Issue 227 of SOCIALIST REVIEW Published February 1999 Copyright © Socialist Review
If there were doubts over what the Blairite project was all about then these would have been dispelled by events over the last few weeks. The resignation of Paddy Ashdown from the leadership of the Liberal Democrats has inadvertently revealed just how far Blair is prepared to go to align with the liberals.
Ashdown confirmed that both he and Blair met regularly before the general election of 1997 to agree a post-election pact, and Blair was planning to bring Ashdown and other Liberal Democrats into the cabinet. Only when the size of the swing to Labour became apparent did the deal fall through. In an interview with the Financial Times (22 January 1997), Ashdown conceded that 'a closer election result would have made it more possible' to conclude a formal alliance with labour.
Not to be deterred, though, Blair has continued to forge closer links with the Liberals. Blair firstly set up a committee with Ashdown to discuss constitutional reform, and this has now been extended to include European affairs and defence policy.
But Ashdown's resignation has brought to light how deeply unpopular these moves are and how difficult it is for any formal alliance to go ahead. The Liberals now have 4,632 councillors and control 63 local authorities. In many areas, such as Sheffield--which in a by-election last month saw a 14 percent swing from Labour to the Liberals, leaving them within eight seats of control of the council--the idea that the two parties will put their differences aside is farcical. This goes for many inner city areas such as east London, Hackney or Southwark where the Liberals are the main right wing opposition to Labour.
Prospects of links with the Liberals have clearly deepened divisions within the Labour Party. Blair faced a hostile reception when he attended a meeting of the Parliamentary Labour Party recently, and it is known that many members of the cabinet are opposed to the moves. The resignation over Xmas of Peter Mandelson, one of the most enthusiastic backers of closer links (see pages 12-13), will only serve to further isolate Blair.
Despite this, however, Blair will continue his attempts to shift Labour even further to the right. Partly he is determined to isolate the left in the Labour Party; partly his whole understanding of Labour support is flawed. Blair still believes that the majority of people are becoming middle class, and that the future for Labour lies in appealing to 'Middle England'. In January he said the working class was being replaced by 'a new larger, more meritocratic middle class ... a middle class that will include millions of people who traditionally see themselves as working class but whose ambitions are far broader than their parents or grandparents.'
This is quite different from how the majority of people see themselves. For example, out of 6,559 readers who responded to a Daily Mirror poll following Blair's speech, some 83 percent (or 5,416 people) declared themselves working class, and not part of the middle class Blair was talking about. This confirms the results of the majority of polls and social attitude surveys throughout the last decade. Most people want Labour to make changes that are in favour of working class people--more spending on the NHS, education, transport, council housing and welfare. Yet this is exactly at odds with Blair's project. All the talk about appealing to Middle England is combined with further attacks on working class people.
This conflict, between the desires and aspirations of most ordinary people and Blair's right wing trajectory, is already expressing itself. Opposition to Blair's policies can be seen over the anger that surfaced during the recent crisis in the NHS (see pages 8-10). The demonstration against low pay originally called by Unison for 10 April and now backed by the TUC along with a number of other major unions can become a focus for such opposition. This can be a rallying point for all those who reject Labour's attacks on workers and it can help to stop Blair's relentless shift to the right in its tracks.
Brazil's abandonment of the pegging of the value of its currency, the real, to the dollar is not only a humiliation for President Cardoso of Brazil, the architect of the pegged exchange rate policy, and for the International Monetary Fund. It also threatens a deepening of the world economic crisis.
In the aftermath of the Russian collapse in August last year, speculators turned their attention to Brazil, the eighth largest economy in the world. It comprised 45 percent of the annual production of the whole Latin American economy, was running a trade deficit of 4 percent of GDP and a budget deficit twice that size. These were the factors which, together with a more general fear of the so called 'emerging markets' following the Russian debacle, led to a huge transfer of funds out of the Brazilian currency, the real, into safer havens by domestic and foreign investors--capital flight which was running at $1 billion a day for weeks in September and October.
The US government and the IMF feared that were Brazil forced to devalue, the financial turmoil would spread to the United States itself. A support package was cobbled together in which over $40 billion would be made available to support the real. Together with three interest rate cuts in the US, the markets appeared to stabilise and the pressure on the real eased.
However, the IMF package came with strings. The budget deficit had to be reduced through tax increases and spending cuts, and interest rates had to be raised to 50 percent. These very high interest rates sent the economy into recession, cutting tax revenues and increasing the debt servicing requirement on the budget deficit. In other words, the IMF package had the consequence of making the budget deficit worse.
The speculative attacks on the real resumed in early January after the Cardoso government ran into trouble with the Brazilian congress over its spending cuts and one of the regional governments suspended payments on its debts to the central government. The Brazilian government then abandoned the pegged exchange rate and floated the currency.
Devaluation of the real could in theory benefit the Brazilian economy by making its exports cheaper and allowing lower interest rates. However, it is much more probable that the devaluation will further destabilise the Brazilian and the rest of the world economy.
The first and most obvious consequence of the Brazilian collapse is that it profoundly undermines the attempt to fix exchange rates anywhere in the absence of capital controls and in the era of enormous movements of capital on the international financial markets. The floating exchange rate regime will make the real subject to acute volatility, with dramatic falls making imports much more expensive and threatening to reignite inflation.
The devaluation also threatens to choke off imports from Argentina and so threatens to export Brazil's deepening recession to Argentina and beyond. Although Brazil only takes a very small proportion of the US's exports, Latin America as a whole takes some 20 percent, so recessionary pressures in Latin America are likely to intensify the problems for the increasingly precarious US economy. US and European banks also have significant loan exposure to Brazil. These loans must now be in question.
In addition, there is likely to be 'contagion'. Speculative pressures are now likely to grow for the Hong Kong dollar and the Chinese yuan. The Hong Kong economy is now in a severe recession with high interest rates to defend the US/Hong Kong dollar peg and property and share prices depressed. The Chinese economy is clearly slowing. And there are increasing doubts about the health of the financial system with the collapse of one of the investment banks that was allowed to borrow from the international financial system. The markets have been further disturbed by the Chinese government's unwillingness to repay western banks.
The ramifications of the Brazilian collapse are still not clear but it will certainly compound the problems of the world's ruling classes.
The proclaimed accuracy of 'smart' bombs was belied once again when two US aircraft fired five missiles into suburban areas of the southern Iraqi town of Basra last month, killing civilians. US aircraft were reported to have attacked sites around Basra after patrols in the southern no-fly zone had been tracked by Iraqi radar and fired on by surface to air missiles. But there were no defence sites anywhere near the poor residential part of the town where more than ten houses were completely demolished and innocent people maimed and killed. There were also reports that missiles from the attack had landed in an Iranian city. It is not surprising, then, that the 'smart' missiles, which can't even be relied upon to hit the right country, endanger the lives of civilians.
Since the end of the four day bombing campaign in December, clashes between Iraq and the US and Britain have continued practically every day. Operation Desert Fox has had no real success and the continuing missile strikes and patrolling of the no-fly zone are carried out only by Britain and the US. The clashes centre on the no-fly zones in the north and south of Iraq imposed by the US after the 1991 Gulf War. During and after the Gulf War the US could muster support from most western governments for its actions. Today the US doesn't have the same level of endorsement that it did in the early 1990s. Only Britain, where any idea of an 'ethical foreign policy' seems to have disappeared, actively backs the current attacks on Iraq.
The casualties from the bombing only serve to inflict more misery on the lives of ordinary Iraqis suffering from the results of sanctions. Hundreds of thousands have died from hunger or the cholera and typhoid epidemics which have swept the country. The bombing during and after the Gulf War left hospitals, water, sewage and electricity supplies decimated. The sanctions have meant that Iraq's infrastructure has not been able to recover. In Baghdad before the Gulf War there were 60 ambulance control centres with two ambulances each. Now there are just two ambulances in the whole city. The parts needed for repair are not allowed under the sanctions.
Saddam Hussein, at the moment, has the confidence to challenge the legitimacy of the no-fly zones. This will increase the friction between Britain and the US and the rest of the UN security council. The casualties and wreckage of civilian areas will further isolate Britain and the US who increasingly look set on a course which they cannot win, but which will bring much greater misery to most Iraqis.
Over 40,000 Greek school students and teachers demonstrated in Athens last month against government plans to introduce tough exams allowing fewer students to continue in education. Meanwhile Oxford was the scene of protests against student fees.
The campaign against fees at Oxford University culminated in a 2,000 strong demo in January. Although the students have now paid up under threat of expulsion, their campaign continues. Jacqui Freeman talked to one of the final six nonpayers, Laura Paskell-Brown.
'We took a principled stand. We all believed that education should be free--it's a right and not a privilege. Tuition fees are obviously an attack on that right which would stop poorer students going into higher education.
For a long time people saw us as the campaign but the demonstration showed that it's actually about thousands of students from Oxford and all over Britain standing up against Tony Blair.
Some people just want to keep it focused on this one issue but a lot of people are interested in broadening out the picture and discussing things like Indonesia, nurses' pay and the health service. A lot of people are pissed off with Tony Blair and want things to change.
It was quite difficult at first to take that step from just talking about the fees. But as time has gone on I have had discussions with people about how the Indonesian students managed to bring down a dictatorship and how if they can do that we can get rid of tuition fees. I've also had discussions about the minimum wage and the link between income tax and tuition fees. We've discussed taxing the rich and who's benefitting from Blair's government.
The demo has scared Oxford University! My college locked all its gates because it thought we were going to storm it. It was very clear from all the media attention that Blair and Blunkett will have been listening carefully and will know what's going on. I think they will be very scared because next year we could win.'
Last July, Labour announced an extra £4.7 billion is to he spent on housing. But John Prescott has made it clear this 'investment' is in return for modernisation, and the transfer of council housing to private landlords remains central to housing policy. News of 'transfer ballots' will become commonplace.
These 'ballots' are the finale to an elaborate and costly 'consultation' process designed to persuade council tenants that council landlords are expensive and useless, and the whole show would be better run by private business. To back up this argument New Labour continues the Tory policy of cutting funds to local authorities while inviting private landlords to take a share of generous handouts to get their projects off the ground. HARCA, the new private landlord in Tower Hamlets, already encouraged and supported with government grants, was to have collected a £38 million sweetener along with 5,000 council homes.
These 'not for profit' landlords will also be allowed to borrow further millions from city financiers, exposing tenants to inflated rents to meet the interest payments. In Tower Hamlets the rent increases were to be a staggering 80 percent in eight years! Along with higher rents, the loss of tenancy rights would leave tenants facing eviction for as little as eight weeks rent arrears. One estate in Hackney, east London, has seen 13 families evicted since privatisation.
It took the Tories nearly ten years to 'dispose' of 250,000 council homes by way of various privatisation schemes. In just 18 months New Labour has reached half this volume of sales, and the pace is set to increase next year as Blair pushes to see all council homes run on a 'commercial basis' within the life of this government.
A total of 17 areas have been picked out as experiments for the New Deal for Communities. The plan is to tackle problems of poor housing, unemployment, crime and failing services all in one go, the product of 'joined up thinking' from Labour's Social Exclusion Unit. Upon closer examination the initial promise of £800 million to be spent mainly on housing doesn't quite join up with reality. Councils may be forced to use what funds they have to wipe out housing debts while giving their homes away. The forum set up in Tower Hamlets to present the plan was made up of a motley crew of quangos, private business, police, a principal from the local FE college, and no less than five housing associations. Tenants were told that they could not have a collective voice because 'they would fight for their share of money--they've got their own agendas!' Far from ensuring better tenant involvement in rebuilding their estates, this looks like turning into a feeding frenzy for private finance.
But New Labour has hit a stumbling block. It is now having to concentrate its privatisation plans almost wholly on areas that have a history of tenants' movements and working class organisation--the inner cities. Until now most transfers have been in rural areas where any opposition has to campaign over an area covering thousands of square miles. However, this didn't stop a handful of activists in Somerset bringing the privateers to within 0.2 percent of defeat in a ballot involving over 9,000 homes--and that only after the result was delayed while several void ballot papers were 'found'.
Inner cities are proving to be a lot less co-operative than was expected. The realisation that the future of council housing is under threat has revitalised a moribund tenants' movement. Whenever housing transfers are mentioned they are met with howls of protest. Across the country campaigns are being set up by local residents fighting privatisation of their homes. These campaigns are run on budgets of pennies while local authorities have thousands of pounds to spend on slick publicity. In Tower Hamlets, residents were won to campaigning in markets and estates. They lobbied councillors, MPs and government departments, demanding the privatisation be scrapped and that councillors and MPs lead a fight for public funding. Areas which have kept some tenants' organisation are seeing an increase in political debate over the best way to oppose the sell offs--the socialist call for activity and outright opposition usually winning the day. The past months have shown that where tenants, local trade unions and socialists work together they are winning the argument on doorsteps with ease. Already Cheltenham, Sandwell, Wokingharn, St Helens and Tower Hamlets have rejected privatisation out of hand. In Camden and Ashfield plans have been pushed back as the scale of opposition forced councils to abandon sell offs almost as quickly as announcing them. Some councils have panicked and have clearly been caught off balance by the no campaigns. Reports of intimidation are plentiful. Fortunately most tenants can be won to fighting for their estates.
The mood against private finance in council services is blooming into a recognition that a political alternative must be found. Calls to scrap the Millennium Dome, slash arms spending and tax big business to find the money to improve local estates continue to gain support. What was a simmering resentment at government cuts has begun to boil over into anger and calls for change.
Minister for housing Hilary Armstrong has been forced to call for the simplification of consultation documents, since she felt they presented opportunities for 'crude no campaigns'. The documents in question are around 80 pages thick and crammed full of legal jargon hiding the fact that the only guarantees are rent rises and loss of tenancy rights.
Warnings that the movement against the sell offs is an SWP front have fallen on stony ground. One woman from Tower Hamlets exclaimed, 'You're born a socialist in the East End. You don't have any choice because you're born into a slum--socialism's the only way out.' The idea of decent affordable housing provided by local authorities is still incredibly popular. It has survived over 20 years of attempts to introduce the free market into social housing. Campaigns over council housing will be springing up everywhere as sell off plans are announced. Experience has shown the introduction of socialist politics can turn them into effective fights against privatisation. Many of these campaigns will feed into the wider anger that will surely accompany the massive cuts in council funding.
More information from Defend Council Housing, c/o Haggerston Community Centre, 179 Haggerston Road, London E8 4JA. Phone (0171) 254-2312/538-2113, fax (0171)254-0924.