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Can’t pay, won’t pay

What a week. Everywhere you look, evidence of a global systemic crisis slaps you in the face. Banks on both sides of the Atlantic reported major losses and capital wipe-outs, world trade talks collapsed, energy prices rocketed and politicians appeared more paralysed and powerless than ever.

House prices are falling at record rates, especially in the US where tens of thousands are handing in the keys to their homes and leaving the banks with daily depreciating “assets”. House building in Britain has fallen 40% and 250,000 jobs connected with the industry are disappearing almost overnight.

Meanwhile, the civil war within New Labour between the supporters of prime minister Gordon Brown and David Miliband is surely the clearest sign that the game is up for a government that hitched its star to the alleged virtues of the global market economy.

Almost before they were made, the giant global energy companies were thumbing their noses at proposals from within New Labour for a windfall tax on record profits, threatening to retaliate with a cocktail of threats including rising prices, reducing investment, and moving their operational bases abroad to evade taxes.

Centrica, having acquired the Belgian power company SPE, announced a 35% increase in the price charged by its British Gas division to 16 million UK households. This was aimed at satisfying its worried shareholders just before it released half-year profits figures showing a sharp decline on 2007. The company said soaring wholesale prices driven by “the market” were to blame.

But the wholesale price is charged to British Gas by its other division - Centrica Energy, which operates its own gas fields and produces electricity from its power stations. It’s the same tax-avoiding not-our-fault game played by the globe-straddling oil companies who claim not to make any money from their forecourt garage petrol and diesel sales. Give us a break!

Despite Peter Mandelson’s warning the previous week that international agreements on climate change, food security and energy use could drift beyond reach if seven years of talks on trade failed, the World Trade Organisation (WTO) was forced to admit the game was up. The Doha round came to a grinding halt because the US wouldn’t budge on its programme of agricultural subsidies to now rich large-scale farmers.

Free-trade enthusiasts, including Republican presidential candidate John McCain, have openly opposed continuation of the subsidies. The programme has ballooned since it was launched to rescue farmers suffering from the combined effects of the 1930s Great Depression and the dustbowls of exhausted soil which arose from industrialisation of food production.

But the subsidies keep US exports cheap and help boost the profits of the handful of corporations like Cargill which control 80% of the world’s grain and are destroying poor farmers elsewhere in the world. And if all the world’s governments operating within the WTO are unable to come to an agreement which would affect the likes of Cargill, what chance has New Labour got of controlling the energy suppliers? None.

On all fronts, the shareholders’ interests are first in line. Never mind the pensioners who’ll die from cold this winter or the millions whose food, energy and mortgage bills may well send them over the financial edge. This is market failure on a gigantic scale and the first step towards ending this catastrophe should be: Can’t pay, won’t pay.

Communities should organise a mass refusal to pay rising energy bills and mortgages and to make sure no one loses their home as a result. Defiance of the banks and energy suppliers would create the conditions for taking them into common ownership and running them in a needs-based, not-for-profit way.

Gerry Gold
Economics editor
1 August 2008

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