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Bankrupt, which ever way you look

Britain is bankrupt – and not just financially either. The obscene bidding war that is going on about public spending cuts confirms that all the major parties have gone bust too as they fall over themselves to offer more pain than their rivals.

The Liberal Democrats are, of course, neither liberal nor democrat but a version of Toryism that goes back to the 18th century. So leader Nick Clegg can pledge “savage spending cuts” while Vince Cable wants a public sector pay freeze.

New Labour’s Ed Balls is offering up deputy head teachers galore as ministers begin to wield the axe while the Tories say they will take drastic action to stabilise public finances if they win the forthcoming general election.

Now the election could produce a hung parliament, with the possibility of a Tory-Lib Dem coalition the outcome. How this might work out in practice is being rehearsed in Leeds, where the city council is under the control of just such a coalition. The council leader is Lib Dem Richard Brett.

The council is cutting the wages of refuse collectors by up to £6,000 a year. More than 500 refuse and street cleaning workers have vowed to strike indefinitely against the plan. The council is presently using private contractors to try and break the strike.

Behind the panic over spending cuts is the fear of the ruling classes that the British state could become insolvent. The Sunday Telegraph yesterday spelled out the disaster scenario, noting that the national debt was equivalent to more than £25,000 for every family in Britain. Interest payments alone are heading towards £60 billion every year.

The paper held out the prospect of a Lehman Brothers debacle where the investment bank went bust after lenders refused to extend further credit, warning: “Something similar could easily happen to Britain. If foreign investors lose confidence in our ability to repay our colossal debts, we will go bust ... Such a crisis, if it happens, will make the present one look positively kind.”

So what’s on offer is a nothing less than an alliance between the state and the bankers to punish working people for the madness of capitalism. The state under the Tories and then New Labour embraced wholeheartedly the creation of an unsustainable debt-driven economy. When this crashed last year, the banks that stoked up fantasy finance were bailed out with taxpayers’ money. Now services and pay have to be slashed to the bone so that the same bankers can stay in business.

Yet none of this will do the trick anyway. As George Parker, the Financial Times’ political editor, remarks today: “No other big country has seen its public finances wrecked by the financial crisis in quite the same way as Britain. The next election will be dominated by questions about when and where to cut a deficit amounting to one-eighth of the country’s income.”

In other words, the sums are simply too huge for a cut here or there to make a difference. At the same time, the financial system itself is on life-support. The magnitude of debts still out there mean that most banks are insolvent, lacking the assets to cover loans that are “non-performing”.

What is unfolding is an historic crisis of the capitalist state and the financial system which won’t be solved by a general election. What is demanded is a total reconstruction of the political and economic system along democratic lines, which involves the repudiation of debts to bankers and the closure of financial markets. Campaigning along these lines would have the merit of seizing the initiative rather than leaving it to Brown, Clegg and Cameron.

Paul Feldman
Communications editor
21 September 2009

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