Britain - The capitalist class must be made to pay for its crisis

Jul/Aug 2008

"The time has come to bow your head and tighten your belt" - such was, in not so many words, the message that Chancellor of the Exchequer Alistair Darling had prepared for his audience, for a prime time interview on BBC1, on Sunday 22 June. Indeed, most of this interview was devoted to hammering out the alleged "need for wage restraint". And, at a time when prices and bills are going through the roof, after years in which real wages have been lagging behind inflation, talking about "wage restraint" is really talking about wage cuts.

This is what Darling was really after, since he finally admitted that "wage restraint" meant wages staying in line with his 2% inflation target. This, when the grossly underestimated retail price index computed by his own officials shows an annual 4.3% increase! In other words, even before taking into account rising interest rates and soaring fuel and petrol bills, workers are supposed to take a 2.3% wage cut!

Of course, Darling would never let it be said that his government is not being "even-handed" or that it is not "benevolent" towards what he calls somewhat patronisingly, the "most vulnerable". So Darling made a point of saying that his "wage restraint" should apply "from the boardroom to the shopfloor." Well, yes, directors and big shareholders can certainly afford a cut in their purchasing power, with all the cash they piled up over the years, thanks to the record profits that companies made from workers' labour over the years. But which working class household can afford such luxury, especially when the real cost of living is going up so fast?

A concerted campaign

Darling is not alone in singing this song, of course. Already, a whole skilfully-crafted campaign has been developing in the media, to get working class people used to the idea that they must agree to "sacrifices" or else... This is a two-pronged campaign.

The first prong involves giving workers all kinds of "evidence" that the economic situation may not be as bad as it may seem and that, after all, they are not as badly off as they may feel.

For instance, over the past two months, there were numerous reports about the fact that consumer expenditure on basic products like food and clothes, had increased compared to the same period last year. This, we were told, was "proof" that consumers were not turning "spend-shy" as a result of the credit crunch.

Except that one does not have to be an Oxbridge-trained economic expert to see the flaw in this "proof". This increase, which ranges between 1.3% and 3.1% depending on the estimate, turns out to represent the increase in the money spent by consumers. But it does not take into account the price hike for most of the items concerned over the past months, which has been far higher than 3.1%. So that instead of an increased consumption, if these figures "prove" anything it is that real consumption, in other words the quantities bought by consumers, is going down! Of course, for the supermarket chains, this may well be irrelevant, since the only thing that matters for them is that they maintain their profits. But from the point of view of working people, this makes a world of difference, because it shows that their standard of living has already gone down measurably.

The second prong involves hammering out in parallel the idea that things could get much more ugly should the "right" measures fail to be taken, meaning austerity measures, of course!

So, over the past two or three months, the national media have made numerous references to rising bankruptcies among small businesses (without saying a word about the fate of the workers!) and falling overall profits, stressing that, for the time being, companies were "benevolently" refraining from cutting jobs. Leaving aside the fact that this is a deliberate lie, when the same media do mention the likely prospect of job cuts, they portray them as being somehow part of a "normal" process which should not be seen as a threat by ordinary workers. This was particularly blatant in the last weeks of June, when the media announced that plans to axe some 10,000 jobs in the finance industry would be implemented over the summer.

The comments made on this occasion implied that the jobs which are to be cut are those of over-paid financial whizz-kids. Except that this is another lie. Most of the workforce in the finance industry, whether in banks or insurance companies, is made of low-paid back office staff. And those are always the first to go when "savings" have to be made. Not to mention the large numbers of agency workers employed in this industry, whose jobs do not even need to be cut: their contracts will just not be renewed! Contrary to the media comments, therefore, ordinary workers should indeed feel directly concerned by these wholesale job cuts, because it is their brothers and sisters who are already being thrown onto the junk pile!

Such announcements and the way they are portrayed are, nevertheless, veiled threats against all workers - a way of telling them "it is not your turn just yet, but your turn will come if you rock the boat".

The obsessive daily headlines about the astronomical speculative increase in oil prices on the London and New York futures markets, play a similar role, because it is, to an extent at least, a scare story. Indeed, there is only an indirect relationship between the speculative headline world price of oil which is used to underpin these hysterical headlines and the prices that consumers pay for fuel and petrol.

Of course, petrol pump prices do change every day and usually they go up. But if the oil component in the price of a litre of unleaded at the pump reflected the headline oil price brandished by the media, instead of being sold for around £1.17 a litre, as it is at the time of writing, it would be sold for at least £1.67 (and this is a gross under-estimation, since it does not take into account the cost of refining oil into petrol). In other words we would pay at least 42% more at the pump! So the cataclysmic comments that are showered on workers on a daily basis are, to this extent, a sleight of hand as well.

But these comments do serve a purpose - that of maintaining a climate of uncertainty. By the same token they back up Brown's claim that the present crisis has nothing to do with the "fundamentals of the British economy" - and, in particular, that the profiteering of British capital bears no responsibility in it - but everything to do with the "world oil crisis" (the "Third Oil Shock" as Brown described it) about which neither Brown nor, above all, the British working class can do anything.

Tying all these elements together, it is not hard to see where the capitalist class and its politicians are going with this. This campaign is aiming to hammer into the heads of workers the idea that they can afford to agree to a measure of sacrifices - and if they fail to do so, things may become a lot harder for them.

The cost of the crisis is rising for workers

There are subjects that the politicians and the national media are careful not to broach. And they include all the issues which show what price workers are already paying for the present crisis.

The issue of food price hikes was impossible to hush up because it affected all social layers, including an affluent petty-bourgeoisie which was not amused to see the spiral of prices at their usual Waitrose, even if they could afford these increases. But we can be sure that had the price hikes been confined to Asda and Lidl, the media would have been far less vocal about them.

However, there are issues which do not affect this affluent petty-bourgeoisie but only the working class - like job cuts. And one would be hard-pressed to find a comprehensive coverage of job cuts over the past months in the national media. Yet, there have been thousands, maybe tens of thousands of them, particularly in construction and all the industries related to it.

Entire building sites have been mothballed, due to bankruptcies, or due to the construction companies or developers involved having doubts as to the likelihood that they would be paid for the work done, once the project was completed. And this does not just affect house builds but also commercial projects, including large ones. At the same time, many developers have scaled down, virtually at the last minute, their plans for this year. Countryside Properties, for instance, one of the big players in housing, has reduced the 3,000 homes that it had planned to finish by the end of this year to 2,000.

But wherever such things happen, they are not mere economic facts, they also mean job cuts. One of the reasons why twice as many businesses went bust in the first quarter of this year as in the first quarter of 2007, is precisely the fact that many of them were left high and dry by the cancellation of building contracts on which they relied to get going. Thanks to the bankruptcy laws, the personal assets of the owners of many of these businesses may well be protected, but the jobs of the workers they employed were not, nor even the money they may have been owed.

By and large, job cuts are only reported in the national media when they affect quoted companies, but only in so far as their decisions have an impact on their share prices. So Barratt's announcement that it was considering cutting up to 5,000 jobs made the headlines in some papers because it is the biggest player in the field and a heavyweight on the Stock Market. So did, to a lesser extent, the 600 job cuts announced by Taylor Wimpey and the 300 redundancies planned by Redrow.

But outside this handful of big companies, how many redundancies are simply ignored by the national media in smaller companies. Local papers do report them, however. Taking just a cursory look at a handful of these papers, it is possible to compile a list of job cuts reported in June alone, which is by no means exhaustive, but nevertheless provides an idea of the extent of the problem: Watson Construction (100 job cuts), Caradale Traditional Bricks (100), Bovis Homes (140), Bellway (320), Gleeson Construction (170), Kingspan (60), Kier (90), David McClean (30), Jeld-Wen (40), Digger Company JCB (70).

In total, therefore, we found 1,120 job cuts reported in June, in just 4 local papers selected at random, all in companies connected to the construction industry. And among these companies, only two, among the smallest, are actually bankrupt. The others are merely "offloading" part of their workerforce in order to maintain their profits. It is not hard to imagine what the findings would be if this compilation was conducted on a national scale. Admittedly, this would be a painful exercise given the lack of centralised data on employment in Britain, but one that the big media organisations, not to mention the network of JobCentres, would be able to carry out easily if they chose to. However, they will not, as this would highlight the fact that the bosses have already gone on the offensive against the working class to make it pay for the present crisis. And this is certainly the last thing that the capitalist class of this country wants to do. This is also probably the reason why official employment and jobless figures have only marginally changed over the past year.

A system gone mad

Job cuts are not confined to construction, however. The usual restructuring exercises are still being carried out by some big companies for no other reason than to boost already huge profits. So Thomson-Reuters, the world's largest news organisation has just announced 1,500 redundancies in order to "streamline" its giant operation. Insurance giant Aviva is to cut 1,800 jobs - nothing to do with the credit crisis, according to its management, but a long-planned restructuring. Likewise, Orange UK, the British subsidiary of French telephone giant France Telecom, has announced 450 redundancies. There is something obscene in such wealthy companies choosing consciously to deprive workers of their livelihoods, in order to boost their dividends by a few percent, at a time when the jobs of so many workers are potentially under threat and when the standard of living of the working class is shrinking.

Companies in the finance industry were bailed out collectively thanks to Darling's great banking rescue. But this did not stop them from starting to cut jobs, and long before the latest announcement of 10,000 job cuts in the City, mentioned earlier.

Among these job cuts, the most prominent and the most shocking perhaps, are the "up to 3,000 job losses" ordered by Alistair Darling at Northern Rock, a bank which was bought and bailed out with taxpayers' money. As if these workers could not have been kept on, to do something useful with this bank, as opposed to Darling's plan - which is to bring it back to profitability and return it to the capitalist class. Indeed, Northern Rock could have been turned into a channel whereby the state could have come to the rescue of the tens of thousands of home-buyers who are already threatened with repossession and the many more who will be, in the coming months.

Assessments published recently by specialist charities suggest that households savings have now reached a 50-year low, while 40% are struggling to pay their debts. This is even more true for working class house buyers, who are faced with the same escalating prices and bills as everyone else, plus increased interest rates on their mortgages.

But this government only feels concerned when the capitalist class faces difficulties. It is prepared to bail out banks with £100bn of public money, but it will not lift a finger for struggling working class families. Brown could not care less if they end up homeless as a result. Tough! They will have to join the 37,000 or so homeless households already in temporary local authority accommodation and they will probably have be content with that for the foreseeable future, despite the resulting overcrowding, damp and inadequate facilities.

Because another cynical irony in all of this is that Brown's famous pledge to build 3 million "affordable" homes by 2020 has not even begun to materialise. For the time being, it has been mainly a pretext for big developers and construction giants to grab state subsidies in order to build upmarket flats and houses for professionals and others who can afford to buy or rent homes at a high price. But there have been precious few builds for rent, that working class families can afford. And despite the fact that such homes are desperately needed and will be even more needed in the immediate future, tens of thousands of building workers are being pushed onto the scrap heap! As if these workers could not be employed by the state directly, in order to put a roof over the heads of working class families who need one, as a matter of urgency!

The capitalist class must pay for its crisis

There is some evidence that the bosses are somewhat worried about the social impact of the crisis as a result of the job cuts that companies are planning.

Business organisations commissioned various surveys on this issue. The findings of two of these surveys were published in June. Both were conducted using the same methodology - by asking a sample of companies, which they claim to be representative of the economy as a whole, what their plans were in terms of jobs between now and the end of 2009. One of these surveys, conducted by the Hay Group and the Centre for Economic and Business Research, came up with an estimated net 350,000 job cuts by the end of 2009. The other survey conducted by Capital Economics, came up with an estimate of 440,000 job cuts over the same period. What may be even more significant in a way, is the fact that both surveys were conducted on the assumption that everything remained equal in economic terms - i.e. that the economy "does not fall into a recession", to quote one of them.

Obviously, such estimates must be taken with a lot of caution, if only because not even the bosses themselves are able to know in advance how they will react to new circumstances, whether in their own companies or in the economy at large. Besides, extrapolating to the whole of society the say-so of a few dozen or even a few hundred bosses, adds a large margin of error to the estimate. But the order of magnitude of the estimates produced gives an idea of the scale of the problem faced by the working class, especially given the fact that the surveys assume that the economic situation will not deteriorate - which seems rather unlikely at this point in time. What if it does? Will the number of jobs under threat have to be counted in millions then? Is this the future that the profit society has to offer the working class?

Not everyone has grounds to worry, though. The little-known "World Wealth Report", published jointly every year by US bank Merril Lynch and French consultancy group Capgemini, shows that, despite the crisis - or maybe thanks to it - the world's wealthy managed to get even richer over the past year. The 10 million individuals who own more than £500,000 in financial assets across the world (excluding primary residences, works of art, jewellery, consumables and means of transportation), increased these assets by 6%. So that, for the first time, their collective financial wealth is larger than the total value produced on the planet over a whole year! And the 100,000 individuals who own more than £15m saw their assets increase by 14.5%! The richer you are, the richer you get!

In Britain alone, there are almost half a million people belonging to the first category - that is a tiny layer of people making up only 0,008% of the population! But between then, they own financial worth of around £1,000 billion! And there is not enough wealth in this country to provide jobs for all, with living wages and pensions, decent housing and public services?

Of course such wealth exists. It is in the hands of this tiny minority of parasites, who live, directly or indirectly, off workers' labour. These parasites, who make up the capitalist class, are the same people whose profiteering led to the credit crisis, thereby threatening the livelihoods of hundreds of thousands of workers, maybe millions. It is their profiteering again which, through the mechanisms of speculation, is now pushing prices and bills through the roof and threatening to reduce drastically the standard of living of working people. They have to be stopped and measures have to be taken urgently to clean up their mess and ensure that it does not happen again. Only the working class has the collective strength necessary to do it, because it makes up the majority of society, and because it has a collective interest to free society of the mad straightjacket of private profit.