Tory measures escalate British capitalism’s chronic crisis

Editorial of the Socialist – the paper of the Socialist Party England and Wales – issue 1197

Faced with the chronically sick, deteriorating British economy, the Tories in government have swung from one path of crisis to another. Having failed over and over again to come up with policies that could improve the health of the capitalist system they represent, today they can barely think ahead beyond their chance of winning the next general election.

Chancellor Kwasi Kwarteng declared in his speech to Tory party conference that the “new approach” being adopted by himself and prime minister Liz Truss is necessary to avoid “slow, managed decline”. But their approach is neither new nor a way of stopping economic decline, and a massive backlash from the working class against the vicious cuts and increased inequality planned by their callous government will hasten its end.

Their ‘strategy’ is to try to force economic growth through handing yet more wealth to the richest in society while taking a sledgehammer to the living standards of workers and those who rely on benefits. This, at a time when a vast number of people are already struggling to get by and can see only hardship ahead.

Mini-budget

The mini-budget of Kwarteng and Truss caused a wave of shock and incredulity, the more so as it triggered a rapid economic crisis that impacted on interest rates. Tory MPs were already hugely divided before it, and now are in even greater turmoil, not least because their party has plummeted in the opinion polls.

Among them, Michael Gove placed himself as an early leader of an offensive against Truss, accusing her of turning against the ‘one nation’ conservatism that he claims the Tories stand for. But the party has no unified policy and is, in essence, several parties in one, with many fault-lines within the wings and crossovers between them.

The election of Truss by the dwindling party membership, now within just a few weeks viewed as an unacceptably reckless leader, is in itself an outcome of the Tory party’s fissures and decline. Reports in the media indicate that the party’s MPs, officials and other senior figures are already intensively plotting how they can remove her as soon as possible and even whether they can prevent the party membership from having any involvement in a new leadership election. A number of them are also discussing plans with Starmer’s Labour group to try to vote down some of her measures in parliament, or even to desert the sinking ship entirely and join Labour instead.

On their part, Truss and those around her clearly entered very intentionally into the policy battle they have started, and with some awareness of the consequences. They had sacked the most senior civil servant in the Treasury and refused to allow an early assessment by the Office for Budget Responsibility (OBR) of the budget, knowing they would be obstacles. They even excluded some members of their own government cabinet from decisions on aspects of the budget, including the ditching of the 45% income tax rate on the highest earners. On that issue they shamelessly carried out an early U-turn at the start of Tory party conference, under pressure of Tories who felt compelled to echo the wave of outrage across the country over the tax gains for the rich. That anger had been added to by news that a few hours after announcing those gifts – most of which remain unreversed – Kwarteng had been lauded at a champagne bash for wealthy Tory donors, including hedge fund managers who made fat profits from the slide in sterling post mini-budget.

The new Tory leadership’s ruthless policies should come as no surprise to anyone who has looked at the ultra-free market ideology of the thinktanks which Truss bases them on, such as the Institute of Economic Affairs. She, and those around her, plan a full-scale onslaught on public services, as shown already by their demand to government departments to find more cuts – at a time when due to inflation they need extra funding to simply maintain services and real pay levels. They also want a bonfire of regulations – including on workers’ and trade union rights, and on planning laws – to maximise the freedom of big business to exploit workers and the environment.

Their declared aim of stimulating economic growth, avoiding a downturn and securing a ‘trickle down’ of wealth is totally fanciful. The economy has already been collapsing towards recession and the budget’s measures have only speeded up that path.

Forecasts of interest rates rising to 6% show the devastating impact that this fast-approaching recession will have, especially for people with mortgages and other debt. For many working-class people the terrible prospect of hunger and lack of heating, due to food and energy cost inflation, has now been added to by the possibility of becoming homeless.

The budget also triggered a ratcheting up of government debt repayments, which were already at the highest-ever recorded level before this new hit. Financial institutions that lend to the government are demanding a higher rate of return in exchange for what they see as a riskier investment, with the result that long-term borrowing costs have gone higher than those in Portugal and Spain.

Ruling classes across the world looked on in astonishment and alarm at this, and at the pound plunging for a day to its lowest ever level against the dollar, fearing the repercussions on the unstable world economy. Reflecting that concern, the IMF pitched in with criticism of Truss for trying to stimulate demand by cutting taxes at a time when inflation is high, and even disapproved of the boost to inequality in her measures – gross hypocrisy for an organisation that has imposed austerity on many populations across the globe.

Certainly, as the Socialist Party has explained many times, while capitalism everywhere in the world is rotten and in decline, British capitalism has developed an even more acute crisis than other developed economies. The policies of its governments over decades have led to deindustrialisation, lower productivity and investment compared with competitor economies, and the second largest current account deficit in the world. A factor in this performance is the arrogance, complacency and stage in history of a ruling class that was the first to bring in the capitalist system, and that once directly exploited the people and natural resources of a quarter of the world’s land.

Following Kwarteng’s budget, the reaction of the finance markets that led to the startling descent of massive pension funds towards collapse was as much due to finance capitalists’ fears of what the budget indicated about this Tory government’s unreliability, and, fundamentally, the state of the British economy, as to particular parts of the budget itself. 

Pension funds

The ruin of those pension funds was headed off by the emergency injection of £65 billion into government bonds by the Bank of England, but that intervention will only have a temporary effect, and it has solved none of the underlying problems in the economy, which will inevitably be expressed in further ways in the course of developments and events to come. Karl Marx explained in the 19th century that the capitalist system contains contradictions that can never be fully and lastingly overcome, which is as true today as it was then.

Rail workers sent the right message to the Tory party conference – with its misjudged slogan “Getting Britain moving” – by stopping movement on the rail network on the day before the conference and on the last day of it.  The present strike wave, spearheaded by the rail unions, CWU, Unite, UCU and others, has been building in momentum, with more strike ballots to come. The TUC needs to play a central role in building coordinated action when it meets this month – a vital issue which the National Shop Stewards Network will be discussing at its pre-TUC meeting on 16 October.

Nothing less is acceptable than a complete protection of living standards, and the raising of them for the lowest-paid workers and those on benefits. These basic needs can be met for the widest possible layer of workers through building the fight for them across the entire trade union movement. The TUC congress should also send a clear message to Truss that the enactment of any further anti-union restrictions, which could be announced as early as next week, would be met by a 24-hour general strike.

Steps forward on a political front, towards a new mass workers’ party, are also crucial.  At the present stage, the campaign of the Trade Unionist and Socialist Coalition (TUSC) for workers to stand as anti-austerity candidates in the next local and general elections will help create building blocks towards that.

Labour Party

The Labour Party has been benefiting significantly in the polls from the government crisis, as its Blairite leaders reject the worst excesses of the Truss government and make speeches intended to raise hopes that they can defeat the cost-of-living crisis and “raise living standards for everyone, not just a privileged few”, as Keir Starmer said at Labour’s conference.

But his speech was also littered with get-out clauses, such as “not being able to do things as quickly as we might like” and a reference to “difficult choices, particularly when managing the country’s finances”, not to mention the loaded words: “I would love to stand here and say Labour will fix everything. But… the rescue will be harder than ever.”

He had already discarded Corbyn’s left manifesto policies and sidelined or removed those who promoted them, and he and the others around him say nothing about challenging capitalist interests: they are not even willing to support workers taking strike action to defend their living standards. Rather, Starmer has assured the ruling class that their interests will be safe in his hands and he will act “responsibly” on public spending and control the economy in the “national interest” – with those two words in reality meaning the interests of British capitalism.

Most in the capitalist class no doubt now view Starmer’s Labour as potentially better for their interests than the Johnson and Truss governments, which have undermined both the economy and the standing of British capitalism in the international arena. 

However, if Starmer comes to lead the next government, no matter how much he ingratiates himself with big business, while at the same time trying to present a softer face of capitalism, he won’t be able to control the economy and end “this endless cycle of crisis” as he deludedly pledged in his conference speech. Cycles of crisis are part and parcel of the profit-based market capitalist system. And accepting that system – as he does – means abiding by capitalist interests, including those of the finance markets.

Truss’s government has experienced the wrath of those markets, which are not a mystical, non-human force, but rather are driven by the actions of super-wealthy speculators and managers of financial institutions across the world. In the case of her budget, their concerns were mainly over the effect that the tax cuts could have on keeping inflation high, and the consequence of the tax cuts in further increasing government debt without a declared plan for mitigating it.

If a future workers’ government tries to maintain a capitalist economy, those markets would be far more venomous. They would want to destroy that government to prevent it from taking measures against their parasitic leeching of vast sums of money into the pockets of a tiny minority.

Corbyn’s general election manifestos fell a long way short of a socialist transformation, but nevertheless were ridiculed and derided by capitalist economists and politicians for pledging a modest reduction in inequality along with some increased borrowing – for investment purposes only – of a much lower amount than Truss and Kwarteng have declared.  This all backs up the need for the workers’ movement to be politically armed with a socialist programme that includes taking decisive measures against capitalist ownership and control. That means the taking into public ownership of the top companies that control the economy, including the banks and finance institutions, and bringing in democratically decided socialist planning. Only on that basis can the interests of the overwhelming majority in society be really defended and advanced, and the cycles of capitalist crisis ended for ever.