Issue 225 of SOCIALIST REVIEW Published December 1998 Copyright © Socialist Review

1998: The year of living dangerously

1998 has proved to be a year where the instability of capitalism has been exposed. Socialist Review takes a look back at the growing economic crisis, the deepening disillusionment with Blair's New Labour government and the continuing revolution in Indonesia. Article compiled by Peter Morgan

A Harris poll in January of 400 top US executives asked, 'How would you characterise your outlook for the US economy in the next 12 months?' and found that 96 percent were either very optimistic or somewhat optimistic about the coming year. Only four percent had a very pessimistic or somewhat pessimistic outlook. Within a few months it went horribly wrong.

The year began with south east Asia in the middle of its deepest economic crisis for decades. But as the year moved on all the talk turned to the likelihood of a worldwide depression like that of the 1930s. It was clear the economic crisis was leading to greater political instability - especially in south east Asia. As the Indonesian dictator Suharto fell, Asia's stockmarkets went into virtual freefall. Tough Decisions

It took the words of the multi-millionaire banker George Soros to finally tip the Russian economy over the edge in August. Soros warned that meltdown in the country's financial markets had reached a 'terminal phase' and urged devaluation. The Russian government announced that the rouble would not devalue 'under any circumstances'. Yet within a week the rouble was effectively devalued to 34 percent, and the government failed to pay its debts.

For the US's rulers the heady days of January seemed a lifetime away. The Dow Jones Index slumped 9 percent by the end of summer, wiping $4 trillion off the value of shares.

In a complete about-turn by September world leaders started talking about the need for lower interest rates to try to stimulate growth. The US Federal Reserve led the way with an unexpected cut in base rates. Nothing exposed the unravelling disaster greater than the near collapse of the Long Term Credit Management hedge fund in September - only bailed out by government intervention. There then followed a rush to turn bonds and shares into cash as investors became increasingly worried. The dollar fell by nearly one fifth against the yen. In Britain, manufacturing industry hit deep recession with a spate of redundancies.

If nothing else 1998 has exposed the inadequacies of the free market. As the year went on, believers in the free market found that increasing clamour for government intervention was the only way to stave off a complete collapse of the system. Now a crisis approaching that of the 1930s is widely talked about, as the financial crisis coupled with the crisis of overproduction hits larger and larger parts of the globe. There appears no end in sight for the crisis in Japan and south east Asia, pressure continues to build up on the US economy, Latin America looks decidedly shaky, and things are set to get worse in Europe. It is one of the worse crises in capitalism's history - and 1999 threatens even greater turmoil ahead.


Good times, bad times

January

French unemployed take to the streets and occupy unemployment offices.
French unemployed take to the streets and occupy unemployment offices. 'There is a whiff of December 1995 in the air,' says Le Monde, while a poll shows that some 70 percent of the poluation support the protesters.

  • Blair makes a speech to Japanese businessmen and promises them he will go 'the full monty' in changing Britain's welfare system.
  • Ken Coates and Hugh Kerr, two prominent Labour MEPs, are expelled from the Labour Party for condemning cuts in social security and the direction of New Labour. 'This is a deeply reactionary and conservative government,' says Kerr. 'It is betraying the trust of Labour voters.'
  • Both Clinton and Blair prepare to go to war against Iraq as they send warships to the Gulf. No blood for oil
  • Liverpool dockers end their 28 month heroic fight. Sacked docker Terry Barrett says, 'The Labour government is the biggest single shareholder in the Mersey Docks and Harbour Company, but Tony Blair has not lifted a finger to help.'
  • Tens of thousands take to the streets of Zimbabwe against the Mugabe government. Within 24 hours strikes, riots and looting has spread to most of the country. Mugabe sends in the military.
  • News in the US is dominated by the allegation that Bill Clinton had a sexual relationship with Monica Lewinsky and persuaded her to lie under oath. Hillary Clinton appears on television and says her husband is the victim of a right wing conspiracy.

    February

  • Labour announces its long awaited London NHS review. It will lead to bed losses in UCLH, Guy's and Queen Mary's Hospital.
  • Good riddance to Enoch Powell - the racist and bigot dies.
  • Over 1,000 people stage a sit down protest outside Downing Street as the military buildup in the Gulf continues. Protests also take place in other cities across Britain. In the US, secretary of state Madeline Albright is heckled and jeered at a televised public meeting in Ohio by anti-war protesters.
  • The Countryside Alliance organises thousands of the rural elite and right wingers to march through London.
  • Hundreds of firefighters lobby the civil defence authority over fire station closures in London.
  • Over 5,000 people march through Canterbury in Kent over hospital closures. The marches continue virtually every weekend of the month.
  • Unemployment reaches 4.83 million in Germany, its highest since the 1930s.

    March

  • The Scottish Labour Party conference reveals widespread discontent with Blair and the New Labour government.
  • Over 1 million students take part in the NUS national education shutdown in Britain as they protest over student fees.
  • Thousands of Ryanair workers bring Dublin airport to a standstill in a fight for union recognition.
  • Gordon Brown's budget does little to alleviate poverty - single parents and the disabled are still worse off under Labour. Corporation tax is cut again from 31 to 30 percent, the lowest rate in any major industrialised country.
  • The BSE inquiry opens following the deaths of 23 people. It is revealed how rich farmers, big business and the government collaborated to cover up the scandal.
  • Blair phones Italy's prime minister on behalf of Rupert Murdoch who is battling to gain greater control of Italy's media.
  • Pensioners take to the streets of London in protest against the Labour government, and 2,000 attend a rally at Westminster Hall.
  • The Stephen Lawrence inquiry finally opens following years of campaigning by the Lawrence family and their supporters. Over the coming months it succeeds in exposing the racism and corruption of the Metropolitan Police.

    April

    Australian dockers strike escalates
    Australian dockers strike escalates as thousands of workers walk out in solidarity. One union leader addresses a mass rally saying, 'Action may be taken outside thelaw. Are you prepared to do that? Stand up if you are.' The whole meeting rises to its feet.

  • GM bosses at Vauxhall's Ellesmere Port and Luton plants tell workers that they have to accept worse conditions or face closure. This is despite the fact that GM's profits were up 35 percent last year. One GM worker says, 'This is a political stick to beat the government. GM are looking for government handouts like Ford got to keep Halewood open.'
  • Government and political leaders reach agreement over the future of Northern Ireland forming the 'Good Friday Agreement'.
  • Greek workers stage a one day general strike in the battle over wage rises and a 35 hour week.
  • Thousands of South Korean workers at the Kia car company launch an all out strike over job cuts as the company becomes the latest victim of the economic crisis and goes into liquidation.

    May

    India and Pakistan test nuclear weapons
    Tensions rise in Asia as India and Pakistan test their nuclear weapons.

  • 'We're Smiles Better' is the Mirror headline on the anniversary of the Blair government. Yet in one poll 66 percent of people say things have stayed the same under New Labour as they were under the Tories.
  • Suharto is toppled in Indonesia after weeks of demonstrations by students and workers.
  • A May Day demo in Seoul leads to mass rioting against the police.
  • A general strike brings Denmark to a standstill as the LO union federation (equivalent of the TUC) brings out one in ten of the population. It is the biggest strike since 1985.
  • France's National Front receives a serious setback when it loses a parliamentary by-election in Toulon. The fascists lose their only MP.
  • Some 50,000 demonstrate outside the G8 summit in Birmingham. Cries of, 'Cancel the debt!' are heard throughout the city.
  • The people of Northern Ireland vote overwhelmingly in favour of the Good Friday Agreement.

    June

    Another general strike in Greece
    Another general strike hits Greece as public sector and private sector workers stage a 24 hour protest against privatisation.

  • Strikes are in the news again in Britain as BBC workers, Essex firefighters and London Underground workers all take action. One journalist describes the tube strike as 'the big shutdown'. Later in the month 9,000 RMT workers go on a four day strike against job cuts and pay.
  • New Labour announces a string of privatisations of national assets. This includes the Tote, the Royal Mint, the Commonwealth Development Corpor ation and, in a complete breach of an election promise, the national air traffic control system.
  • General Motors in the US grinds to a halt as strike action by 9,000 workers cripples production. The strike begins at the Flint Metal Centre and spreads quickly. The cost to GM is estimated at $65 million a day. 'Greed, greed. That's all we get from GM,' says one striker. 'We've had the power to shut down GM for years,' says another. 'I'm glad we're finally doing it.'
  • The murderers of Stephen Lawrence appear at the inquiry. Hundreds of people protest outside and force them to flee under police protection.
  • Labour launches the Education Action Zone scheme which sees schools sponsored by big business.

    July

    Derek Draper
    'I just want to stuff my bank account at £250 an hour', Derek Draper, New Labour parliamentary lobbyist'

  • Over 20,000 construction workers join a 40,000 strong protest in New York City and bring much of Manhattan to a standstill.
  • Some 70,000 workers defy ranks of riot police and rally against attacks on jobs and conditions in Seoul.
  • Riots break out in most of Nigeria's major cities when news breaks that Moshood Abiola is dead - possibly murdered by the military regime.

    August

    Two month strike by GM workers in the US ends
    The two month strike by GM workers in the US comes to an end. The bosses are forced to make major concessions. 'This has inspired the workforce. We know now that we can stand up to GM,' says one GM worker.

  • Latest figures from the Japanese government show that seven out of ten of the country's regions are in prolonged slump. Two others are defined as stagnant.
  • The Omagh bombing in Northern Ireland kills 28 people.
  • Strikes continue in the US with 73,000 Bell Atlantic phone workers striking over job cuts. They win pay and pensions increases after two weeks.
  • Siemens announces the closure of its plant on Tyneside with the loss of 1,100 jobs. It had been opened just three weeks after Labour's election victory last year. Other job losses include BOC, which is to sack 3,800 workers, Royal Ordnance, which is laying off 500 workers, and Grove Cranes in Sunderland, which is to sack 600 workers. 'They told us the future was safe. Now we feel betrayed,' says one worker.
  • Two bombs blow apart US embassies in Kenya and Tanzania, killing over 200 people. Local people criticise US officials for concentrating their relief efforts on US citizens and ignoring injured locals.
  • Hyundai Motors suspends car production at its Ulsan plant in South Korea as thousands of car workers and their families occupy the plant.
  • Over 2,500 Glasgow social workers go on unofficial action over three suspended colleagues. It forces the Labour council to back down from attacking the union.
  • Blair supports Clinton as he launches almost 100 cruise missiles on Sudan and Afghanistan in retaliation for the embassy bombings.

    September

    Anti-government protest in Kuala Lumpur
    Anti-government protests in Kuala Lumpur escalate over the detention of Anwar Ibrahim.

  • Japan's latest plan to reform the banks is met with dismay - the Nikkei index falls to a 12 year low.
  • Ford announces it is to cut UK car production by 20 percent - putting 4,400 workers on a four day week. And 600 jobs are axed as Fujitsu announces the closure of its plant in Blair's constituency.
  • ETA, the Basque separatist group, announces a 'total and indefinite truce' after 30 years.
  • The Brazilian government announces plans to slash $3.4 billion off social and infrastructure programmes in an attempt to reassure financial markets. Interest rates also soar in a move to protect the Brazilian real.
  • A strike by 6,000 Northwest pilots in the US brings the airline to a halt - it ends in a victory for the workers.
  • The Starr report is delivered to Congress exposing the Clinton-Lewinsky affair. Clinton comes under intense pressure to resign.
  • A high court judge slaps an injunction on health workers at London's UCLH to stop their strike against privatisation, despite the fact that workers voted for action in an official union ballot.
  • Over 12,000 demonstrate outside the Labour Party conference
  • Gerhard Schröder is elected Germany's leader as millions of voters swing to the left.

    October

  • The Italian government of Romani Prodi falls. Ex-Communist Massimo D'Alema becomes the new leader.
  • Over half a million French students protest against education cuts.
  • Western governments are on the brink of mass bombing against Serbia over Kosovo - with Tony Blair the most enthusiastic supporter.
  • Pinochet is arrested in London 25 years after the coup that brought him to power. Thatcher says we should show him 'compassion'.
  • Paul Condon is forced to apologise to the Stephen Lawrence inquiry, yet still denies institutional racism at the heart of the Metropolitan Police. Doreen and Neville Lawrence demand he is sacked.
  • The IMF lowers its forecast for economic growth next year.
  • Rover motors at Longbridge issues an ultimatum to the workforce - accept over 2,400 redundancies and attacks on conditions, or the plant will close. Peter Mandelson tells Longbridge workers to 'sharpen up their act'.

    November

  • Figures reveal a collapse in consumer spending in Britain, best summed up by the head of Marks and Spencer, Sir Richard Greenbury, when he announced a slump in profits: 'It's a bloodbath out there...We are in a consumer recession for sure.'
  • Unemployment rises in Britain for the first time in six years.
  • Hurricane Mitch devastates Honduras and Nicaragua. Aid promised by western countries is pitiful compared to the Long Term Capital Management hedge fund bailout.
  • Civil war breaks out in the Labour Party in Wales following the resignation of Ron Davies. Blair's decision to back Alun Michael as leader of the Welsh Assembly leads to a groundswell of grassroots support for Rhodri Morgan, who is seen as the anti-Blair candidate.
  • Workers stage a general strike in Zimbabwe in protest against price rises and a worsening economy. Some 90 percent of workers strike, and troops open fire on protesters.
    Labour gets worse

    Labour: things only got worse

    The year began for the Blair government with mounting anger over benefit and welfare reform. Despite this Blair and Harriet Harman were determined to press ahead. The grand plan was for Blair to tour the country with the 'welfare roadshow', designed to sell the idea of welfare reform to Labour Party members. Wherever New Labour ministers went they were met with protests and pickets. Harriet Harman became one of the most despised members of the cabinet. When the welfare proposals were event ually announc ed they were substantially watered down. Blair went to great lengths to distance himself from Harman and she was sacked from the cabinet in the summer, quickly followed by the resignation of Frank Field. New Labour's welfare plans were in complete disarray, and it took months, and the appointment of Alistair Darling, before it felt confident to go on the offensive again.

    Labour's policies have differed little from the Tories'. Labour has continued PFI - handing over previously public services to the private sector. NHS waiting lists have risen to even greater heights. With a great fanfare Gordon Brown promised more money for the NHS in July, but a close look at the small print revealed there was little new money. Just to show that Labour can be as tough on pay as the Tories, awards granted to nurses and teachers were phased in through two stages in April and December. A 3.8 percent rise was cut to 2.6 percent. Meanwhile government inspectorate Ofsted chief Chris Woodhead was awarded a 34 percent pay increase in September, taking him to £130,000 a year salary.

    In June the Low Pay Commission recommended a rate of £3.60 per hour, and a 'youth rate' for 18-20 year olds of £3.20. This was not low enough for the Labour leadership. Blair lowered the youth rate to £3 an hour.

    On social issues Labour mirrors the authoritarian right wing. Asylum seekers have been treated as badly under Labour as under the Tories. And Straw was one of the main instigators of a vicious witch hunt against Mary Bell when the Gitta Sereny book was released. The government passed one of the greatest assaults on civil liberties with its law in the wake of the Omagh bombing. When former MI5 agent David Shayler disclosed that MI5 kept files on cabinet ministers, Jack Straw went to great lengths to extradite him from France to face charges. He is still in prison in Paris.

    It is no wonder that the disillusionment with Labour has deepened this year. A poll on its first anniversary in office in May showed 46 percent thought Labour had not kept its promises and 48 percent said things had stayed the same since the election. By September a Guardian/ICM poll showed that Blair's personal rating had plummeted. Disillusionment was expressed in the defeat of Blairites in the election to the NEC at the hands of the left wing Grassroots Alliance. And 12,000 trade unionists and socialists demonstrated outside the Labour Party conference.


    The fight starts now

    Will the ruling class make working people and the poor pay for their crisis? That is the question that has been posed most sharply in 1998 and will be even sharper in the year to come. Everywhere our rulers have been prepared to preach sacrifice while piling that sacrifice onto those who already have least. There are bail outs for the investors in hedge funds, but not for workers at Siemens or Fujitsu. There are cuts in corporation tax for big companies, while the old and the poor pay tax on their heating fuel. There is compassion for Pinochet, while single mothers are imprisoned for debt.

    But the signs throughout the world are that people have had enough. There has been explosions of anger from Zimbabwe to Moscow, as workers try to assert their right to a decent life. The French school students have shown again how spontaneously protest can erupt.

    In Bitain the year is ending with the Labour Party in disarray. Blair's relentless shift to the right has led to growing protests and demonstrations over council house sales, school closures, closure of services such as libraries and old people's homes. Many are determined not to put up with Blair's Tory policies in the coming year.

    So what are the prospects? As the economy gets worse the political crisis will deepen. While the ruling class is united over the fact that workers have to bear the brunt of the crisis, it is at loggerheads as to what to do to solve the mess. This can lead to splits at the top of society, but these can fuel the confidence of workers.

    It is difficult to predict where the next convulsions will come. But with the confidence of the ruling class seeping away, and with the workers' movement increasingly prepared to fight back, we are entering a period of instability and turmoil - and of great opportunities for socialists.


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