#25 - Behind the "free" market myth - Capital's dependence on the state.

Jan 1996


After nearly two decades of deregulation, privatisations and cuts in welfare and social expenditure, the traditional role played by the state in capitalist society could seem to be in question. This is certainly the message put across by politicians of all descriptions throughout the world. Their argument is that we live in a "changed world" which cannot afford to allow the state to tamper with the economy whose management should be left entirely to the "free", but blind operation of "market forces", as they call them.

Today, however, politicians no longer venture to claim, as they often did in the 80s, that this "changed world" heralds a new era of affluence for society. On the contrary the "new wisdom" is openly aimed at taking stock of the conditions created by the re-emergence of the world capitalist crisis in the early 70s. Long before Tony Blair's "Commission on Social Justice", bourgeois economists already argued that the days of full employment were gone forever and that society could no longer be expected to support all its members from the cradle to the grave - as if society ever had! Blair's "merit", from the point of view of the capitalists of course, was that he spelt out the practical consequences of this general statement of facts, to endorse them and to give them a respectability which the Tories were unable to generate.

These consequences are three-fold. First, the state should hand to the capitalists as much control as possible over public funds - in the form of Blair's "new partnership between the state and private capital" or Heseltine's "private finance initiatives". Second, the norm for employment should become one of total flexibility, in which workers have no right other than that of adapting to the employers' needs - what Blair calls "new innovative forms of employment" and Major "new venture careers". Finally, we should no longer expect any protection from the state against the uncertainties of the future, whether in terms of pensions, dole money, etc.. Instead, in order to relieve the state of the welfare burden, the individual should take care of himself by saving all his life - this is Blair's "stakeholders society" or the Tories' "self-help society".

What really lies, therefore, behind today's apparent retreat of the state from its traditional economic role is not just the ideological obsession of Tory politicians but the implementation of a policy demanded by the capitalist class to overcome the limitations imposed on profit by the world crisis.

But how real is this apparent retreat of the state from economic intervention? In his own personal way, Blair answered this question while visiting Singapore earlier in January, by showing his admiration for the local regime and setting it up as a possible model for New Labour's "stakeholder society" - thereby agreeing once again with Thatcher who often referred to Singapore's alleged "economic miracle" as an image of the future she had in mind for Britain.

There is nothing more remote, however, from a "stateless society" than Singapore's paternalistic dictatorship. Apart from the artificial nature of the country's economy - which, like that of Hong-Kong, is primarily the product of the long blockade imposed by imperialism on China from 1949 onwards - the regime's main features are, on the one hand its totally open and cynical redistribution of public funds to private capitalists and, on the other hand, contrasting with the official benevolence towards business, the iron dictatorship imposed on every aspect of the lives of working people.

In other words the model chosen by Blair and Thatcher alike is not one involving less state intervention in the economy, but much more. The contrary would have been surprising in fact. For nearly two centuries, the capitalist class developed its parasitic existence in the shadow of the state. It would have been ironical, and very unlikely, that the bourgeoisie should choose precisely this period, when its profits are threatened by the longest world crisis ever, to give up what has always been its most effective weapon.

From a fungus of the monarchic tree...

A very popular slogans among young bourgeois radicals in the heyday of the 18th century revolutions was that of a "costless state". No doubt they were genuinely angered by the luxury enjoyed by the monarchs at the expense of a destitute peasantry. Yet, without this parasitic magnificence, the bourgeoisie would never have risen to become a fully-fledged class. Not only was the bourgeoisie parasitic on the population as a whole, like all other exploiting classes, it also grew as a parasitic fungus on a state which had been set up by another class.

The luxury and expenses of monarchs like Queen Elizabeth, in England, or Louis XIV, in France, could not feed only on the exploitation of the relatively small peasantry of their time. Their endless need for cash gave the still modest town traders a unique opportunity to increase their economic weight. From mere intermediaries in the sale of goods and occasional money lenders, the traders became the royalty's bankers before becoming its business partners - and with all the resources of the monarchic state thus at its disposal, the bourgeoisie grew immensely rich, much richer than its aristocratic patrons.

The meteoric rise of Sir Thomas Gresham, in the second half of the 16th century, was typical in this respect. A wealthy London merchant, Gresham spearheaded the drive of the English traders to take over the Dutch wool market. Not only was Gresham able to make a fortune out of all these dealings, he was also rewarded in 1570 with Queen Elizabeth's blessings for the trading floor, modelled after the Antwerp Exchange, which he had just opened in the City of London. The Royal Exchange was born, opening a new world of profitable speculation for the London merchants.

Not just Gresham but a whole social layer grew fat out of the monarchy's constant need for fresh cash. The legalisation of interest-bearing credit by Queen Elizabeth in 1571 was merely a favour to her well-deserving friends, the London merchants, allowing their shady money-lending business to become respectable. No more than a century later, their main customer was to be the monarchy itself. The size of the public debt and the number of "fundholders" who held public debt certificates became so large, that buying and selling these certificates became even more profitable than just cashing in the interest they paid. Thus emerged the ancestor of the bond market, the largest and most unstable component of today's world financial system. The Bank of England, which was granted a Royal charter in 1694, was itself no more than a joint-stock company set up by subscribers to a state loan raised to finance a war against France. Although the entire capital of the Bank was already lent to the state and it had no other assets, it was allowed by law to issue bank notes secured on the public debt certificates it held and, therefore, to enter the credit business. Thirteen years later, the Bank was further rewarded with a virtual monopoly on the issue of such notes, allowing it to become the country's largest bank. The modern monetary and banking system was born. In the process, a whole new section of the bourgeoisie had developed, whose existence was primarily based on the proceeds of the public debt. And with 20,000 households by the mid-18th century, this totally parasitic bourgeois layer was by no means insignficant at a time when the population was still hardly over six million.

The well-known success story of the English traders was no less dependent on the helping hand of the state. Just as Columbus' discovery of the "New World" had been financed by the King of Portugal, it was the English monarchy which helped the English merchants to achieve dominance over the growing sea trade. Under Queen Elizabeth, the monarch became patron, ship leaser and joint stockholder in the expeditions of Hawkins, Drake and others to the New World.

As to the bourgeoisie's "manufacturing genius", it is no less of a legend. The early bourgeoisie was much too fascinated by the quick and rich pickings that could be made in trade and finance to be willing to risk very much in manufacturing ventures. Most large-scale pre-industrial manufacturing projects were initiated, financed and carried out by the monarchic states. In Britain and France, these were largely related to war needs - subsidising shipbuilding, setting up smelting works and foundries for guns, etc.. - although the French monarchy ventured into more unusual areas, setting up for instance the world's first large tapestry manufactures.

... To a triumphant parasite of the bourgeois state

It must be recalled that not all of the bourgeoisie, by far, were enthused by what we call today the bourgeois revolutions, whether in England in the 17th century, or, subsequently, in the rest of Western Europe. The bourgeois establishment, in particular, was reluctant to give up its comfortable parasitic life in the shadow of the monarchic state for the uncertain future opened up by the revolution. But once the revolution was victorious, the revolutionary crowds were forced back into the gutter from where they had risen, the radicals were repressed and this wealthy establishment took control of the new state power. Now, its parasitism could reach entirely new heights.

Whereas the monarchic states had often resorted to protectionism and tariffs as a means to raise cash, the new bourgeois states used these devices primarily to protect their own national markets - i.e. the profits of their national manufacturers - against foreign competitors. Contrary to widespread myth, the bourgeoisie, whether in England or elsewhere, was never in favour of "free" trade, except where and when it was certain to dominate the competition. Nor was there much "entrepreneurial" or "pioneering" spirit among the triumphant bourgeoisie who merely relied on the brute force of their state's armies to take over or retain control of overseas markets on their behalf. If the Industrial Revolution did take off in the end, it was primarily thanks to the gunboat policies, aggressive colonialism and protectionism of the richest states throughout the 19th century.

In fact, industrialisation for its own sake was certainly not a concern for the bourgeoisie. It is significant that, for instance, up until the mid-19th century at least, one of the major sources of income for the French and English bourgeoisies, and the cause of endless colonial expeditions by their respective states, was their control over the opium trade in the Far-East - hardly an example of "pioneering" industrialism! Industrialisation only became a major concern for the bourgeoisie when it opened up the prospect of huge new profits. But even then, the profits generated were usually proportional to the damage caused to others. The growth of Britain's industry was a typical example. It was, for instance, the virtual ban on imported Indian textiles, by means of prohibitive tariffs, which allowed the Lancashire cotton mills the time to get on their feet. Once this was achieved the Indian market was flooded with cheap English textiles and the desperate rebellion of hundreds of thousands of Indian craftsmen was met with the fire of the Empire's gunmen.

The American bourgeoisie, allegedly the most "pioneering" of all, was no exception. The colossal fortunes of such big names as J.P. Morgan and Vanderbilt came out of the subsidies and massive land grants they were awarded by the American state as an additional premium for opening up the country to railroads, often at the expense of the real pioneers who had risked their lives to find some new grazing land on which to settle. The fact that it was said of Rockefeller's Standard Oil, which started life in Pennsylvania and quickly came to dominate the oil industry, that "it did practically everything to the Pennsylvania legislature except refine it", only showed that the American capitalists had been quick to learn how to milk the state cow.

By the beginning of the 20th century, capitalism's expansion was over in the sense that there were no new continents waiting to be discovered, no corners of the globe that had not been brought into the fold of the world market. Between them the rich bourgeoisies had divided the world. It was about this time that the term "imperialism" was coined by an English bourgeois economist, to describe the stage which had been reached. Already capitalism was entering its period of decay, although admittedly a long one. Far from receding, the role of the state was about to expand as never before, to the point of covering increasingly every aspect of social and economic life.

Keeping the working class under control

As the working class grew in size and strength, the state of the bourgeoisie developed another primary function - that of keeping this unruly working class under control. Unemployment, which was more or less endemic from the earliest days of the Industrial Revolution, presented the bourgeoisie with an increasingly thorny problem.

In Britain, the Victorians thought they had solved the problem by building in each town a jail for petty criminals and another one for the unemployed, the so-called "workhouses". But whenever there was a slump, the workhouses were overwhelmed with the destitute. Charity, organised mainly by religious groups, was quite incapable of filling the gap. The growing number of unemployed, moving uncontrollably from town to town, reached such a scale that it became a social phenomenon.

It was in Germany that new methods of social control were first experimented with. In the 1880s, Bismarck introduced a compulsory state insurance system covering anything from health and injury at work to invalidity and old-age pensions. Bismarck's repressive policies and the fact that this was introduced at a time when the German Social-Democratic Party was forced underground, left no space for illusion. The aim of this scheme was primarily to impose some form of registration on workers, to reduce the influence of their clandestine unions which ran the only existing mutual aid funds, while at the same time relieving the capitalists from any concern about the welfare of their workforce.

In the turbulent years of high unemployment and industrial unrest before WW1, the British bourgeoisie chose to follow Bismarck's example. Lloyd George and the Liberal Government of the day implemented their own version of his schemes. First, labour exchanges were set up for the unemployed all over the country. Then, in 1908, old age pensions were introduced, paid by taxes, followed by contributory and compulsory health insurance and unemployment schemes. In theory workers were to pay less than half the cost of the benefits they were to receive, while the employers and the state paid the rest. But in practice, employers simply considered that their contribution to the schemes should be taken out of their wage bill and real wages were progressively adjusted downward accordingly.

Direct class collaboration had always been problematic at the point of production due both to workers' pressure and to employers' reluctance. And yet, the capitalists had to find some way of buffering the assault of the class struggle and protecting their profits. On this too, the state was called in to supplement the inability of the bourgeoisie to find a solution. So, as part of his reforms, Lloyd George offered the unions a role in the administration of the health and unemployment insurance schemes. Coming after recent changes in the law which had given unions the right to sponsor parliamentary candidates, this was another way of integrating the union leaderships into the institutions of the system and giving them a stake in it.

A weapon in the trade war

More than anything else, the imperialist era saw the build-up of state military power as the main weapon used by the rich bourgeoisies in their economic rivalries. Clausewitz's famous statement, in the early years of the 19th century, that "wars are the continuation of politics by other means" could have been rephrased in the latter part of the century to read "wars are the continuation of capitalist competition by other means".

So far Britain's industrial pre-eminence had been unchallenged. This was now over. The French, German, American and, to a lesser extent, Japanese bourgeoisies were now bidding for their own share of the world cake, thereby threatening the status quo which had so much benefited the British bourgeoisie. Markets, trade routes and, above all, new sources of raw materials for the domestic industries of the rich bourgeoisies, became the causes of endless rivalries which often threatened to splill over into military confrontrations. More and more resources and fire power were brought in to reinforce the colonial armies of the imperialist powers.

Africa, being the last relatively "open" land available, became the centre of a fierce battle between the imperialist rivals in the 1880s, in what came to be known as the "scramble for Africa."

Western Africa, where colonial boundaries had never been well defined and actual colonisation had been confined to the coastal areas, became the scene of a frantic activity, with each rival power striving to occupy as much land as it could before the others. In the end, however, there were relatively few clashes beween the rival powers, mainly due to the fact that France had concentrated its fire power in the region and was more or less in a position to dictate its conditions. The only exception was in the area of what is today Nigeria where the British army was instructed to fight to the bitter end in order to protect the interests of the powerful Royal Niger Company.

More serious confrontations, however, took place by proxy in Southern Africa. First in today's Zimbabwe, in 1896, where the British army staged one of its most ferocious punitive expeditions against an indigenous uprising caused by the ruthless exploitation of the country by British chartered companies. Then, between 1899 and 1902, in South Africa, during the second Boer war, to uphold the interests of Cecil Rhodes' Consolidated Goldfield Company against the Boers' claims to independence. In both cases, although they were not directly involved in the actual fighting, the agents of rival German companies had been busy helping the insurgents.

There were other confrontations looming across the world. The growth of the USA in the 19th century also threatened British commercial interests in Latin America. Both bourgeoisies wanted to control Nicaragua which was seen as the key to linking Atlantic trade with the Pacific. The US military occupation of Cuba in 1898 was a potential threat to British interests in the West Indies. Eventually the US government decided that Panama was the most favourable location for a canal linking the Atlantic and the Pacific. In order to separate Panama which was part of Colombia, the US backed a Panamanian independence movement. The new Panamanian government immediately signed a treaty with the USA leasing the canal zone "in perpetuity". And when the British backed a rival scheme in Nicaragua, the Americans organised an insurrection to overthrow the pro-British government. The message to Britain from the US bourgeoisie was unambiguous: keep out of our "backyard".

In the end, however, it was in Europe that imperialist rivalries broke into a full-scale and direct confrontation between the rival bourgeoisies. An obscure incident in the Balkans, one of the many areas where the bourgeoisies of France, Britain and Germany had been waging an on-going war behind the scenes, served as a pretext for them to use the full military might of their respective states in order to settle their rival claims. This, of course, could not and did not end the rivalries between the rich bourgeoisies. But it was a landmark in that it showed the extent of the dependence of the now decaying bourgeoisies on their state machineries - a dependence which was to increase much further, in parallel with the decay of the capitalist system as a whole.

A crutch against the Depression

Just over a decade after the end of WW1, capitalist competition resulted in another catastrophe with the 1929 Crash and subsequent world economic crisis. And immediately the states stepped in to bail out their respective bourgeoisies at the expense of the poorest classes in society.

The most blatant case was, of course, that of Germany, where the entire resources of the state were put at the service of the big companies by Hitler and his thugs. Behind the Nazis' populist nationalism was a policy aimed at reducing drastically the share of the national income received by the working class. The main beneficiaries of this "redistribution" were the same big companies whose representatives had, from 1931 onwards, chosen to finance the Nazis' rise to power as a means to crush the working class and its organisations. They enjoyed a massive cut in their wage bills and huge state orders first for the newly-established state-owned enterprises, such as the Goering steel works, and subsequently for the army.

Ironically, outside Germany, it was in the USA, where capitalism and "freedom of the individual" were allegedly so intertwined, that the most dramatic interventions of the state were to be found. In 1933 Roosevelt in effect nationalised the banks by exchanging massive amounts of state funds against worthless stock. When the crisis was over a few years later they were able to buy back their stock, at a token price, of course. At the same time, Roosevelt set up the National Recovery Administration or NRA which aimed to get every industry into agreement on production levels in exchange for extensive direct subsidies, underwriting of loans, tax rebates and a huge increase in state procurement.

Roosevelt's "New Deal", as it was called, has often been compared with Mussolini's corporate state which had bailed out the Italian bourgeoisie when confronted with recession in the early 1920s. Roosevelt's showpieces like the Tennessee Valley Authority (TVA) which brought electricity to large areas of the South through a series of interlinked dams, matched Mussolini's draining of the malarial Pontine Marshes, which were subsequently used to grow wheat, or his massive rebuilding of the country's rail and road systems. In both cases, government propaganda emphasised the job creation value of these programmes in the fight against unemployment - but, of course, not the fact that these jobs would be short-lived anyway. What was less publicised were the names of the main beneficiairies. In Italy, these were Fiat, who manufactured most of the heavy farming equipment required for Mussolini's "battle of grain", as well as the country's large pasta producers who gained a source of cheap wheat, not to mention Italy's cement tycoons who made a fantastic killing out of all of Mussolini's programmes. In the USA, the TVA provided massive contracts for firms like General Electric - which built the turbines - and was one of a number of big capital projects financed by the state, designed to open up the South to industrial development.

In Britain, considerable restructuring was carried out by the state, mainly to the advantage of big business and at great cost to public funds. The steel industry was coordinated into a massive price-fixing cartel. Import controls ensured that competition was kept out and profits rose. The creation of the Agricultural Marketing Board backed by extensive subsidies brought guaranteed profits to big farmers. Public corporations developed electricity supply and made the investments necessary for a national grid. Government also provided the infrastructure for the private civilian aircraft industry in the form of airports and the state-owned British Overseas Airways Corporation.

By 1936, every politician in the capitalist world was hailing the "recovery" and the imminent return of the "good old days". What none of them was prepared to admit was the fact that this "so-called" recovery only concealed the artificial boost to profits generated by massive state orders and subsidies. But while the rich American state could offer its capitalist class a solid crutch that could last for many more years, this was certainly not the case of the European states, at any rate not without increasing the exploitation of the working class to levels comparable to those achieved by Hitler in Germany.

When the crutch turns into a bazooka

By that time, however, whole sections of the world bourgeoisie knew already that the imperialist rivalries which had been made increasingly tense by the crisis, would have to be resolved through another war - in order for enough "winners" to emerge out of the crisis, there had to be enough "losers"! The rearmament drive which started simultaneously in the mid-30s in almost every industrialised country had obvious economic motives, but it was also a political choice - that of ensuring that the bourgeoisies would be able to use their states not only as crutches, but also as bazookas against their rivals.

Thus, in Britain, the biggest infusion of state cash came after the Treasury's "ten years rule", which anticipated no new major war for at least 10 years, was abolished in 1932. The restraints on rearmament were lifted. So that by 1939, as much was spent on armaments in a single month as for the whole of 1933! Of course, the beneficiaries were the companies which could contribute one way or another to produce weapons.

The aircraft industry made a fortune out of the rearmament drive. Under the pretext of turning the RAF into a major modern strategic force, massive state funds were made available to the industry. A small group of companies, known as the "ring", which had been organised since WWI in the Society of British Aircraft Constructors, netted most of the cash. The state paid for the modernisation of their existing factories and offered them new ones. In Coventry alone, six large new factories were built. And all this in exchange for a mere commitment to keep production to required levels and quality standards - a commitment which the companies concerned were all too willing to make. Not surprisingly, within the first four years of this scheme, the total profits of these companies trebled and their return on capital became the highest in the whole of the engineering sector.

After 1936 when war production really got underway, many similar, although usually more modest schemes, were introduced in other sectors too. And this was used by the state as an opportunity to provide a lifeline to a number of firms. Thus tank orders turned chronic lossmakers like the North British Locomotive Co, Fowler's or the Vulcan Foundry Co into profit makers. As for Rolls-Royce, the onset of rearmament prevented them from abandoning aero-engines altogether.

After the war broke out, once again, the warring bourgeoisies relied entirely on their states as economic coordinators. Of course, turning the economy into a war machine also required a measure of discipline in the ranks of the bourgeoisie - including accepting a degree of restraint towards their workforce which was uncustomary for hire and fire employers like Lord Nuffield of Morris Motors in Britain. In fact the collaboration of the trade union machineries with employers under the auspices of the state to maximise production worked to the advantage of the likes of Nuffield, allowing them to introduce productivity and flexibility changes which would have been difficult before the war. Profits mushroomed as never before. The state was the only purchaser. Contracts were awarded to whoever had spare capacity. As a result overcharging became the norm. The fact that a 100% Excess Profits Tax had to be introduced in 1941, to cream off the super-profits made by companies, was an indication of the scale of the problem. But even then, this tax was still designed to guarantee every company a level of profit equal to its best pre-war year!

The nationalisation of ... industrial investment

When the war ended, the Japanese and German bourgeoisies were pushed out of the game, at least for some time. The American bourgeoisie dominated the world with all its military and economic might and it was in a position to keep things this way for the foreseeable future. Only one question remained open - what would the future have in store for the two main lesser imperialist bourgeoisies, the French and the British? Their colonial empires had been partly broken up by the war, the markets which they used to dominate had been taken over by others, their domestic industries were largely outdated if not destroyed, their financial clout was almost non-existent.

On the other hand, reconstruction was going to offer fabulous business opportunities for the next decade at least. Grabbing these opportunities, however, required large amounts of fresh cash, and quick. Once again the states were called in to help. Both in Britain and in France, a sizeable part of the bourgeoisie's assets had been made of shares in war industries, which were bound to remain worthless until these industries were adapted to the new situation and modernised. The postwar nationalisation programme was the answer to this immediate problem of the capitalists. Whatever the ideological clothes in which they were dressed at the time, ad especially later, and regardless of whether they were introduced by a Labour prime minister as in Britain or by a right-wing general as in France, these nationalisations had the same fundamental aim - to relieve the capitalist class of assets which had become unprofitable and to provide them with the fresh finances required to win a share of the world's reconstruction business.

The compensation which was paid to shareholders in Britain in the nationalisation process was indeed enormous, bearing in mind the fact that before the nationalisation announcement had triggered a wave of speculation, the shares themselves were hardly worth the paper on which they were printed. The total £2bn or so awarded for the whole nationalisation process represented almost the equivalent of three years of the defence budget!

An idea of the enormous profits built up, thanks to these handouts to the bourgeoisie by the postwar Labour government, is provided by the change in the balance of "invisibles" which measures the net flow of financial income between Britain and the rest of the world: from a £165m deficit in 1947, the balance moved into a surplus the following year, reaching £380m in 1950. To understand the real meaning of these figures, it should be recalled that, at the time, Britain was still by far the most indebted country in the world. This large surplus meant, therefore, that the British bourgeoisie was already managing to earn far more dividends, insurance premiums, banking fees and profit transfers from its businesses and partners abroad, than the total amount that the state had to pay to foreign lenders in interest and repayments on the public debt built up during six years of war! Yet, it was in the name of the need to repay the public debt, that austerity and rationing remained in force for the British working class well into the 50s!

In the longer-term the nationalisation programme had another objective. The bourgeoisie had long been unwilling to invest in long-term ventures, specially in Britain where the flight of capital away from the production sphere towards finance and banking had started even before World War I. Yet someone had to pay for adapting British industry to peace time and, looking further ahead, modernising it to the standards of the competition, that is of American industry. The nationalisations shifted this burden from the capitalist class to society as a whole.

The irony, of course, was that the main and, in fact, only beneficiaries of the nationalisations, long after they were implemented, were the same capitalists who had made such a killing out of selling their shares in the industries concerned. Over the following decades private companies were able to buy electricity, gas, coal, oil, steel, telecommunications, etc.. at reasonable, if not cutdown prices, without having to bear the cost of maintaining and developing the necessary infrastructure. They enjoyed the facility of a large rail network to carry their goods and bring their employees to work and, of course, they made profits out of massive orders from the nationalised industries. Every year billions of pounds were thus spent on public funds, i.e. mostly taken out of the income of working people, which went straight into the pockets of British capitalists.

From being a temporary crutch designed to see the capitalist class through the Depression of the 30s, the state had by then become a permanent crutch to which the capitalist class owed not just its livelihood in part, as well.

A welfare state... to keep wages down

In the early postwar years the setting up of the welfare state was the other major form of state intervention in the economy.

In Britain, the plans for the welfare state were drawn up during the war by Beveridge, a civil servant and former Liberal MP, who had assisted Lloyd George in drawing up the first social insurance over three decades earlier. And the plans for the postwar health service were prepared by Churchill's Tory health minister, Henry Willink. Just like the nationalisation programme, these plans expressed a cross-party consensus around the idea that the capitalist class should be relieved of the burden of taking care of the welfare of the working masses and that a comprehensive system of state-run social provisions would take the pressure off wages. Contrary to today's myth about this period, the perspective behind the image of a benign state looking after citizens "from the cradle to the grave" was primarily that of a permanently low-paid working class.

According to Willink's plans, the NHS was to be funded through general taxation. The fact that it was national in scope was expected to bring enormous economies of scale. Moreover, right from the beginning, there were provisions aimed at limiting the uncontrolled growth of expenditure - for instance the fact that patients could only see the GP with whom they were registered.

The other main aspects of the welfare plans covered unemployment, sickness and subsistence benefits for the poorest layers of society. Survival benefits would have been a more accurate description, in fact. For instance, Labour MPs earned no less than sixteen times the benefit they voted in for a single pensioner.

Once the troops had all been brought home unemployment reappeared and the numbers on the dole never went below the 300,000 mark. Such were precisely the conditions for which the welfare system had been designed from the word go and it worked wonders for the capitalist class.

On the one hand, the cost of the system to employers was minimal, since it was soon recouped by the subsequent huge productivity increases which were never made up by real wage increases. The employers' contributions to the system became no more than a share of the wages paid to the state instead of being part of the workers' pay slips.

On the other hand, the very existence of the health and welfare provisions created the illusion of a "safety net" which made low-pay, redundancy, retirement and long-term sickness less intolerable for the working class who no longer felt necessary to make provisions for it. Real wages could therefore be kept closer the bare minimum necessary to cope with day-to-day life. All the more so as the system had built-in mechanisms to ensure that, despite the dole money guaranteed to the unemployed, it would still put pressure on them to accept the first job on offer, regardless of the pay which came with it. Thus, clause 12 of the National Insurance Act included a time limit on unemployment benefit and a "genuinely seeking work" condition. This meant another downward pressure on wages.

In the long run, therefore, not only was the welfare system entirely funded by working people out of their wages, but in addition, by helping to keep wages down, it amounted to an enormous subsidy to the entire capitalist class which was, again, paid for by the workforce.

From a crutch to ... a stretcher

The development of a large public sector in countries like Britain, France and Italy, in particular, was implicit recognition of the impotence of these countries' capitalist classes to maintain and develop the economy as a whole by their own devices. What was then justified officially by the economic consequences of the war should have ended with the reconstruction period. And yet, when profits were fully restored by the early 50s, in fact to well above their pre-war levels, there was never any question of the capitalist class using these profits to invest in the economy's basic and most vital industries.

The division of labour whereby cheap public sector coal and steel etc.. was used to subsidise private industry continued - regardless of which political party was in government. At the same time private manufacturing turned away from the world market, where competition was too tough and came increasingly to rely on state orders. This was particularly noticeable in the case of Britain whose share of world trade kept falling steadily from the early 50s. Of course, this trend did not mean a reduction in profits, merely that the bourgeoisie increasingly relied on the public purse - at least in the production sphere. So much for "private enterprise"!

This trend was most obvious in the case of military contractors like GKN and Marconi in Britain, Dassault in France or Fiat in Italy. While the size of the armed forces was steadily reduced, the cost of the equipment kept increasing. Thanks to government contracts, the favoured military contractors made an exceedingly rich living and were often able to export huge quantities of armaments for which research and development costs had been met entirely by the taxpayer. Even a technological "flop" such as Britain's TSR-2 - the supersonic fighter which never made it into the air - was paid on public funds.

Other big beneficiaries from the public sector in Britain included the pharmaceutical companies like Glaxo which benefited from the NHS' captive market, firms like Tarmac which built and maintained Britain's motorways and the construction companies which built the publicly-funded council houses, comprehensive schools, new universities and new towns of the last 50 years.

As for major long-term investment programmes in high-tech infrastructure, there is scarcely one project where the costs have not been borne by the state. Nuclear power was an exclusive state concern everywhere in Europe offering massive contracts to firms like GEC of Britain, Alsthom of France and Siemens of Germany. The state-funded modernisation of steel production facilities which was carried out everywhere in Europe in the 60s and 70s, was another massive boon for the private engineering and toolmaking industries. In the 70s, computer firms like ICL and Bull-Thomson of France received huge state cash infusions, in an albeit unsuccessful attempt to prevent the technological lead passing to the USA and Japan. In the 80s, the high speed trains were the decade's big state investment, with most of the profits going straight to companies such as GEC-Alsthom and Siemens, though in the case of Britain, BR eventually pulled out, owing to a faulty design. The costs of the Channel Tunnel, which Thatcher liked to claim were borne by private enterprise, have all been underwritten by the French and British governments and subsidised in many other different ways - through grants for regional development, job creation, from the EEC transport fund, etc..

Moving into the 90s, communication seems to be the new craze to justify state subsidies - whether it is through the development of portable phones and satellites, the generalisation of fibre-optic cables or the electronic "super highways", all of which are now the basis for major public-funded infrastructure programmes both at national and European level.

It is difficult to work out precisely what share of private industrial profits are the direct result of state intervention in a country like Britain. If only because very little information filters through about the subsidies actually paid by the state or about the names of the beneficiaries. An incredible variety of different types of subsidy has been developed precisely to hide such dealings from the eyes of Joe Public. But an indication of the extent of these subsidies is given for instance by EEC funding, which is a bit more transparent. A Euro-sceptic like foreign secretary Malcolm Rifkind, who prides himself so much in the low rate of EEC contribution paid by Britain, has still to mention the fact that the entire amount, if not more, goes back to British-based companies under EEC regional development subsidy provisions alone!

The states pump up the financial bubble

The economic crisis returned in the 70s, first with the oil crisis in 1973 and then the dollar crisis the following year. The postwar intermezzo of relatively smooth economic growth came to an end.

Behind the new crisis were the same causes which had produced the Depression of the 30s. But because of the much larger size and tighter integration of the world market, their consequences were potentially even more lethal. There was no crash similar to that of 1929, but apart from that, all the symptoms of the Depression reappeared. World trade slowed down and capitalist competition spiralled up, while the smaller players went to the wall. More private capital ran away from the productive sphere in search of a quicker and safer buck, this time on financial markets. Productive investment slumped to the point where, in the early 80s, used industrial machinery was no longer being replaced. While unemployment soared, the states stepped in, once again, to bail out capitalist profit.

Except that the days when the states were able to channel massive amounts of fresh cash towards the capitalist class, like in the 1930s, were over - if only because even before the resumption of the world crisis the capitalist class of the rich countries had already been dependent on the life support machine of state economic intervention, particularly in the older capitalist countries. Unlike in the 30s and 40s, the states could not generate significant economic growth by pouring cash into the production sphere, which was already over-dependent on state procurement. New ways of boosting profits had to be found, which did not rely on an increase in production.

The enormous growth of the credit economy in the 1980s was the most visible example of the new forays made by the state into the economy. This growth was engineered by all governments worldwide. Consumer and business credit were deregulated in order to allow the banks to use their growing stockpile of cash - in exchange for high interest, of course - and make up, at least partly, for the reduced purchasing power of the less affluent social layers as well as for the general reluctance of the capitalists to invest. This was the period when plastic cards really took off. Within a few years most British families were heavily in debt as a result. Worldwide, the total mass of international bank lending, for instance, was multiplied 18-fold in the twenty years up to 1995.

With banks and many individual companies sitting on huge stockpiles of cash, the mass of floating capital seeking an easy, short-term profit across the world increased considerably. The activity of this floating capital was limited in two ways, however: by the actual volume of shares and bonds which were on offer, on the one hand, and by the time it took for any deal to be carried out, compared to the relatively modest profit that it could yield. So the states introduced changes aimed at speeding up the circulation of money and the operation of financial deals. The stringent controls introduced in the wake of the 1929 Crash were removed and the big stock markets deregulated. The era of the "Big Bang" on the world's financial market began, speeding up the flow of capital by removing the need for intermediaries. By introducing computer-based trading, it made possible transactions worth millions, on any of the computer-linked stockmarkets in a matter of seconds.

At the same time, deregulation opened the way for the growth of a large variety of so-called "financial instruments" whose only purpose was to increase the profits - or losses - that could be made on any single deal, compared to the amount of money that these deals actually required. New, glamorous "financial products", promising big returns for those who could afford to buy them, were developed in order to attract the cash reserves which, previously, would have been converted into fixed-interest bonds. The middle-class fell for the bait, but also quite a number of local councils, with some running into deep trouble as a result. All this gave another boost to the mass of floating capital operating worldwide, and therefore provided more cash for the capitalist class to speculate with.

The extent of this development is difficult to measure due, among other reasons, to deregulation itself. But the estimates which are produced are even more difficult to grasp. For instance, last year, worldwide speculation operated on financial assets whose value was the equivalent of nearly three times the domestic production of all Western industrialised countries put together. To put this figure into perspective, it must be remembered that those in control of this speculative capital make up well under 1% of the total population of these same countries!

The irony was that all these changes in the financial sphere were introduced in the name of "liberating" the forces of the market and removing the heavy hand of the state from the levers of the economy (i.e. from the wallets of the better-offs). Never mind the fact that the sophisticated techniques and technology introduced to make the "liberated" markets workable had been conceived, imposed and financed from beginning to end by the states. Never mind either the fact that if the so-called "global" financial market is able to operate at all, it is only because the states of the richest countries guarantee the "electronic signatures" needed for each one of these international deal. In other words, the system can only work as long as the capitalists trust the ability of the states to discipline the markets! So much for "free enterprise"...

The baffling growth of the financial sphere should not conceal, however, its parasitism on the economy as a whole. Despite the gloss surrounding the fabulous fortunes built by tycoons like George Soros, no wealth is ever created on financial markets. Financial profits always have to be matched by equivalent losses. The fact that the total mass of speculative capital never stops growing only reflects the permanent flow of fresh capital which is being pumped into the financial sphere from the wealth-creating parts of the economy - that is from the productive sphere. Ultimately, whether business commentators like it or not, the sophistication and high profits of the financial sphere are all paid for by the crude exploitation of the working class.

From state handouts to the debt abyss

The way in which the capitalist class has stepped up the exploitation of the working class over the past two decades is well-known. In this, the states played an important part - by helping employers to cut jobs and real wages, attack working conditions and, in general, weaken workers' resistance against these attacks. But to generate the kind of profit growth seen during this period against the background of a stagnant world economy has required a lot more than what the capitalist class felt capable of imposing on the working class in terms of direct exploitation. This was where, yet again, the states played a decisive role, by increasing the share of their resources which was channelled directly towards the capitalist class - thereby reducing further the share of social income received by the working class.

From the early 80s, most Western countries initiated a progressive shift from direct to indirect taxes, thereby bringing the tax burden to bear much more heavily on the more modest layers of the population. In Britain, which took a lead in this respect, the top rates of personal income and capital gains tax were reduced, allegedly "to reward enterprise", from 83% in 1979 to 40% in 1988. The vast majority of working people gained little out of these changes and the low paid actually lost out. By contrast, these tax cuts nearly trebled the net incomes of the very high earners, in other words the capitalists themselves!

At the same time all the payments made by companies to the state were reduced. In Britain, the slashing of corporation tax from 52% to 33% in 1984 resulted in net profit increasing by 40% overnight. Likewise the share of social contributions paid by employers was progressively reduced. Overall, by 1985, the combination of company tax and social contributions paid by the employers had gone down to 21.5% of total taxation in Britain, 24.4% in the USA and 36.4% in Japan. No wonder Japanese car manufacturers were queueing up to invest in Britain!

While the states were reducing their income from taxation in order to leave more cash in the hands of the capitalist class, they also invented new ways of subsidising private companies. Probably the biggest of all cons over the past two decades, and a very big money-spinner for the bourgeoisie, was the funding of "job creation" by the states. British governments' attempts at attracting foreign investors provide a graphic illustration of this. Not that the pretext was always that of creating jobs. When the last Labour government created an "Invest in Britain Bureau" in 1976, it was openly aimed primarily at attracting new business for British companies. The same policy was then continued under Thatcher, but this time in the name of fighting unemployment. Massive subsidies were forked out by the state, paying sometimes as much as 25% of infrastructure costs, not to mention the tax breaks awarded to the newcomers. Yet, although Britain "won" 45% of all foreign investment in Europe in the period 1985-1991, only 98,000 actual jobs were created, thereby creating each new job at a very high cost.

The same logic is behind the many employment and training schemes introduced in Britain under Thatcher and Major. None of them has ever created even one job. On the contrary, they allowed the employers to replace their older unskilled workers with unemployed youngsters, with the state paying their social contributions in most cases and at least some of their very low wages. Such schemes were not a monopoly of right-wing governments. The sort of "workfare" scheme advocated today by Gordon Brown for New Labour's future government, was introduced in the early 80s by the French Socialist Party-led governments. By the early 90s, through these schemes alone, French companies were receiving an annual subsidy of £27bn - which did not prevent them from producing massive redundancy programmes year after year.

This combination of huge hand-outs to the bourgeoisie and reduced tax income has resulted in a massive growth of state indebtedness across the world. Today the public debt of the 7 richest countries represents more than 50% of their domestic product, almost double the debt of 15 years ago. Of course this debt represents another major source of state subsidy to the capitalist class. Just through the interest paid by the states, the banking system can rely on a steady revenue which is its largest single source of income by far. But at the same time the very size of the world's public debt has become a major factor of instability in the present world crisis.

Here again the figures are so huge that they tend to become meaningless. But they can give an indication of the extent of the problem. Government bonds, which can be considered as shares in the states' public debt, are traded across the world just like any ordinary share. But whereas they made up 18% of all internationally traded financial assets in 1980, they account for nearly a third today. Linked to the government bonds market, but four times bigger in terms of turnover, is the currency market, which represents on its own far more than half of all financial business worldwide. Every day, the total turnover on these two markets is estimated to be over £1,100 bn, or well over twice as much as the value of all the currency reserves held by the industrialised countries. This means that there can no longer be any guarantee that, in the event of a major run of one particular currency or set of currencies, the central banks will be in a position to intervene effectively, assuming they manage to agree on a co-ordinated intervention.

The "rolling back" of the state

This constant threat created by the enormous overgrowth of public debt worldwide has been one of the major factors behind the rolling back of the state over the last ten to fifteen years, in order to reduce the public debt. But there are other factors too, among them a significant shift in the attitude of the bourgeoisie itself.

Indeed the reasons which led the capitalist class in most European countries to agree to an extensive and permanent intervention of the state in the economy in the post war period no longer exist. In the conditions of economic chaos generated by the war, when part of the world economy needed to be rebuilt by means of massive investment while the rest was relatively open and offered new potential markets, the bourgeoisie had agreed to a division of labour with the state, even though this involved a certain degree of centralisation and therefore some constraint for business. As long as markets kept expanding, the capitalists were willing to carry on with these arrangements which provided them with services and utilities which they did not have to finance.

The re-emergence of the crisis, however, put all this in question by reducing the possible sources of profit. At first the bourgeoisie faced the new conditions by getting rid of "unprofitable" assets, increasing the exploitation of the working class. The battle to take over existing profitable companies and facilities intensified, as no-one was willing to risk investing in new ones. As a result each individual capitalist came to consider more and more intolerable the fact that he could not lay his hand on some parts of the economy, simply because they were under state control. Eventually a consensus has emerged among the capitalist class about the need to dispose of all the constraints on profit which result from the relative economic centralisation still imposed by the state.

Of course, a significant factor in encouraging the emergence of this consensus has been the weakness of the working class in the conditions of high unemployment of the past period. The less the bourgeoisie is worried about working class resistance, the less it is concerned with the social consequences of its drive for profit. Having been able to deprive millions of workers of their jobs and to reduce the real wages of those remaining at work, without having to face a serious fightback, the capitalist class now feels confident that it would be taking no risk by dismantling parts of the existing public services or reducing significantly welfare provisions - even if it means turning the clock back by a century or more for the vast majority of the population. And, just like in the rest of the world, this is what the capitalists have been doing in Britain over the past seventeen years of Tory government, and what they intend to carry on doing under the next Labour government, with Blair's assistance of course.

Because, paradoxically maybe, but only in appearance, this rolling back of the state which is demanded by the capitalist class today does not mean in any way that it expects less from the state, nor even that it wants the state to play a lesser role. On the contrary the state's role as a crutch for capitalist profit is to continue even more than ever, only using other means and on the basis of a much more direct and open subservience to the needs of the bourgeoisie.

Selling off the "family jewels"

The privatisation wave of the past two decades reflected the coincidence of several factors: the growing consensus among the bourgeoisie in favour of the rolling back of the state, the need to provide over-inflated financial markets with new chips to gamble with and the growing need for the governments to raise fresh cash in order to face their debt crisis.

The British state took the lead in introducing privatisation owing to its greater vulnerability to financial pressures. Though even in Britain's case, there were fairly modest beginnings. Hardly anyone remembers the sale of Amersham International and Cable and Wireless. Thereafter the pace accelerated. The later sales of BT and British Gas were carried out with much more fanfare and "get-rich-quick" demagogy.

By contrast, in France, for example, the move towards privatisation was less abrupt. The process was in fact preceded by a wave of nationalisations. The aim had, of course, nothing to do with socialism - even though the Socialist Party was in power. It was simply the most efficient and direct way for the state to inject fresh funds into the economy, and in particular into industries which were badly affected by the world crisis. These newly nationalised companies were subsequently revamped and streamlined at the taxpayer's expense before being redirected into the private sector.

In Britain, the sale of British Telecom in 1984 for almost £4bn marked the real starting point of the large-scale sales. Others followed: British Aerospace, Britoil and then British Gas in December 1986, for £5.34bn to the tune of "Tell Sid". Rolls-Royce and British Airports followed and then came the remainder of BP. Sales continued beyond the resignation of Thatcher in November 1990, including that of electricity, parcelled up and sold off in stages, and the water utilities. Finally with all the large and obviously profitable sections of the public sector gone, there were a series of backdoor privatisations, mainly of public services such as corporation bus services and parts of British Rail, often in the form of City-financed management buy-outs.

To those should be added the myriad of contracted out operations in central and local government and in the NHS - where contracts were put out to tender to the private sector and renegotiated every few years. So far about 40% of local council operations put out to tender have been snapped up by private operators with total contracts running into billions.

Altogether around £60bn have been raised from the direct sale of state assets alone. But this conceals a fantastic subsidy to the capitalist class on which it is impossible to put a figure. The market value of the privatised companies is now far higher than their selling price - not due to better management, as politicians would argue - but simply because they were sold at such bargain prices. Most of the privatised companies had considerable debts which were written off by the state before the sale, and in some cases, like for the water utilities for instance, these debts ran into billions of pounds. Besides, privatisation did not always result in the ending of state subsidies. When British Aerospace bought Rover, for instance, an additional £547m was paid to BAe after the sale, plus the guarantee of large state orders for the following years. And most privatised utilities, particularly the very profitable water utilities, are still receiving public subsidies through the European regional development fund!

As to the social consequences of the privatisation wave, these have still to be fully assessed. Tens, probably hundreds of thousands of jobs have disappeared between the run-up to privatisation and the subsequent restructuring exercises - although these are less the result of privatisation as such than a reflection of what was taking place across the whole economy during the same period. Likewise for the worsening of workers' conditions where privatisation took the form of private tendering. On the other hand, the privatisation of former public services may well have more far-reaching social consequences as is shown, for instance, by today's chaos in British Rail even before privatisation is completed.

The rolling back of the welfare state

The long series of cuts in social expenditure seen across the world during the same period had a three-fold aim. Apart from that of reducing public debt, these were intended to pressurise the poorer layers of the working class into accepting lower wages and conditions, at the same time as they opened up new sources of profit for private capital.

One of the first acts of Thatcher's government in 1980 was to link state pensions and other benefits to prices rather than to earnings. Since the "average earnings" index also reflected increases at the top of the salary scale, it was bound to be more favourable than the price index, particularly in a period when employers wanted to increase the differentials between employees and managers. This change limited the damage caused to the social security budget by fast-rising unemployment, but all claimants lost out as a result.

This was followed in 1986 by the decision to wind down SERPS, the government's earnings related pension scheme. Employees were encouraged by tax incentives to opt out of SERPS and take out one of the glossy personal pension schemes which were then beginning to be advertised by insurance companies. High earners certainly gained out of this, but then they hardly needed to be encouraged. But hundreds of thousands of workers on low wages were caught by the heavy advertising campaign, particularly when they heard that they could get part of their future pension immediately as a lump sum. Most failed to see the small print in the new schemes, namely the fact that so-called management costs would reduce the worth of their weekly payments to almost nothing. This led to a huge scandal, which resulted in the government being forced to reinstate into the state pension scheme many, but not all of those who had lost out. All in all, however, an estimated total of £8bn was literally stolen by the insurance companies without any possible legal redress. And, of course, without Thatcher's intervention, the personal pension business would probably never have taken off on the scale it did.

Other cutbacks in social expenditure generated a similar boost for private business. Such was obviously the case of the running down of the NHS which opened the way for the development of very profitable private insurance schemes for high earners, like BUPA. The subsequent administrative nightmare created by the introduction of the so-called "health market" within the NHS has further boosted private medecal care. For instance, due to the fact that so few patients qualify for free dental treatment, dentists treat 40% of their patients privately, which avoids them having to go through the long administrative process of the NHS but also means that prices and standards of treatments are no longer controlled.

Another striking example was Thatcher's great council house sale. In the view of many working-class families, the positive side of this was undoubtedly that they felt able to afford secure housing, even if it was at a much higher cost than that of a council rent - although, subsequently, many also ended up losing everything due to redundancy. But Thatcher's real aim lay elsewhere. In a way, the sale of council houses resulted in the privatising of part of the state debt, with a number of additional advantages. Not only did it create a huge new source of profit for banks and building societies, but it also generated an artificial boost for the real estate industry which was instrumental in initiating the subsequent boom of the housing market - and before this market eventually collapsed, the big players in the game had plenty of time to rake in enormous profits.

A new plight for the Third World

In the aftermath of the debt crisis of the 80s in Third World countries, international financial institutions, like the IMF and the World Bank, applied pressure on the governments of these countries to privatise their state sectors. The reasons were the same as in the West: to reduce the debt mountain while generating business for financial markets.

Of course the difference with a country like Britain was that the prime beneficiaries were imperialist vultures operating from abroad who had even less reason to bother about the social and economic consequences of their moves in these countries. And the results are even more severe. In most of these countries, state intervention in the economy had been the only way to make up for the poverty of the economy and introduce some basic facilities and elements of modern technology. Likewise, the main function of the exchange and trade controls which existed was to protect local producers from the devastating effect of the world market. They prevented, for instance, large Western clothes manufacters from flooding the local market with their goods, waiting for local producers to be bankrupted and then increasing their prices to levels far beyond the means of the vast majority of the population. Besides some of the cash earned by the states through their tariff systems was used to pay for minimum social facilities in health and education. All this was blown to pieces by the pressures of the IMF - with the help, of course, of the local privileged.

The end result of all the "Structural Adjustment Programmes" dreamed up by IMF experts was in most cases to destroy what little local viable economy had existed. State companies were sold off to pay for these countries' debts. But the international banks immediately sold these unattractive shares on the world market, thereby opening the way for takeovers by specialist groups like Hanson or Trafalgar House whose main activity is to buy companies experiencing difficulties, close down all their unprofitable facilities and sell what is left at a much higher price - regardless of the effects of the closures on the local economy. For instance, many old electricity power plants were closed down in South American and African countries without being replaced with new ones because it was estimated that the local population was too poor to pay a high enough price for electricity.

In the longer term, the rolling back of the state in the Third World does not lead to a reduction of their debt. In fact the overall debt of the Third World is still increasing, although at a much slower rate than that of the rich countries. But what it does lead to is a growing impoverishment of these countries. And it only take to look at the consequences which are already visible on the ground, such as the poverty-induced civil wars in countries like Zaire, Liberia or Sierra Leone, to see what further catastophes are in store.

The real issue is who controls the state

The balance-sheet of the past twenty years is clear enough. Behind the various ideological pretexts used in different parts of the world, the capitalist class is busy reshaping the operation of the state and the economy so as to keep profits rolling at the same level and if possible higher, despite less wealth being created worldwide. The rolling back of the state worldwide, or rather the rolling back of its past intervention in the economy, is the expression of the determination of the bourgeoisie to ensure that the working masses will foot the bill, regardless of whether this helps or not to fight the causes of the crisis or its consequences for the working population.

The case of public transport in this country provides an obvious illustration of this. The British bourgeoisie's choice to cut public transport has nothing to do with economic logic. On the contrary developing a comprehensive transport system would help to develop the economy - and in addition it would help to solve many of today's environmental threats and economic wastage. The concern of the capitalist class is that making rail and other public transport a priority would require enormous investment which would put large chunks of public funds beyond their control of the capitalists, imposing on them a degree of state planning and constraint which they now feel no compulsion or incentive to accept.

What is true for public transport in Britain is true for every aspect of the workings of the economy. There is no economic necessity, even under the conditions of the present crisis, for keeping millions of workers out of jobs and imposing on them severe conditions under the pretext of giving them an "incentive" to take a job which does not exist anyway. But doing otherwise would require drastic measures by the state. For instance the state could impose some discipline on the capitalists by making it illegal for any company which is in profit to cut jobs; it could initiate large-scale public works to rebuild the derelict parts of the inner cities, restart the building of affordable housing for working people and develop the network of public transport instead of closing lines; or it could fill the hundreds of thousands of jobs which are desperately needed in the NHS, education, local government, etc...

None of these measures are beyond the means of today's society, even under the chaotic rule of capitalism. But all of them would mean more constraints on the capitalist class, capping of their profits and, in general, exercising tight control on what they do with their assets. In other words, apart from requiring a political will which none of the parliamentary political parties has today, such measures would also require a change in the balance of forces in society in such a way as to give the capitalist class no other option than to toe the line.

What we are talking about therefore, is a social mobilisation of the working class and all the exploited classes against capitalist rule. The bourgeoisie has used state intervention solely as a profit-boosting operation. But the proletariat can no longer afford to wait while these parasites play irresponsibly with economic forces which threaten to ruin the whole of mankind. To prevent this there is no other way than to challenge the political power of the bourgeoisie, that is, its control over the state and the social organisation of society.