Issue 226 of SOCIALIST REVIEW Published January 1999 Copyright Socialist Review

Storm warning

Recession looms in the new year yet Labour still accepts the priorities of the market, John Rees argues that the government has little room to manoeuvre and that workers' anger can be translated into action

The crisis which has already engulfed Asia and Russia and which has held Japan in recession for most of this decade has begun to hit the British economy. We cannot predict how deep this recession will be, nor can we say how long it will last. But we can see the outlines of the coming British crisis.

For the manufacturing sector of the economy the crisis exists in the present and past tense, as well as in the future tense. High interest rates and the strong pound have ensured that the recession has already bitten into the manufacturing sector in the last year. The Engineering Employers Federation insists that 'recession is becoming deeply entrenched in the engineering industry'. In the print industry order books are at a 15 year low and nearly 40 percent of firms are already laying off workers. The construction industry is reporting similar shrinkage. Such contraction will hit the service sector if only because 20 percent of service sector output goes to manufacturing industry.

Relation between growth in GDP and business confidence (CBI)

Strong signs of a more general slowdown are already apparent. In the three months to September 1998 business failures rose by nearly 18 percent in Britain. And the Confederation of British Industry's business optimism survey is registering an 18 year low (see graph). Even TUC estimates of growth, the most optimistic estimates available outside the delusional statistics on which Gordon Brown bases his predictions, forecast half a million jobs will go between mid-1999 and the end of 2000.

There are some other certainties about the British economy. The high level of integration between the British economy and the world economy means that Britain is particularly prone to bouts of pneumonia whenever the world economy catches cold. In both the recession of the early 1980s and the recession of the early 1990s the British economy fared worse than the economies of the US, Japan, France and Germany and suffered more than the average of the 29 economies represented in the Organisation for Economic Cooperation and Development (OECD).

Even the Economist was recently forced to admit, 'In 1987, Margaret Thatcher boasted that "Britain is back in the first division. In economic growth and productivity, we are top of the league of major European countries". Sadly, she appears to have spoken too soon. More than a decade later, studies still suggest that British productivity is way below that of other western countries such as America, France and Germany... According to the OECD, America's GDP per head is about 40 percent more than Britain's; France is 7 percent ahead and western Germany is about 16 percent richer.'

The main reason for this gap is revealed by the Department of Trade and Industry's own figures for investment in plant, machinery and so on; such investment is 40 percent higher in both the US and Germany, 50 percent higher in France and 60 percent higher in Japan. This analysis was confirmed by the threat to the Longbridge car plant in Birmingham. The plant's owners BMW, backed by Labour trade and industry minister Peter Mandelson, argued that productivity improvements, wage cutting and redundancies were necessary in order to 'secure the future of the plant'. The real threat to Longbridge comes from lack of investment in the 104 year old plant. As the Financial Times revealed, 'Labour is only 20 percent of the cost of a car. For the long term Longbridge needs to be rebuilt-- either on part of the existing 400 acres or a greenfield site.' But this isn't what BMW is proposing to do with the 1.6 billion investment-- 300 million of which it wants from the taxpayer-- only half of which is earmarked for refurbishing the plant.

As recession once again takes hold of a weakened and exposed British economy the Labour government can expect more problems like those it faces over sackings at Longbridge and the closure of the Fujitsu plant in Tony Blair's constituency. But the onset of the recession threatens the Labour government in more ways than the direct effect of higher unemployment. The indirect effect of recession is to squeeze welfare spending as the dole queues lengthen. The last recession produced a crisis in the government's budgetary plans. At the end of the boom in 1988 the balance of government spending as a percentage of GDP was in the black to the tune of 1 percent. By 1990 it was 1.3 percent in the red. In 1992 the deficit was 6.7 percent of GDP.

Cuts by Labour controlled Islington council led to a series of protests towards the end of 1998

We can expect that the Blairites will meet this crisis by intensifying the well worn themes of the recent past. Indeed, Blair's devotion to pro-market economics leaves him little choice. For if the market is the best available means of organising the economy then it follows that if failures and crises occur they must be the fault of the individuals who are failing to meet the demands of the market, not the fault of a market which is failing the individuals who depend on it. It is precisely this proposition which distinguishes New Labour from Old Labour. Old Labour was at least willing to countenance the idea that the system was at fault if people were thrown on the dole, or if working class kids failed at school, or if NHS waiting lists grew, or if the numbers living in poverty mushroomed-- even if it went on to insist that redress must be gradual and constitutional. Blair will have none of this. If there is unemployment it is because people are not training themselves to a high enough standard for the market, are not motivated enough to meet the market's needs. If the education system is failing then lazy, progressive teachers are the problem, not underfunding. If social decay is all around, then feckless single parents are to blame. Devotion to the market produces the moralistic preaching which is the hallmark of Blair's political style.

Some of this makes some trade union leaders queasy. John Edmonds' outburst about 'greedy bastards' in the boardroom was distinctly 'off message'. The decision by Unison in Wales to ballot its members on the candidate for leader of the Welsh Assembly will be a big boost for anti-Blairites of every stripe. It would be foolish for socialists to ignore such anti-Blair sentiments, however limited they may be, or to refuse to build on the consciousness which underpins them among the mass of workers. But the mainstream of the trade union bureaucracy is still solidly, if suspiciously, wedded to the Blair project.

The TUC general council recently disavowed even verbal criticism of the government: 'An open challenge to the government, on monetary policy or the fiscal framework, risks a public rebuttal. No government can afford to be seen to U-turn on central elements of policy without damaging credibility.' Nevertheless, even the TUC is worried. It is concerned that it 'cannot be a cheerleader for government economic policies. Unions will expect the TUC to voice concerns about pay and jobs'. This dilemma will continue to haunt the union leaders, but they will not speak, let alone act, unless there is independently organised pressure from below.

The onset of the crisis has produced disarray among the neo-liberal defenders of the market who have dominated the intellectual argument on much of the left in recent years. There has already been a revival of interest in Keynesian economics and the social democratic governments in Europe, especially in France and Germany, are much more 'Old Labour' and Keynesian than they are Blairite. In this atmosphere socialists can project their ideas on a much larger screen than they could previously. The Marxist critique of the market, the argument in favour of working class struggle and a socialist alternative to Labourism is now easier to make than at any time since the 1970s.

There are now real prospects of socialists playing a key role in struggles against job losses and spending cuts. Over many years socialists have had to be cautious in their estimation of the level of class struggle in Britain. While it is important to retain this sense of realism it is increasingly clear that there are a wide range of struggles taking place which, although they are unlikely to shift the balance of class forces at a national level, are very important for the confidence of workers at a local level and for the health of socialist organisation in the class as a whole.

As importantly, the people involved in these campaigns are generalising politically on a wider scale than the size of the struggles might at first lead us to believe. The context is the important factor here. A small struggle taking place before the world crisis and during the honeymoon of the Labour government will not lead people to generalise in the same way as a struggle which takes place when the market is being shown to fail catastrophically on a daily basis and when Blair and Mandelson are seen as the most outspoken defenders of a bankrupt system. In these circumstances a small amount of practical activity produces a disproportionate ideological radicalism. This is why it is essential for socialists to relate to and initiate campaigns over school closures or council house privatisation.

But even the combination of those who will be drawn to socialism on the basis of an ideological argument against the market and those who will be won by the practical struggles against the effects of the crisis are small in comparison to the number of workers who are desperate to find some immediate political strategy to combat the crisis. Even the numbers currently involved in cuts campaigns nationwide, probably the most numerous single group of people currently engaged in struggle against the government, are far smaller than the numbers asking 'what can we do to beat the recession?' This is why the Action Programme, originally published in Socialist Worker, is so important. It can become a bridge between socialists and the hundreds of thousands of workers who know that there must be an answer to the crisis but do not know what it is. These people can be won to support the Action Programme, even in the face of opposition from union bureaucrats and Blairites.

The political origin of the Action Programme lies in Trotsky's formulation of an action programme for France in 1934 and in his generalisation of this approach in the Transitional Programme in 1938. The definition of a transitional demand is that it is rooted in the existing consciousness of the working class but is incompatible with capitalism. Or, as Trotsky put it, 'It is necessary to help the masses in the process of daily struggle to find a bridge between present demands and the socialist programme of revolution. This bridge should include a system of transitional demands, stemming from today's conditions and from today's consciousness of wide layers of the working class and unalterably leading to one final conclusion: the conquest of power by the proletariat.'

'The right to work' is a transitional demand in this sense because every worker believes they should have the right to a job, yet the system is obviously unable to meet this simple requirement. It is obvious that the effectiveness of transitional demands depends on the political and economic circumstances in which they are advanced: there would have been little point in advancing the slogan 'fight for the right to work' during the long boom of the 1950s and 1960s when full employment was a fact of life. It was a mistake made by some socialists in the 1960s and 1970s to treat Trotsky's transitional programme in this timeless fashion. For instance, the demand for a sliding scale of wages, advanced by Trotsky in the 1930s to ensure that wages kept up with inflation, was still being advanced in the mid-1970s when wages were running ahead of prices-- the effect of winning the demand would have been to hold wages down! But the misapplication of the method by others in the past does not mean that we should abandon the principle or fail to apply it correctly today.

This is precisely why the Action Programme is not the same as a united front around a specific, single demand. It is a programme of action designed to beat the recession and no single issue campaign could meet that challenge. The Action Programme may feed into specific agitational campaigns but it should not be reduced to them. The Action Programme should become the 'common sense' response of every militant and activist in the movement.

The recession may well be with us for the next two or three years and that means that the Action Programme will be with us as well. The Action Programme signatories can become the basis of a rank and file network that can deliver solidarity for the struggles that will accompany the onset of the crisis.

Profit warnings in the last 3 months

Action Programme
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