New debt time bomb primed
As the economy heads inexorably for catastrophic collapse, the failure of capitalist politicians to come up with any answers – or indeed accept any responsibility for the crisis – is glaring. That, however, does not mean there are no solutions to hand. It’s just that they don’t spring from a conventional approach to what’s happening.
New Labour has temporarily bailed out the banks with up to £500 billion of taxpayers’ money, slashed interest rates and cut VAT. Yet none of this has made the slightest difference to the economy. Major firms are going to the wall, falling like ninepins – including Wedgwoods, Woolworths, Adams – while others like Marks and Spencer are slashing staff numbers. Unemployment is soaring as are repossessions.
Waiting for the economy to “bounce back” through the defiant action of consumers spending in the shops is not going to happen. A new survey shows that a quarter of all British families will have no disposable income at all in 2009. Worse, much worse, is around the corner without decisive action to fundamentally change the political and economic landscape – in the shape of a corporate debt meltdown.
The real story behind the financial crisis is the relentless, reckless and ultimately unsustainable “growth” driven by the corporations. The aim was to sustain profits but, as the cost of goods fell, this could only be done through greater and greater sales. This treadmill was maintained and funded by loans and bonds of one sort or another. In turn, these loans fuelled the financial markets, which bought and sold corporate debt. This led only in one direction – to a world of fantasy finance, which is now in the process of disintegration.
Now much of this corporate debt is up for repayment - and hard-pressed banks are not in a position to take no for an answer. As the Sunday Telegraph explained:
For many companies which have survived the credit crisis the greater challenge lies ahead - the task of navigating through a record £110bn of debt that will have to be repaid in 2009. But the bomb was primed by the companies themselves as they drew down hundreds of billions of pounds of cheap debt over the last decade to help fuel growth. Now that world has come crashing down and the money drawn has become a ticking time-bomb with companies waking up to the stark reality that lenders are demanding their cash back.
There is no way that the capitalist state can bail out corporations and banks at the same time. And what difference would it make if they could? None! The prospect of this kind of financial Armageddon, with accompanying job losses, defies every-day thinking. That’s why we have to build a movement that is prepared to move beyond the severe limitations of the existing political and economic framework.
As the People’s Charter for Democracy says: “The existing system of government fails to represent the interests of the vast majority of people … the state’s primary purpose is to promote business interests at the expense of ordinary working people.” It goes on to suggest new forms of democratic rule.
The Charter also indicates a way out of the economic crisis, through a transfer of resources to “co-operative forms of ownership and workplace control of major corporations, enterprises and services” and to “eliminate speculation and profit as the basis for society”. These are revolutionary ideas and proposals. But with the economic crisis out of control, they are eminently practical and necessary. Sign the Charter petition today and build the momentum for change.
AWTW communications editor
6 January 2009