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Capitalism's crisis dictates the cuts

As the coalition begins to unveil its public spending cuts, the muddle-headed idea that they are simply “ideologically driven” remains fashionable, especially among those who think protest will produce a government U-turn.

It was the central theme of yesterday’s Right to Work march against the cuts in Birmingham, where the Tory Party conference is taking place. The notion is also at the heart of November’s Coalition of Resistance conference planned for London. Even trade union leaders like the RMT’s Bob Crow – a rarity as someone who puts his money where his mouth is when it comes to actually fighting back – holds this point of view.

The Labourites hedge their bets as they would surely be making cuts themselves if they had been re-elected. They accuse the Lib-Con coalition of wanting to “shrink the state” to benefit big business. (This is a bit rich coming from a party that created £90 billion in contracts for the private sector when in power in “partnership” projects).

There is an inconvenient truth that’s missing from all these viewpoints. It’s summed up in just two words – capitalist crisis. The budget deficit crisis which is affecting every major economy, has its origins in the end of the speculative boom in 2007.

The recession that followed the global financial collapse exploded the myth that government deficits could be repaid out of the proceeds of a continuously growing economy. A sharp decline in private and corporate tax revenues ensued, whilst demands for social support like unemployment pay, housing benefits and pensions have grown.

In Britain, the budget deficit reached £162 billion in 2009-10. At 11% of national income (GDP), it is the highest of the group of 20 leading capitalist economies. The national debt – all the previous budget deficits added together – has reached £1 trillion (or £1,000 billion – three times the level of 2001) – equivalent to almost two-thirds of GDP.

Interest payments on the loans that fund the debt are expected to rise to £70 billion a year and could reach £100 billion a year. An estimated £110 billion of the national debt is the result of buying up Northern Rock and other failing banks. A report by the New Economics Foundation suggests further bail-outs are on the way.

Budget deficits are a global phenomenon which are themselves part of a wider financial and economic crisis. In the United States, total national debt is about $13 trillion dollars and rising and is over 92% of the country’s annual income. It is forecast to soar by another $10 trillion between 2011 and 2020. Those who call for “investment not cuts” should be aware that Obama’s administration has failed to revive the US economy with just such a programme.

The global capitalist economy is heading for a depression, according to the International Monetary Fund while others show that the "recovery”, such as it was, is over.

The coalition like all capitalist governments is caught in a vice. They have to cut the deficit to appease the financial markets and prevent state bankruptcy. Yet every cut takes money out of the economy and deepens the crisis. This is a graphic example of capitalism at its most self-destructive.

Rather than capitalist governments being in control and having an “ideological” choice, their actions are severely limited by circumstances. As Steve Barrow, Standard Bank, quoted in the Financial Times (28 June 2010) said:

It might seem that these things [elections/strikes] don't matter too much as it's the financial markets that have the power to dictate to governments and so bring about change, not the unions and the electorate.

General strikes in Spain, Greece, France and Italy have failed to halt the cuts because it’s the system itself that’s in crisis. Suggesting otherwise is to let the coalition and capitalism off the hook when we should be preparing a strategy to bring the government down and lay the foundations for a transfer of economic, financial and political power away from the ruling classes.

Paul Feldman
Communications editor
4 October 2010

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Your Say

Bruce says:

The driving force behind the cuts, decimation of jobs, services, and communities, which the Tories conference this week is just the preamble, is the crisis of global capitalism as explained in the Blog above.

The question now, is not only who is in power but also what is our response to be to the system, they represent?
Tories, Liberal or labour or any other pick and mix of parties, it is all academic as they all leave us with a bad taste. It dose not mater at the end of the day, compassionate cuts, or fairer cuts, to pay off the deficit, a rose by any other name would smell as sweet. However even this little luxury can not be afford to us any more as the possibility of a new round of bailouts and recession appear on the horizon. The demands of capitalisms crisis follows it own logic and as disciples of the system, governments have no choice but to agree and comply.

The trade unions leadership and the far left at best offer resistance to the cut and the coalition government. The ordinary members of the trade unions and labour movement often against the wishes of their leadership have had to fight hard, for reforms in the past to the system. Successive Tory, old and new Labour governments have privatised, sold off and cut back these concessions, this is now to be taken to the next level by the Con-Dem coalition. The lesson is do not trust in reforms or god, to trust in, that’s no insurance and cuts no ice, any more. This is the dictatorship of globe capitalism they must be able to produce a surplus value and make a profit; its wants and needs are primary. They do not give a dame for the needs of ordinary people, or the health of our planet, which we depend on for life.

AWTW at the general election put forward the argument for people to hang on to your vote, and to build peoples assemblies and the evidence has proved the idea correct. I cannot wait to be able use my vote, in the future when it means something.

The coalition is weak and not in control as it has to do its masters biding. The cuts will drive millions into unemployment, homelessness and poverty for life, especially amounts the youth.

This by necessity will lead to conflict with the coalition and the ruling class, in response we should build People’s Assemblies. Not only in this country, but also across Europe which has experience a wave general strikes, against the austerity of their governments and the US where unemployment is at its highest since the 2nd World War, the crisis is biting deep around the world. How is the majority of humankind going to resolve the confrontations that are ahead? People, need to step out side of the constraints of the capitalist system, to prepare an alternative to capitalism and the anarchy of its markets. We need Revolutionary Solutions.

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