Issue 257 of SOCIALIST REVIEW Published November 2001 Copyright © Socialist Review

The first victims of an economy going into recession

The thermometer has returned to normal but the patient is much worse. That, crudely, has to be the reaction to the way stock markets had returned, by the second week in October, to their level before 11 September. In the interim a wave of sackings had occurred on both sides of the Atlantic such as we had not seen since the early 1990s. And the bankruptcy of firms like Polaroid, SwissAir and Bethlehem Steel suggests that other giants are in the wings waiting to collapse.

The easiest story for the defenders of capitalism is to put the blame for the economic chaos on the destruction of the World Trade Centre. In fact the direct economic damage caused by that was less than that of the Kobe earthquake in Japan in the mid-1990s. What mattered was the indirect impact in bursting the bubble of consumer spending which was bound to burst in any case within a couple of months.

What kept the US boom going from around 1998 onwards, producing the much hyped 'longest expansion since the war' and the spectacular but short lived euphoria about 'the new high-tech economy', was massive borrowing by US firms and consumers. Some of this flowed into the purchase of shares, so producing the spectacular upward movement of the stock exchanges which was then used as collateral for other borrowing. And some went straight into the purchase of goods.

Meanwhile hardly anyone noticed that corporations were inflating their profit figures massively--by a level now estimated to have been about 50 percent. What a few commentators did notice was that the ratio of stock market prices to underlying profitability (even at the artificially boosted levels) had risen to about twice the average for the past 50 years, making a stock market crash and a loss of consumer confidence inevitable at some point. But none of this dented the confidence of those proclaiming a 'new paradigm' that supposedly spelt endless expansion.

The truth began hitting financiers and industrialists well before 11 September. The collapse of the dot.com craze was followed by the devastation of the telecoms industry. The Financial Times was writing about this and its effect on nearly destroying Britain's onetime engineering giant Marconi-GEC the week before the attack on the World Trade Centre. And other industries were already following close behind.

The biggest effect of 11 September was on the airline and hotel industries. But even here the sackings are a response to pressures that were building up beforehand. Professor Christopher Thornberg of the University of California has pointed out that airlines were already losing money hand over fist. Now they are saying, 'The devil made me do it. Bin Laden--he's the one who made me lay off these people.' The tourist trade was also in trouble before the attacks, with hotel occupancy rates down to 55 percent during the summer, he said. Now they had an excuse to lay off workers without fearing any industrial difficulties (Guardian, 12 October). More than 1 million workers in the US hospitality industry were due to lose their jobs within weeks, the US Chamber of Commerce warned.

A whole range of companies in no way directly affected by 11 September or its aftermath are revealing deep falls in profitability and pushing through redundancies in the hope that no one apart from the workers directly affected will notice.

The boom of the late 1990s never reached the fever pitch in Britain that it did in the US. That does not mean that the recession is not crossing the Atlantic, as chancellor Gordon Brown tries to argue. The Financial Times (6 October) reports that company profitability has fallen to its lowest level in five and a half years, 'raising fears that businesses are set to shed more jobs and cut investment to claw back disappearing margins'. For some companies this can be devastating, since it means they do not have the resources to cope with massive levels of indebtedness. Further largescale bankruptcies seem inevitable at some point--and with them the transformation of economic crisis into political crisis as the government tries to cope. The row over Railtrack is a foretaste of things to come.

Every day there are announcements of hundreds, even thousands, of redundancies which are ignored by a media obsessed with Tony Blair's alleged world status, and by trade union leaders afraid of being accused of disrupting 'national unity'. It is up to those of us who are standing out against the destruction of people's lives in Afghanistan also to take a stand against the destruction of livelihoods nearer home.
Chris Harman

BETWEEN THE LINES The Railway Forum, representing both the rail operators and Railtrack, had a great idea at Labour's conference. To help delegates get through the strain of debate, it gave out squeezy 'stress relievers' in the shape of trains from its stall. Kodak has taken advertising to new extremes. The first advertising hoarding in space has now been erected. Two Russian cosmonauts spent some hours outside the international space station so that a Kodak sign could be hung. That's one small step for man, one giant leap for interplanetary capitalism. New Labour seems drawn to some disastrous private companies. The annual accounts released at its conference show Labour received '£5,000 or more' in sponsorship from computer firm Sema. Labour awarded Sema the £305 million private contract to organise disability testing for benefit claimants--a contract which has run disastrously. Sema itself has been so badly managed that it went bust, to be taken over by oil services giant Schlumberger, a company not known for its experience helping the disabled.

MIDDLE EAST Stirrings on the Nile Palestinians protest at the death of a young boy The anti-war movement in Europe has already made a mark in the Middle East, where the US is struggling to hold together its alliance against Afghanistan. Television footage of the demonstration in London has been widely shown across the Arab world where, say anti-war activists, it has made an enormous impression. Hilmi is a member of the anti-war campaign in Cairo. He says: "The demonstration in London was shown on Al Jazeera (TV], and it made a big impact. People were amazed. A common question was, "Who are all these people? Are they all Muslims?" 'This is of great importance to socialists in countries like Egypt. Demonstrations against US and British aggression which take place in London or New York show that the war is not about Christians versus Muslims. It shows that millions in the west disagree with the war--that it's not a new Crusade, as the Islamists say. 'We argue that this is an imperialist war, that the US is using the events of 11 September to reimpose its control in central Asia and the Middle East. Both the anti-capitalist movement and the intifada in Palestine have made things difficult for the US. The war on Afghanistan is an effort to shore up their power once more.' Amr is a student on a large campus. He says, 'In countries like Egypt it's the Islamists who influence the opinions of most ordinary people. All people in the west are presented as hostile to us, as part of new attacks in which the Christian world makes war on Muslims, just like the Crusades of 1,000 years ago. 'The bigger the anti-war movement in the west the easier it is for us to show that this is not true, helping us to build an anti-war movement that is also an anti-imperialist movement.' There have been demonstrations in most Egyptian cities. The regime has threatened unprecedented reprisals against protesters--all university campuses have been ringed with riot police and in some cases by armoured cars. Students identified as activists have been prevented from entering. Despite this, demonstrations have taken place even in smaller cities such as Mansoura and Zagazig. At the end of September a rally in Cairo which had earlier been planned in solidarity with the intifada turned into a demonstration against imperialism, an illustration of the close link between the war and the problem of Palestine. Ingi is a socialist and an anti-war campaigner. She says, 'Bin Laden has become a people's hero--he is seen as the Che Guevara of our times. People cheered on 11 September--not because they like to see civilians killed, but because they saw an attack on symbols of imperialism (like the Pentagon) that have been dominant in this region for so long. 'We focus on the threat to the people of Afghanistan, but we never surrender our criticisms of the Taliban. This is important because they are being presented as heroes. The fact that they are victims of the US and Britain does not mean that they show a way for people of Islamic countries to win their liberation. 'Our job is to argue that imperialism is the enemy. This is where the anti-war movements in Europe and the US are so important. The London demonstration amazed people and undercut many of the Islamists' arguments. We hope to see even bigger demonstrations in the west in the weeks to come.' Hari al-Khazzaf For more on the anti-war protests throughout the world see pages 20-22

ITALY

The Genoa demonstration has led to a resurgence of protests in Italy

The Genoa Social Forum, the umbrella group which organised the anti-capitalist demonstrations in July, has now become the Italian Social Forum (ISF). This was agreed by 2,000 delegates from 92 local forums meeting in Florence during October. The most moving moment was a speech by Adelaide Giuliani, mother of the murdered Carlo: 'Like many people of my generation I thought it was enough to just do your job well, raise your kids decently, and to both teach and practice solidarity--but it's not enough. So I'm here to ask all of you and Carlo to forgive me. But I also want all of you to individually be as big as this great movement, to be strong, and to not let yourselves be divided.'

The movement fought off massive repression in July, attempts to criminalise it during August, and has managed to keep everybody on board after 11 September. As the coordinator of the ISF, Vittorio Agnoletto says, 'We thought we would lose a few bits, but at Florence everybody, including the (Catholic/pacifist) Lilliput network, have said they wanted to continue down the road started by the Genoa Social Forum.'

The movement has arguably become the main political opposition to the government. Italy's equivalent of the Labour Party, the DS, is now standing in its shadow. Agnoletto points out that 'DS leaders have to engage in discussion with the ISF in order to get themselves noticed'. But there is no temptation to engage in party politics: 'Standing candidates at elections would mean the death of the movement.' Union leaders too are now starting to debate with ISF leaders at large public meetings, as they are aware that their rank and file is becoming increasingly attracted by anti-capitalist arguments. The Italian edition of Naomi Klein's No Logo was reprinted five times in just a month.

The ISF will have a national structure which will invite all local groups to take part in its actions, but local groups can remain independent. This is very much the formula which has been successful so far--a coalition of interest groups which campaign individually over a wide range of issues, but which pull together in times of crisis.

This way of organising has been the strength of the movement in Italy, but for socialists it has also revealed a weakness. Arguing that workers should take strike action over some of the excesses of capitalism is effectively just as important as campaigning, say, for the implementation of the Tobin Tax. Having said that, the movement is still growing and is full of life. The Genoa Social Forum was one of the main contingents on a 300,000-strong peace march on 14 October. The Florence meeting agreed to support the following actions: consumer boycotts of banks which finance the arms trade, and of multinationals involved in genetically modified foods. But the ISF will also be central to a whole range of more direct actions. It will support a national school strike on 31 October, and will organise two days of 'anti neo liberal' forums in dozens of cities on 8-9 November which coincide with the WTO meeting in Qatar--followed by a demonstration against the war on 10 November. The 'social disobedience' (autonomist) wing of the movement has called for three days of action in the same period, including the occupation of schools, universities and houses left empty. The movement will also support a national strike called by the Fiom engineering union on 16 November.
Tom Behan

RAILTRACK

'Competition', we were promised at the time of rail privatisation, 'would lead to greater efficiency and a wider choice of services more closely tailored to what customers want.' So said transport secretary John MacGregor in 1992. The collapse of Railtrack has shown what a disaster the whole project has been.

Instead of the sale of the railways leading to a greater choice of service it led, in fact, to a concentration of power in the hands of just a few firms. This is a point made by Andrew Murray, a communications officer for the train drivers' union Aslef, in a new book released the month Railtrack went bankrupt. He says, 'The reality in 2001 shows four bus companies dominating train operation, one track monopoly showering its shareholders with taxpayers' cash, a few construction firms bringing the practices of the building site to railway maintenance, and three banks owning all our trains... Railtrack was created as a private monopoly owning the railway infrastructure--the largest private monopoly in the country. And the 25 Train Operating Companies (TOCs) were so structured as to make genuine competition between them less than a rarity.'

Although New Labour has fallen short of the renationalisation of the rail network, it has been forced to make huge concessions. Firstly it has admitted that privatisation was a complete disaster. Secondly it is having to underwrite the debts of Railtrack as well as establishing a not-for-profit company to take over the running of the rail network.

The result has been to bring into question New Labour's plans to privatise London Underground as well as their plans to increase the use of the private sector for public spending projects. As Andrew Murray concludes, 'There is a still larger lesson to be learned from the whole privatisation experiment, and this is the lesson that the rigours of the market and the profit motive are not the only, or even the best, guarantors of progress and development, and that society needs to base its choices on different criteria altogether. Of these criteria, public service is the most important. If the experience of Britain's railways marks the end of the line for the disastrous political supremacy of privatisation and the free market, and raises society's vision once more to the alternatives to capitalism, then the suffering described will not have been in vain.'
Off the Rails by Andrew Murray is available from Verso, price £13