A Future That Works

A Future That Works
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Sunday, 21 August 2011

Robert Griffiths General Secretary and International Secretary John Foster of the Communist Party of Britain

1. What are the fundamental reasons for the international financial crisis? What are its effect on capitalism?

We see the financial crisis as one combined with a cyclical economic crisis of over-production of commodities and over-accumulation of capital. The overturning of the socialist systems in the former eastern Europe and the Soviet Union helped facilitate the penetration of Western monopoly capital into the labour, raw materials and commodity markets of Europe, Asia and Africa on an unprecedented scale. This escalated the cyclical over-accumulation and over-production. Over the same period, real wages were held down by corporate and state power in the main imperialist countries – especially in the USA – while economic demand was maintained by the massive extension of household, government and corporate debt. Ballooning credit, notably through the housing market, was itself facilitated by the 'big bang' of finance capital as markets were deregulated and globalised, fuelling the invention and spread of financial derivatives. The over-extension of credit, based on unsustainable debt and on paper assets whose value was largely fictitious, precipitated the beginning of the banking crisis. The resulting credit freeze, state bail-outs and compensatory cuts in public, social and welfare spending ensured that the cyclical downturn in the main capitalist economies was all the sharper, more synchronised and more prolonged. Growing resistance to imperialist super-exploitation in the former and remaining colonies and semi-colonies in Asia, Africa and South America also began to restrict the possibilities for Western monopolies to maintain, extend or revive high levels of profitability.

18 comments:

  1. The financial and economic crisis also revealed deep structural problems in the capitalist system, nationally and internationally. The concentration of capitalist ownership – monopolisation – has involved the accumulation of enormous economic and political power in very few, but giant, corporate hands. In the financial sector, in particular, this process has been accelerated by 'financialisation', where financial assets have been created and exchanged at increasingly 'fictitious' values, utilising the savings of working people to prime, fuel and lubricate the process, with the banks and financial institutions greatly increasing their domination of most other sectors of the economy. The City of London was the centre of these developments for powerful US and British monopolies. In the rest of the European Union (EU), notably the 'euro-zone', French and German financial monopolies – with their controlling shareholdings in the industrial monopolies also – grew massively, increasing the already large systemic imbalances in trade and banking credit between the stronger and weaker economies.

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  2. The main imperialist governments and central banks realised that, from the standpoint of their own state-monopoly capitalism, many of these banking monopolies were 'too big to fail'. They are also powerful enough to put up substantial resistance to any government or central bank efforts to regulate them effectively. Thus, three years after the financial crash, all national and international attempts (such Basle II) to regulate financial markets and their monopolies more effectively, or to break up the big banks, have so far failed, leaving the economies vulnerable to the same kind of financial crises and collapse in the future as before.

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  3. 2. What are the major adjustments of policies of European countries and the United States during and after the crisis? What are the new features and tendencies of the development of capitalism?

    The first and most fundamental response was for each capitalist state to take over the debts of the banks owned largely by the capitalists of their own country. State central banks rescued failing banks through loans, guarantees and even partial or full nationalisation, while enormous liquidity was pumped into the paralysed money markets. Banking debts were thus converted into sovereign debt. Such policies confirmed the degree to which the capitalist system is still organised on a national basis and depends on the exercise of state power at that level. This response also demonstrated that the capitalist state is subordinate to the interests of one fraction of the capitalist class, namely the monopoly finance capitalists. The crisis and the response also revealed the scale of financialisation that has occurred since the 1970s, with finance capital dependent on the control and manipulation of retail credit institutions handling the savings of the working class, the intermediate strata and non-monopoly capitalists.

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  4. The impact of the economic and financial crisis on Britain has been a sizeable destruction of capital values, a sharp decline in what was already a low level of domestic industrial investment, a further concentration of ownership – particularly in the financial sector – as weaker companies failed or were taken over, and further accentuation of finance capital domination of the British economy as the result of the huge injection of state-backed funds into the banks and money markets at the expense of construction, manufacturing and public services. These features have arisen in the other major capitalist economies to a greater or lesser extent.

    In Britain, the Treasury provided £289 billion in direct support for the banks (about 10 per cent of GDP), plus more than £600 billion in guarantees and indemnities – virtually free credit that kept interest rates close to zero and led to the depreciation of sterling by 25 per cent against the euro (roughly the same as the depreciation of the dollar). In addition, the Bank of England has injected at least £200 billion into the banks via the money markets through 'quantitative easing', although little of this has been subsequently invested in housing or industry.

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  5. Since 2008 if not before, ruling class strategy in most European countries has been to shift the financial burden and the blame for causing the crisis onto sections of the working class: low-income families borrowing to buy a home, public sector workers who have won better pension entitlements (usually to compensate for low wages) or the unemployed and sick in receipt of welfare benefits. While regressive taxes on purchases or employment have been increased, taxation on capital accumulation has been slashed. Austerity programmes have been launched to cut socially useful government expenditure and privatise public sector assets, in order to finance sovereign debt and cheapen costs of reproducing labour power (notably through reforms in the health and education sectors). In such ways, the processes of financialization have been renewed, while the imposition of disproportionate interest rates on the weaker, most indebted states has ensured a further redistribution of income towards the financial monopolies in the major imperialist countries. This new impetus to capital accumulation and inter-imperialist rivalry itself increases the pressures for more expansionary and aggressive foreign policies by the main imperialist powers.

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  6. In Britain, the Tory-Liberal Democrat government has added some £73 billion to the last Labour government's plans to cut public sector spending by £130 billion between 2010 and 2015. This is one of the harshest austerity programmes in Europe. The state health and education services are being opened up to private capital on an unprecedented scale. A major attack on the pension schemes for public sector workers is now underway, designed to reduce the financial burden for private sector employers who take over public services. Already, there has been a significant redistribution of income from labour to capital through a state-enforced wage freeze in the public sector and rising prices and profits in the energy, transport and retail food sectors. This year, household real incomes are falling by an annualised rate of almost 11 per cent – the biggest drop for 34 years.

    The financial crisis has had a deeper and more prolonged impact on the economy in Britain than in many other developed capitalist countries because the financial sector occupies a comparatively large share of the British economy The major banks extended credit far beyond their capital base (by 65 times rather than the recommended 10) and so were hugely exposed to to potential bad debt (bank lending is equivalent to 460 per cent of Britain's GDP – far higher than in Germany, France, Japan or the USA). The policies that favoured the financial sector (eg. liberalisation of the City of London, weak regulation, no credit or capital controls, high interest rates) have been the very ones that disadvantage British manufacturing industry – the sector that has led the emergence from recession in Germany and France, but which now accounts for less than 11 per cent of Britain's GDP.

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  7. Thus, early last year, Britain was the last major capitalist economy to pull out of the recession. But recovery has stalled since autumn 2010 and GDP is still more than 4 per cent below its pre-crisis level (whereas it has more than recovered in Germany and the USA). Nor are the immediate prospects any better as incomes and public spending continue to fall, while the banks refuse to extend credit for house purchases or business investment. Government insistence on retail banks maintaining a higher ratio of capital reserves than proposed for the EU will make credit more expensive. At the same time, the circulation of capital through British offshore tax havens is unlikely to be regulated, while US banks and the US state are allied with Britain in a struggle to limit the application in Britain of an EU directive regulating hedge funds.

    The decisive role that the City of London as a financial centre plays in dictating government policies and determining the course of economic development represents a major structural weakness in the British economy. This is even more so now that US finance-capital has come to exercise substantial economic and political influence through the City, which it uses as a global centre for unregulated offshore banking. London controls 70 per cent of the world's eurobond transactions, 45 per cent of the trade in financial derivatives and 37 per cent of foreign exchange transactions. Britain and its Crown Dependencies (many of them unregulated tax havens) are now the base for almost 25 per cent of all US capital investment overseas.

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  8. In this era of state-monopoly capitalism, the British state is used by British and US finance capital to promote their joint interests within the European Union, especially to open up the European banking and financial markets. However temporary or longer-term, the joint interests of British and US finance capital comprise the basis for British imperialism's wider political, diplomatic and military alliance with US imperialism at the global level. This is important for the British capitalist monopolies, whose investments are world-wide including a substantial presence in the USA itself. Only the US capitalist class, and from time to time the French, has a bigger stock of direct investment capital outside its own borders than the British. The financial crisis has already intensified inter-imperialist rivalries, especially through currency devaluations and – notably in the EU – differences about how best to resolve various sovereign debt crises.

    On the ideological front, the crisis has revived Keynesian ideas about the most appropriate policies to alleviate capitalist recession, although the monetarist, neoliberal trend is waging a fierce defence of its recently-acquired hegemony in capitalist political economy.

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  9. 3. What do you think of Europe's sovereign debt crisis and the stringent economic policies adopted by some European countries under pressure?

    The sovereign debt crisis is the product of, firstly, the state takeover of bank debts in all the states of Europe and, secondly, the specific imbalances within the euro-zone. These imbalances have, in turn, been the result both of a monopoly concentration of markets and productive power in the hands of Germany and France within a ‘free market’ covering the whole of the EU, and of a ban on state aid for industry. The increase in German exports to Greece between 1998 and 2008, for example, was 126 per cent; Greek exports to Germany, on the other hand, rose by only 19 per cent. Similar imbalances apply to Spain, Ireland and Portugal.

    The structural reform programmes being enforced on debtor countries by the European Central Bank and the International Monetary Fund will intensify these imbalances by weakening their economies and further opening them to external control. The ‘rescue package’ negotiated on July 23 this year will, however, temporarily indemnify the French and German banks for loans to debtor countries.

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  10. The Euro Plus Pact of treaty revisions on 'economic governance', to be ratified by the EU summit in September 2011, will mark a definitive transfer of economic sovereignty from debtor states to the dominant states. Debtor states will lose control of tax policy and public spending. The objective will be to secure a drastic reduction in labour costs on the European periphery – thus enabling the completion of the objectives of the Single European Act for the movement of capital across EU and the progressive reduction of labour costs of production as envisaged in the 1988 Cecchini Report – but in new circumstances, where German and French monopoly capital sees itself in direct competition with China as well as the US.

    The British state has sought to keep its own currency – and hence the City of London’s financial sector – out of EU control, but with full freedom to operate within the EU. It has participated in ‘rescues’ of indebted states to the extent that British banks have been exposed, most heavily to the bailout of Ireland. The British state is supporting current moves towards euro-zone stabilisation through enhanced central EU control of national budgets, firstly, because further financial instability would be detrimental to British-US financial operations within the EU which supplies 50 per cent of Britain’s balance of payments income. Moreover, the centralisation of budgetary control for eurozone countries (but which does not include non-euro EU members such as Britain) would legitimise the limitation of EU (German/French) interventions that could threaten the freedom of US-British finance capital based in the City of London.

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  11. At the same time, the British state has strongly supported EU policies for external Free Trade Agreements – particularly those which require the opening of financial markets, banking and equity trading. Britain has been particularly associated with the current negotiation of the EU Free Trade Agreement with India, which would open Indian banking to external competition and enable British subsidiaries established in India to transfer cheap labour under Mode 4 to Britain (under this particular FTA Britain has a 50 per cent quota of all posted labour allocated to the EU). This matches the drive of the British state to further reduce labour costs in Britain and to enhance labour flexibility. Already, 50 per cent of Britain's labour force is now in part-time or temporary employment.

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  12. 4. What is your point of view about the mass protest in some European countries: what are the demands of the participants?

    Naturally, we express our solidarity with the strikes and other protests against national and EU-backed austerity programmes. In particular, we seek to challenge myths that blame the working class in Greece, Ireland etc. for the debt crisis in their countries and to expose the role of the EU to the labour movement in Britain.

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  13. 5. To respond to the financial crisis and the debt crisis, what are the political alternatives that your party has proposed? What are the opportunities and challenges that communist parties of Western Europe are facing now?

    In its programme Britain's Road to Socialism, the CPB advances an Alternative Economic and Political Strategy. The objective is to develop a popular, democratic anti-monopoly alliance led by the working class that can begin to shift the balance of class forces against finance capital, disrupt the functioning of monopoly capital’s state apparatus, challenge its anti-democratic exercise of power and expose the contradiction between the interests of super-rich who profit from the operation of state-monopoly capitalism, and the great majority who experience the degradation of their labour and the productive economy.

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  14. The key initial elements of this strategy are incorporated in the People’s Charter, initiated by our party, and now adopted as policy by most trade unions and in 2009 by the British Trade Union Congress (TUC). The main demands of the Charter are to tax the rich and big business; take finance, public transport and the energy utilities into public ownership; invest in housing, education, productive industry and a sustainable economy; and an end to policies for militarism and war.

    The attitude of the CPB to the European Union is determined by the requirements of the Alternative Economic and Political Strategy. The fundamental treaties of the EU treaties prohibit the implementation of key elements of the People’s Charter: in particular, controls on the movement of capital, public ownership of the financial and infrastructure sectors (transport, energy) and state aid for industry. The CPB therefore supports Britain's withdrawal from the EU, while also demanding immediate revocation of the Lisbon Treaty and opposing the further tightening of federal control represented by the Euro Plus Pact.

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  15. The CPB sees it as essential that the movement against EU policies and against the EU itself is conducted on progressive lines. We oppose the xenophobic propaganda long used by British finance capital to win popular support for its defence of sterling, in the interests of British-US capital. The CPB seeks to make clear that:

    The EU was the joint creation of the old imperialist states within Europe, including Britain, and with the support of the US.

    Despite the contradictions between these imperialist powers, the EU has been a crucial joint instrument for eliminating the democratic gains of working people and negating their ability to use parliaments to impose limits on the power of capital.

    The current development of extreme right wing populist parties, with significant working class support, is the direct result of the inability of social democratic parties to sustain any form of pro-working class agenda within the framework of the EU.

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  16. As a result of these factors the CP supported a 'No2EU-Yes To Democracy' platform at the last EU elections. With the support of a major trade union and other political forces, the CP provided many of the candidates for this challenge to the pro EU and right wing parties.

    As part of its alternative strategy, the CPB projects alternative arrangements for international trade and economic cooperation. These arrangements need to be appropriate to the stage of political development in terms of the balance of class forces – from trade treaties that would simply maintain most existing trade patterns (other EU states are currently net beneficiaries of trade with Britain) to, at a later stage in the maturing of an anti-monopoly alliance, economic cooperation that could incorporate elements of planned economic concentration of research, development and production with other states on a similar road. Here the existence and example of international economic planning agreements in South America, Asia and Africa will be increasingly important.

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  17. The immediate phase in Britain is one of growing resistance to the British government's austerity programme of deep public spending cuts and wide-ranging privatisation. Official TUC policy is for coordinated industrial action against this programme, although the TUC leadership is not aggressively promoting this perspective. Nevertheless, there was a 750,000-strong TUC demonstration in London on March 26. At it, trade unions paid for free distribution of 50,000 copies of the Morning Star, the socialist daily paper which is guided by the principle's enshrined in the CP's programme, 'Britain's Road to Socialism'. This mass distribution was carried out by CP members, supporters and Star readers. Five public sector unions organised a joint one-day strike of one million workers on June 30 in defence of their pensions. It is likely that the biggest public sector unions will call coordinated strike action in October or November, again on pensions and possibly pay, redundancies or privatisation.

    The CPB is involved at every level of this movement. Despite our party's small size, we play an influential role in many of the local Trade Union Councils which bring unions together in each town and city, while the two biggest trade unions are represented on the TUC General Council by communists. Our party produces special issues of its bulletin, Unity!, for major strikes and demonstrations. But our main influence in the mass movement is through the Morning Star, which now has five national trade unions represented on its Management Committee including Britain's biggest union, Unite. We work hard to achieve and look forward to an increase in party influence and membership in the coming period, as workers resist the austerity programme and look for clearer, stronger alternatives than those currently projected by the Labour Party leadership. We seek to mobilise, but too educate too and the CP organises Communist Universities throughout Britain to engage organised workers in the development of their and political strategy. At the same time, the CPB sees its own growth as an essential part of a general growth in militancy and a political turn to the left in the labour movement that also needs to find expression within the Labour Party as well.

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  18. (Rob Griffiths and John Foster Delegation visit, meetings and seminar in China 2011)

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