Brexit Is Central - Part 4 of 6

So, just as we have no illusions in bourgeois-democracy or the bourgeois national revolution, being only moments in the transition to Socialism, via permanent revolution, yet go along with the workers in such struggles, on that basis of permanent revolution, so, too, we adopt that approach to the EU. We sow no illusions in its capacity to solve workers' problems, but we go along with workers who do have such illusions, on the basis that, in the course of this struggle, we build workers' unity across Europe, we posit workers' interests to the interests of capital, across Europe, and we posit independent workers' parties and organisations across Europe as the means to achieve it. In doing so, we draw out the logic that workers across the EU can only resolve their problems by creating a Workers Europe, on the road to a Socialist United States of Europe.

Of course, none of the main parties seek to get anywhere near such a condition, in which they would provoke the ire of the global ruling class. That is why they have already committed to such modest proposals, and why they have stated so vociferously that they will not raise taxes or borrowing. But, that does not change the fact that their current plans simply do not add up, as the IFS has set out. They must implement spending cuts, or raise taxes, or increase borrowing.

The ability to raise taxes has been discussed, but the position in relation to borrowing is very similar. Lloyds Bank has already warned them not to try to raise borrowing to meet the gap. Blue Labour, and to an extent the Liberals, have sought to blame the constraints on them on the Truss government. But, as I have set out previously, the rise in interest rates was underway long before that government. It is a global process, driven by the dynamics of the long wave cycle. A long, secular decline in global interest rates began in the mid 1980's, as the annual average rate of profit rose sharply, and the supply of money-capital from realised profits exceeded the demand for it, for capital accumulation. It is what created the initial surge in asset prices.

That secular fall in global interest rates ended around 2012, and was presaged by the global financial crisis in 2008. It is only the extraordinary measures introduced by states and central banks, since 2010, as they sought to slow economic growth via austerity, and to boost asset prices by QE, that has subdued that dynamic, bringing its own contradictions and idiocies, such as negative yields on bonds, with it.

The lunacy of Truss's government gave the opportunity for the ruling class to slap down the petty-bourgeoisie that has been ascendant since the 1980's. It used its power in global financial markets to hammer the Pound, and drive down UK bonds, sending UK interest rates higher. It was a soft coup against the government, showing just what a radical Left government would face. But, having carried out that coup, the Pound rose, and UK interest rates fell back. That those rates are again higher is not a consequence of Truss's government, but of those underlying longer-term dynamics that are driving global rates higher as part of a long-term secular rise in interest rates establishes itself. Just as the secular decline in rates lasted for around 30 years, so too the secular rise will last for around 30 years, and these minor fluctuations are merely bumps on that upward slope.

Conservative social-democrats, and petty-bourgeois nationalists, such as those of Blue Labour, do not want to acknowledge that reality, because it undermines the whole of their strategy of the previous forty years, based on low interest rates, rising asset prices, and the illusion of wealth created from thin air, out of the rise of these asset prices, as the basis of debt collateralised on them. Rising global interest rates, induced by a rising demand for money-capital to fund capital accumulation, at the same time as the supply of money-capital grows more slowly, as rising relative wages squeeze profits, of itself, puts a further huge hole in the budgets of governments, simply to cover the rising cost of servicing their existing debt. So, any addition to that debt, by further borrowing, will result in government's facing sharply rising interest rates. The right-wing, petty-bourgeois, populist government, in Italy, has already found that, clipping its claws, and, now, France is seeing the same thing, as the yield on its bonds rises sharply compared to that on German Bunds, even before Macron's party loses control of the Assembly.

The idea that Britain could just borrow its way out of the problem is, then, simply not tenable. Ten years or more ago, Britain could have taken advantage of historically low interest rates, so as to thoroughly renovate its national infrastructure, and so on. That would have repaid itself, as it brought improvements in productivity, and so on. But, instead, the government imposed austerity, to slow the economy and slow wage growth, to enable asset prices to be inflated.

The idea that this problem could be avoided by simply monetising the debt, i.e. by printing money tokens to pay the debt, or to finance the additional spending shows a lack of understanding of what money is. It is to invite a repetition of the hyperinflation of the Weimar Republic, and elsewhere, when such measures are undertaken, and of what happened in the 1970's and early 80's. It is what happened on a smaller scale when liquidity was injected to cover the furlough payments and other costs inflicted due to lockdowns. The inflation that results simply increases money costs, rather than reducing interest rates, and acts like wear and tear of fixed capital, in respect of the money advanced by lenders. It means that they seek to compensate for that depreciation (Net Present Value) of their capital, by demanding higher nominal rates of interest.

Moreover, as already seen, lenders are more likely to lend to EU countries, backed by the ECB, than they are Britain, as its economic problems intensify, as a result of Brexit. Its true that Britain can always print additional currency to pay back its creditors, but, in doing so, it devalues that currency, paying them back in “funny money”, just as when states used to reduce the gold content of the currency. Lenders simply respond to such measures by demanding even higher nominal rates of interest.

So, any incoming government will find that it has a hole in even the existing budgets that cannot easily be filled by either taxes or borrowing. That is why they use the magical thinking of “growth” to resolve this dilemma. But, as I set out earlier, and as the IFS also state, to rely on growth requires that you set out where this growth is suddenly to come from. The obvious quick answer would be to re-join the EU, but none of the parties dare speak its name, despite the fact that a clear majority of voters are in favour of it!

The only response they can give as to that is that the 2016 referendum voted for it, and for some unknown reason that decision binds us for all time!! That's like deciding to drink from a bottle that you did not know contains poison, and then, discovering your mistake, assert that you must still drink from it, because that was the decision you had made, and so must stick with it!!!!

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