Ben Peck takes a closer look at Labour MP John McDonnell’s new document on the alternative to the Tory programme of non-stop cuts
Ben Peck takes a closer look at Labour MP John McDonnell’s new
document on the alternative to the Tory programme of non-stop cuts
The left-wing Labour MP John McDonnell, responding to the Tories’ repeated protests that “there is no alternative”, has published the “Radical Alternative to Austerity” on his website. This attempt to pose a real alternative to the pro-cuts views of the Tories and Labour leaders is to be welcomed, especially when working people are being faced with years of austerity. John has opened up a debate and as Marxists we think it is very important to participate in such a discussion. It is vital that the Labour movement is rearmed with a political programme that can offer a serious way out from the capitalist crisis.
The Radical Alternative begins by stating that the austerity programme is obviously failing. The economy is in a double-dip recession and growing worse, investment is collapsing, exports are falling, and we face years of draconian cuts. Originally, the Tory Chancellor has set out to cut an average of 25% of public expenditure across the various departments (health, education, benefits, etc.) by the end of this parliament in order to reduce the public debt.
Timetable
However, the government is lagging behind its timetable for cuts, with only about 10-15% of its 2015 target achieved so far. The government has made a series of backtracks on planned cuts because of the deterioration of the British economy. This has meant a delay. It has been announced that the cuts will need to continue a further two years to 2017. Cameron has gone even further and said the austerity will last for at least ten years.
For the Coalition, there is no turning back. According to them, the austerity programme has partially succeeded in keeping “the wolf from the door” – Britain’s credit rating remains at a premium – but there have been ominous threats that this may change.
They have justified the cuts by pointing to the low costs of borrowing, as compared to Spain, Italy, Greece, etc. Last year, interest payments in Britain amounted to £49bn, whilst spending on education was little more – £59bn. Since the bank bailout of 2008, capitalist governments throughout the world have seen their debts balloon.
The Radical Alternative states that austerity is failing to stimulate economic growth. This is absolutely true. Government cuts serve to reduce demand in the economy, creating unemployment, reducing wages, reducing markets, and thereby cutting the incentives of businesses to invest and expand.
However, austerity regimes are being introduced everywhere, not only in Britain, due to massive state debt and budget deficits, all of which were a result of the massive slump of 2008. This slump was not a “normal” recession but was the deepest crisis of the capitalist system since the Thirties. The capitalist world has not been able to recover from this crisis as growth rates have been downgraded everywhere. Rather than growth, we see stagnation and deepening crisis.
The Radical Alternative suggests that the government is failing when it makes “cuts in investment in public services, in jobs, wages, pensions and benefits” and as a consequence creates “mass unemployment and mounting hardship”. Of course, the Coalition government can do no different. The austerity programme launched by the government is but a loyal response to the needs of the capitalist system, which can no longer afford to maintain the reforms of the past. The cuts are being dictated by the crisis itself.
Capitalism does not operate for the well-being of people. It operates on the basis of private gain and profitability. That is its starting point. The capitalists only invest and produce (create growth) when they can make sufficient profits. However, there is widespread over-capacity in the economy from a capitalist point of view. Why invest when the market is not ther eand you cannot sell what you are currently producing?
Deepening the Crisis
The job losses that flow from the austerity programme are aggravating the crisis, as the Radical Alternative states. By cutting jobs there is a decrease in what the state receives in tax revenues and also an increase in benefit claimants. A few months ago in May, the public debt increased by £2.7bn due to a sharp decline in income tax receipts and an increase in welfare benefits. The solution is of course straightforward for Cameron and Osborne – introduce another round of cuts to housing benefits for under-25s, slash child benefits and force the unemployed to work for free.
This brings us to the central point in the Radical Alternative:
“There is no lack of wealth and resources in our country that we can draw upon to tackle this recession. The problem is that this wealth and these resources are held in the hands of too few people and are not being used productively to create the growth and jobs we need.”
It is absolutely true that there is an enormous amount of wealth in Britain, which are in the hands of the capitalists and bankers. It has been estimated that British companies are alone sitting on £950bn in cash. The polarisation of wealth has been staggering. The rich have got richer, while the living standards of ordinary people have been squeezed. The question is: will this money be “used productively to create the growth and jobs we need”?
These resources are in private hands. It is clear that they will only be used if the capitalists can make a profit. They are not philanthropists and will not donate their wealth to charity. They are not investing their money for this reason.
It is true that the wealth and resources of the country are not being used productively (this was also true in the boom where only 80% of industrial capacity was used; today it is closer to 60%), but on a capitalist basis, this is now the norm.
Where capitalist countries are attempting to “grow”, they are attempting to export. But not all countries can export. Some will need to import but as capitalist countries retrench, their home markets are been cut. This is the dilemma for capitalism, where each is attempting to out-compete the other.
However, to compete means to cut costs, which, in turn, means cutting wages. In this sense, there can be no solution to the crisis along purely national lines. Where is the growth in the economy to come from if there is no market to sell British goods to?
Some argue that we need to increase the availability of cheap credit for businesses. In this way, they will be encouraged to invest. Yet despite interest rates being historically low, and the Coalition promising to inject £100bn into the economy through cheap loans, businesses are not borrowing because they see no market for their goods.
Practical proposals
The Radical Alternative makes a number of practical proposals in order to solve the problem of growth. It proposes:
“…the introduction of a limited range of redistributive measures which will raise the funds we need from those most able to pay and who have profited most out of the boom years.
“This redistribution can be achieved through; a wealth tax on the richest 10%, a Robin Hood tax on financial transactions, the restoration of progressive income tax of 60% on incomes above £100,000, and a clamp down on the tax evasion and avoidance that is costing us £95 billion a year.”
While we are in favour of progressive taxation and forcing the wealthy to pay the taxes they owe, it still does not get around the fact that the economy is owned by a tiny handful of multi-millionaires. The key question is: who can carry out such a far-reaching measure? It certainly will not be carried out by the capitalists and their representatives – they are the top 1%! For the Labour parliamentarians, trying to carry such a measure through the capitalist state will be met by the active resistance and sabotage of the ruling class at every step.
The only way to carry out such a wealth-tax is with the backing of the organised and radicalised labour movement, ready to enforce its effective collection.
But if the workers are on the move for change, why stop at a mere wealth tax? Why not go the whole hog and expropriate the major corporations and banks under democratic workers’ control and management?
Tax
When it comes to a Robin Hood tax on financial transactions, unless carried out unilaterally throughout the world, would merely mean capital transactions moving to areas of the globe where the tax wasn’t in place, i.e. a de facto flight of capital. It is clear that a tax on financial transactions could only be implemented effectively by the working class coming to power internationally. And once again the question is raised, if the workers have gone so far, why stop there?
The Radical Alternative statement implies that the problems faced by working people can be solved by a series of (radical) measures under capitalism. But this is not the case. It is the capitalist system that is the problem and no amount of (radical) tinkering will change this fact.
The merit of the Radical Alternative is that it recognizes that the old Keynesian idea of stimulating growth through deficit financing is completely at odds with reality, owing to the already massive indebtedness of the state.
But isn’t this what is being proposed, namely that the finances raise through taxing the rich, would be used to invest as follows?
“Investing in a mass public housing building and renovation programme, in universal childcare, in the modernisation of our public services, in the NHS, in creating a national Caring Service, in our schools and colleges, in our transport infrastructure and in the extension of broadband [and investment] …in alternative energy, combined heat and power and insulation to both tackle climate change and create one million climate change jobs.”
While we would agree with more public spending on these things, taxation of rich alone, without taking over the commanding heights of the economy is open to sabotage and capital flights. Public ownership of the economy would allow us to create the wealth needed to carry out the above reforms and much more.
Therefore the Radical Alternative commitment to “…establishing a national investment bank with the resources levied from the banks so that there is no shortage of funds to lend for manufacturing growth and research and development…” needs to be changed to the nationalisation of the key levers of the economy, together with the major banks and finance houses. To leave the banks in private hands would be to leave the power of the capitalists untouched, inviting chaos and sabotage.
Such a socialist programme would allow us to carry out the Radical Alternative commitments of a living wage, a 35-hour week, a guaranteed job and much more besides. Yet socialists must come out clearly and unambiguously not just for reforms based on fair and equal distribution – that is just one side of the equation – but also for a programme to realise these reforms by taking the levers of the economy out of the hands of the capitalists as a class.
This means the nationalisation of the commanding heights of the economy under democratic workers’ control and management.
This would provide a beacon to workers elsewhere, linking up to create a Socialist United States of Europe and a world federation of socialist states.
