. Enemies of the working class, such as Larry Summers in the US, are open about this, calling for US unemployment to have to rise to over 5% for more than a year to achieve such an effect.
The trouble is that workers, in Britain, as now, across the globe, are not going to sit back and simply allow that to happen, and, what is more, the simple dynamics of the economy, despite all of the talk about recession and economic slowdown, let alone economic crisis, do not favour such a strategy. That dynamic is more apparent in the US than it is in Britain or the EU, where the self-imposition of huge rises in energy prices, resulting from NATO's economic war against Russia, including NATO's sabotage of Nordstream, is severely hitting economic growth.
In the US, the economy continually frustrates the predictions of economists about impending slow down, as employment continues to rise sharply, and that employment fuels growth of wages, which then feed into rising aggregate demand, which leads firms to accumulate additional capital, and so employ yet more labour. With profit margins still high, there is scope for that to continue for a long time, before rising wages start to squeeze profits to a degree in which a crisis of overproduction of capital arises. The same dynamic basically exists in Britain and Europe, not to mention China, Japan and the rest of Asia.
After 2010, Britain and the EU imposed fiscal austerity. There was clearly no economic reason for doing so, because, as has been stated many times, governments enjoyed the lowest costs for borrowing there has been in 5,000 years! They could have borrowed money, at these historically low rates, to finance their activities, and, in the process, would have kept workers in work, earning wages that could be spent in the high street, would have kept suppliers to government busy producing goods and services, including schools and hospitals, which would, in turn, have employed people, who would have earned wages, and paid taxes, and themselves bought goods and services, providing employment, wages and profits that would have expanded the economy further. The reason for austerity was never to do with the needs of the economy, but was always to do with the needs of the ruling class, of speculators, to prevent interest rates rising from rock bottom, and so causing asset prices to crash again, as they had done in 2008.
But, the consequence of all of that austerity is also that the condition of the infrastructure in many of these economies became even more dire. And, the base from which any further reduction in the level of state provision could be effected has been reduced even further. A comparison can be made with the cuts in local government that occurred in the 1990's. During that time, large chunks of actual service provision disappeared. Leisure services were handed over to private companies, community halls and other such facilities were closed down, council housing was handed over to arms length companies (ALMO's), and so on. But, Councils still needed to function, which required administrators, and they still required expensive computer systems, costing millions of pounds, to deal with the collection of Council Tax and so on, as well as an army of accountants, solicitors and so on.
In short the actual services provided by Councils shrank significantly, but the size of Council Tax bills didn't, because vast amounts of money still were required to pay for the computer systems, the administrators, the accountants and solicitors, and senior executives who remained in place. In large part, particularly District Councils, became not providers of local public services, for which Council Tax was levied, but simply local fiefdoms of politicians and bureaucrats, providing very little, and whose main expenditure was for their own administration, and the collection of Council Tax itself! They ran administrative systems to collect Council Tax, and pay out Council Tax and Housing Benefit. As I wrote at the time, about two-thirds of District Council expenditure went, not to provide services to their communities, but simply to pay for the continued administration of the Council.
To cut local authority spending, would probably require simply closing down District Councils, and absorbing them into larger Unitary Authorities, which probably should have happened a long time ago, anyway, but there is little scope for cutting the spending of existing Unitary Authorities, County and Metropolitan Councils, because their budgets for the provision of services such as education, and social care, are already inadequate. Schools are already faced with running out of money, as inflation has caused costs to rise substantially, whilst social care has effectively ceased to exist years ago. The Tories proposed to deal with it, via the National Insurance rise, but they subsequently scrapped it.
The NHS is also in a state of collapse. COVID and lockdowns enabled the Tories to disguise the extent to which the NHS no longer exists, for two years, but anyone that has been unfortunate enough to need its services over the last decade and more, knows that it had virtually collapsed years ago. The ending of COVID and lockdowns, whilst waiting lists continue to grow, and waiting times in A&E extend into days not hours, illustrates the degree of its collapse, such that any idea that its budget could be cut becomes ludicrous. Those problems are exacerbated by the idiocy of Brexit, again illustrating how far from reality is the idea of Steve Baker that Britain can afford to antagonise its huge neighbour even further.
Indeed, the ruling class knows that any possibility of increased growth without rising wages and interest rates is dependent upon Britain re-joining the EU, so as to remove all of the remaining frictions and costs, to bring about further rationalisation and concentration of capital, and to obtain the benefits of free movement of labour.
The possibility of any great savings from austerity has gone. But, in addition, large numbers of Tory MP's were elected to parliament in 2019, from so called “red wall” seats, on the basis of the promise from Boris Johnson, and Rishi Sunak of “levelling up”. Many of those MP's were actually keen for Bojo to be brought back by popular demand, to replace Truss, for exactly that reason. They see their short parliamentary careers coming to an abrupt end, if Sunak, or anyone else attempts to introduce a new round of even harsher austerity, which would impact their areas more severely than most.
So, whatever Sunak might be inclined to do, and whatever the ruling class, and global financial markets might want Sunak to do, by imposing such austerity, so as to balance the books, slow the economy, reduce interest rates, and boost asset prices, around 40 or so Tory MP's, from those seats, will vote against it, which, together with the votes of opposition MP's, would make it impossible to get through parliament.
Sunak's only other option is, then, to balance the books by raising taxes. Again, all of those Tory MP's that backed Truss, and whose mantra is lower taxes, will oppose any such plan. They, too, form enough votes to prevent it going through parliament if they are joined by opposition MP's. Whether those opposition MP's do vote against depends on the tax rises proposed. Labour and Liberal, as well as SNP MP's have proposed windfall taxes on energy companies and on banks, so Sunak might get those tax rises through parliament. They seem unlikely to be enough to cover the huge gaps in government finances, even after the reversal of the suicide plans of Truss/Kwarteng.
A large part of that debt came from Sunak's own largesse in relation to lockdowns. The lockdown payments replaced wages and other incomes, but wages represent only a fraction of the amount of new value that workers produce by their labour. A while ago, I estimated that whilst average hourly wages amount to around £15, the amount of new value created by labour is around £55, and all of this new value production was lost to the economy during two years of lockdowns.
On top of that, we now have the energy price cap subsidy to energy suppliers. Originally, that was estimated to cost around £130 billion over the two years to the next election, but, even to next Spring, as now proposed, it amounts to around £48 billion. Funding that, on top of all of the rest of the debt, at a time when inflation is also increasing costs, and interest rates are rising, so that interest charges look set to become the single biggest part of government spending, would require much more in tax raising than windfall taxes on energy companies and banks can provide, let alone the effects of such taxes themselves on the economy.
Austerity will mean a focus not on cutting services, but, even more, on cutting public sector wages. The state is already attempting that, and using its power with near state enterprises, such as the railway companies. But, even that is fraught, because with labour shortages across the private sector, public sector workers are able to simply move into other jobs with higher wages, as has happened for example with whole teams of local authority bin lorry drivers, being recruited by haulage firms, care workers getting better jobs on supermarket checkouts, or in restaurants and hotels etc. The other area of such cuts will be in relation to pensions and benefits. On all of these a Blue Labour government will be better placed to push through the attack.
The problem facing any Tory Leader – and the same problem applies to Labour – is that the party is trying to represent two antagonistic social classes. In the past, the Tory Party's membership was a motley bunch of the old rural squirearchy, mixed with the executives of companies, along with local small businesspeople. The latter always dominated numerically, but the levers of power remained in the hands of the rich, who also provided the funding for the party, and to whom the small business people subordinated themselves. Choice of party leader was always in the hands of Tory MP's, and the party always, therefore, looked to the interests of big capital, and, thereby, the shareholders/ruling class. Whilst paying lip service to small business, and free enterprise, it was always, in practice, a conservative social-democratic party.
That changed in the 1980's, as Britain experienced deindustrialisation, a stagnation in the growth of large-scale socialised capital, and a rapid expansion of the petty-bourgeoisie, whose increased social weight became itself expressed in its takeover of the Tory Party, and support for other parties to its Right, like UKIP. At the same time, the party membership also gained the power to elect the Leader. Given the reactionary petty-bourgeois nature of the membership, it was inevitable that, given the choice, they would elect those that reflected those politics, hence, Boris and then Truss (party members would have again elected Bojo in place of Sunak). But, as just seen, any attempt to implement those reactionary, petty-bourgeois policies, will bring down the wrath of the ruling class, and its expression via the financial markets. The government in Italy will find exactly the same thing, in coming weeks.
The Italian government, at least, has not shackled itself by committing to leaving the EU, as the British government has done, even though, in reality, Britain remains tied to the EU, and the need to conform to single market and customs union rules, most visibly in relation to the Northern Ireland Protocol. Sunak will find that to satisfy the requirements of the ruling class, and financial markets he has to pursue policies that are anathema to the majority of his party membership, and to a large chunk of Tory MP's.
But, a Labour leader faces a similar problem. Labour has traditionally also attempted to reconcile the antagonistic interests of two different classes, the ruling class and the working class, although, on many fronts, these interests do coincide, because it is in the interests of both capital and labour that capital should develop and accumulate on an ever larger scale. But, under Starmer, and as increasing Bonapartist tendencies have undermined democracy in the party, it too has become a Brexitory Party, representing the interests of the reactionary petty-bourgeoisie, and English nationalism, in search of an electoral coalition it believes can put it in government. Yet, such policies are anathema to the interests of both the ruling class, and to the working-class.
Polls show that 67% of Labour voters, now favour rejoining the EU, and if the polls are also to be believed, Labour now has the support of around 54% of voters. So, a reactionary English nationalist agenda, appears to be deluded even just in electoralist terms. At the weekend, around 20,000 people marched in London to call for Britain to re-join the EU. Its not a huge number, but given the current pro-Brexit, English nationalist position of both Tories and Blue Labour, and the fact that the Liberals and Greens are not shouting their pro-EU position from the rooftops, as well as the fact that the TV did not even mention the existence of the demonstration, its not a bad start. Its about ten times the size of any of the pro-Brexit demos that Farage tried to mobilise, in latter years.
Of course, most of those involved in this demonstration were liberals not socialists. But, that does not change the fact that their position is progressive compared to that of the Tories or Blue Labour. Marxists do not advocate support for bourgeois workers' parties like Labour, because of their progressive nature, but simply because, given our own weakness, we seek to gain the ear of the working-class, and its more advanced sections, which itself continues to look to such parties. We do not at all support the reactionary policies and programmes of such parties, and their leaders, quite the opposite, but we do align ourselves with the ordinary workers, and their organisations within them.
“As the experiences of the Russian Revolution teach us – remember this in England and America! – the most important thing of all is to stay in the midst of the masses of workers. You will often go wrong with them, but never leave the mass organisations of the working class, however reactionary they may be at any given moment” (emphasis added).
(Zinoviev’s closing speech at the 15th Session of the Second Congress of the Comintern)
So, we can well understand why progressive workers, who back re-joining the EU by large majorities, will look at the near identity of reactionary English nationalist position of Sunak's Tories, and Starmer's Blue Labour, and conclude, in an election, that the pro-EU policies of the Liberals, Greens, SNP, and Plaid are a better alternative, and, as actual by-elections have shown, as against opinion polls, even where Labour has been in second place, voters have voted tactically for Liberal candidates seen as having a better chance of winning by consolidating that progressive vote, so that the Liberals overtook both Labour and Tory candidates, to win the seat.
These are conditions in which these contradictions, manifest within the two main parties lead towards a realignment, several false starts of which have already been attempted. The Tories are unlikely to be able to push through either the reactionary policies their base wants, or to push through the attacks on the working-class that the ruling class requires. Starmer's Blue Labour is much better placed to achieve that. On the one hand, Starmer can offer up some populist, reactionary, petty-bourgeois “anti-capitalist” rhetoric about windfall taxes, as left cover, whilst using Labour's historic links to the trades union bureaucracy to push through austerity, in the same way that Wilson attempted in the 60's (failed), and Callaghan attempted in the 70's (worked for a while, and then failed catastrophically). Marxists should bear this in mind, in mindlessly demanding “Tories Out” and demanding a General Election.
Currently, we have tens of millions of workers, in Britain, mobilising to demand wage rises, and improvements in conditions. It is the first time workers have risen from their knees, in decades. Reeves demand that they, instead, place their future in the hands of a Labour government, and do nothing to risk it being elected, shows exactly what their intentions are. Calls for a General Election, now, which can only mean replacing one reactionary bourgeois government with another (and one better placed to impose austerity and wage cuts upon workers), is to be complicit in demobilising the workers struggle, in the same way that the French Stalinists did in 1968, amidst widespread workers strikes and occupations. As Lenin put it,
“action by the masses, a big strike, for instance, is more important than parliamentary activity at all times”
(Left-Wing Communism)
Of course, that does not lead us into syndicalism, which was the error of the SWP in the 1960's and 70's, because, as Lenin goes on to say, we need to combine these industrial struggles with the political struggle, to give political solutions to the general problems highlighted by the industrial struggle, including the need to build a revolutionary workers' party. But, that makes it all the more necessary to learn to think, and, in current conditions, to see that a General Election would only act to demobilise the actual struggles being undertaken, with very little opportunity for Marxists to use any election to raise those necessary political demands.
As these class divisions between the interests of a reactionary nationalist petty-bourgeoisie, dragging behind it a long tail of lumpen elements, concentrated in decayed urban areas, and the progressive, internationalist interests of the ruling class and working-class break apart both the Tories and Labour, a realignment is not at all impossible. It is the basis on one side, of all the existing red-brown coalitions already established, for example, in Britain between former “communists” of the RCP with UKIP, as well as the national socialists of the CPB.
A coalescence of interest of red-wall Tories, with Starmerite Blue Labour is not out of the question, and would draw in behind it the existing red-browners. On the other hand, the defection of conservative social democrat Tory MP's that took place to the Liberals, before 2019 would be exacerbated, especially if Liberals appear set to pick up Tory seats, and the same applies to all of the progressive, internationalist elements of the Labour Party. The fact that both Labour and Tory are set to lose all their seats in Scotland, itself plays a significant role in this calculus, because it makes it difficult for either party to obtain a working majority in parliament.
If such a realignment did occur, Marxists would, of course, have to reassess the political landscape. We do not fetishise support for the Labour Party, but only on the basis set out above. If, in a realignment, it became clear that the majority of workers, and certainly of progressive workers, looked to some new Liberal/Social Democratic Party, then we would have to determine what our attitude to this party should be, for example, seeking to affiliate trades unions and socialist societies to it. We would again do so, not on the basis that the politics of this party were more progressive to that of the rump Blue Labour Party, and certainly not on the basis of giving any support to the bourgeois politics of any such party, but solely on the basis of continuing to gain the ear of workers, and to mobilise them in political as well as industrial struggle.
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