Cameron and Osborne appear oblivious to the crisis unfolding in front of
their very noses. While standing on the edge of a precipice, they are
busy reassuring everyone that Britain has nothing to fear from the
European financial crisis. They are the modern equivalent of the emperor
Nero, who fiddled while Rome burnt. British banks, they say, are sound
and with enough capital to insulate themselves against a sovereign debt
crisis across the Channel.
Cameron and Osborne appear oblivious to the crisis unfolding in front of their very noses. While standing on the edge of a precipice, they are busy reassuring everyone that Britain has nothing to fear from the European financial crisis. They are the modern equivalent of the emperor Nero, who fiddled while Rome burnt. British banks, they say, are sound and with enough capital to insulate themselves against a sovereign debt crisis across the Channel. But these assurances were then contradicted by Mervyn King, governor of the Bank of England, who said the European “mess” was at the present time the biggest threat to the British economy. The Labour Opposition is acting no better. Ed Balls wants Cameron to act as an “honest broker” in trying to help Greece out of its debt crisis as if a few words of wisdom from our Tory “friends” would resolve matters. In reality, they are all impotent in face of this unfolding catastrophe.
While the Coalition is in a state of denial, the more serious capitalist commentators are aware that we are on the verge of a financial implosion. Even Sir Steven Wall, former ambassador to Brussels, believed the European Union was “on the way out”. The present crisis is a continuation of the world crisis of 2008-9, which is now rippling throughout Europe. Ireland, Portugal and Greece have already been bailed out, but Greece, despite the financial handouts, is on the verge of financial collapse. A Greek default, which is inevitable, will produce the ultimate nightmare scenario. The only question is not if, but when. They may be able to put the crisis off for a temporary period, but even this is not certain.
Once Greece implodes, the dominos will fall one by one as the “contagion” spreads from one country to the next. Germany, France and Britain are the most “exposed” to a Greek default. While Britain has underwritten £12.5bn in loan guarantees to Greece, as the collapse spreads, the financial loss will become enormous. Britain’s exposure to the eurozone is an eye-watering 700bn euros, 300bn of which is to the weaker eurozone economies. Under these circumstances we are facing a European banking collapse that would drag the entire continent into a depression.
This would mean a run on the banks, which would implode under the strain and be forced into bankruptcy. Credit would dry up in Europe and further afield. Households would not be able to withdraw funds, spending would stop, and companies would lay off workers in a re-run of the Great Recession. The eurozone would break up under these circumstances, with the value of new national currencies in free fall. Governments, on the verge of collapse, would revert to the printing press to fund themselves, creating hyper-inflation. The situation would be similar to Germany 1923. Globalisation would mean global contagion.
This is not simply the scenario of the Socialist Appeal, but was one of the scenarios published in the Financial Times, the organ of finance capital, under the heading “Default scenarios go from bad to worse in world of uncertainty.” The article concludes, “As Europe enters a depression, its leaders contemplate the ruins of their political and economic experiment.”
They hope and pray that it will not come to this. They hope that having learnt the lesson of Lehman Brothers, the central banks, the European Central Bank and the IMF would intervene to prevent such a catastrophe. But as we have seen with their performance over the last 12 months, little can be expected from these quarters. In any case, they simply do not have the resources to bailout the entire European capitalist system, even if they wanted to.
All the talk of the recovery has now evaporated. All the politicians are concerned about is increased austerity, whether in Greece, Portugal, Ireland, Spain – or Britain. The working class must pay for the crisis of capitalism, while the bankers have gotten away with murder. Now the sovereign debt crisis threatens to drag us all down, one after another. On a capitalist basis, this means economic calamity and even more austerity cuts “to balance the books,” as in the 1930s. This is the real reason that the Coalition has declared war on the working people of this country.
But such cuts will only cut into the market and cause a deeper decline.
It is a catch 22 situation, which can never be resolved by tinkering with capitalism. Clearly no amount of changes to the tax system or “taxing the rich” will resolve the crisis, as some have argued. It is far too serious for that. It is like offering an aspirin to cure cancer.
Every man, woman and child must be mobilised by the trade union movement to oppose the government’s cuts. Nearly a million workers took action on 30 June. The intention is to involve over two million in strike action this autumn. This must be the first step towards a 24 hour general strike. We must launch the biggest industrial action yet seen against this Tory-led Coalition of millionaires, a government of the rich, by the rich, for the rich. This must be seen as part of a national campaign to bring down this austerity government, which has no electoral mandate for these cuts.
But now more than ever we need a socialist solution to the nightmare of capitalist austerity. Len McCluskey, the general secretary of Unite the Union, one of the most powerful unions in the country, said that “socialism should be placed back on the agenda.” We wholeheartedly agree. The market economy has failed abysmally. It is threatening to take us back to the days of the Great Depression. Mass unemployment is rising, wages are being cut, pensions are being cut, terms and conditions are being made worse – even before the crisis deepens. Len McCluskey’s words should be turned into deeds. An emergency situation requires urgent action. As part of the fight back, Unite has the influence to rally the unions and place the socialist alternative on the agenda of the whole Labour and trade union movement.
The deepening crisis is a dire warning to working people. We ignore it at our peril. We must act to prevent it dragging us down. Not only must we fight against these attacks, but we must also fight for the alternative. Socialism, in reality, has never been more relevant than it is today. Faced with the bankruptcy of the capitalist system, we say: “you are fired!”
We must fight to rearm the Labour movement with a socialist programme. This means not only opposing cuts to wages, conditions, the social wage, and so on, but must include the demands for the nationalization of the banks, the insurance companies and the 150 or so big monopolies that dominate the economy. We can do away with the tragic waste of unemployment by drawing up a plan of production, not in the interests of private profit, but for the needs of the majority. This should be done by committees involving workers, students, small shopkeepers, pensioners, and other sections.
The nationalized industries must be democratically run under workers’ control and management. On this basis, rather than cuts, we can dramatically raise the living standards of people. This is the alternative to the nightmare of austerity!
A socialist Britain would reach out to workers in austerity Europe to follow suit and join in the creation of a United Socialist States of Europe as a stepping stone towards a socialist world. This is no “utopian” perspective, but a realistic alternative to the miseries of capitalism. It is a future worth fighting for. Join us!