Is the worst of the economic crisis behind us?

You’ll have seen quite a few economic ‘good news’ stories recently, proclaiming the green shoots of recovery. Stock markets have enjoyed impressive rallies. At the time of writing, it seems that these have run out of steam, but the Dow Jones is still 29% higher than its most recent trough in February. Similarly the FTSE-100 has gained by nearly 22%. According to economic pundits, the main driver of this optimism is the stabilisation of the credit markets. The rates at which banks lend to each other (LIBOR), a key indicator of stress in the markets, have finally returned to a normal range (albeit still at the top of that range).

After the economic carnage of the past 6 months, which at one point seemed to pose the possibility of the collapse of the financial apparatus, finally, the counter-measures - nationalising the banks, reducing interest rates to zero, quantitive easing - seem to be having some effect. There are still serious problems lurking on the horizon, such as the potentially crippling debt crisis in Eastern Europe but for the moment the commentators of the ruling class are talking a good recovery. But what will that ‘recovery’ mean for the working class?

Massive spending cuts

State spending now accounts for 54% of all economic activity in the UK. As unemployment grows and tax receipts are lower, the state has been reduced to borrowing record amounts of money to maintain the stimulus which is underwriting the economy. The British state now has debts standing at £775 billion, equivalent to 55% of GDP, the largest proportion for over 30 years.

Already, the markets are balking at trying to absorb the massive quantity of IOUs being pumped out by the Treasury. Recent auctions have failed to shift all the bonds on offer and the credit-rating agencies (who write credit reports for countries and corporations) are threatening to downgrade the UK’s rating unless it can get its finances under control.

The ruling class realises this – the only question is how best to present it to the working class. Hence the squabbles between Labour and Conservatives about whether to cut the budget by 7% or 10%! Even the hitherto untouchable NHS is already facing a £15 billion hole over the next ten year under current plans – this can only get worse as the drive to austerity gathers pace. £500 million that was earmarked for hospital building and refurbishment work vanished last week.

In addition to the impact that such cuts will have on the wider population, most of whom depend on the public sector for health and education provision, there is also the question of public sector workers. The CIPD is predicting 350,000 jobs will be eliminated from the public sector in the next five years. Those who remain will face brutal attacks: cuts in pay and pensions coupled with productivity targets.

Massive unemployment

At present the official figure for unemployment is 2.261 million and rising. Economists are predicting a peak at between 3 to 4 million over the next few years. But this is just the tip of the iceberg because ‘official unemployment’ excludes nearly half of those who want, but can’t get, paid work. To this should be added the hundreds of thousands of people who can only find temporary and/or part-time work and live a hand-to-mouth existence on the revolving door of benefits-temporary job-benefits again.

Young workers are particularly hard-hit by the unemployment crisis. Already in 2008, the unemployment rate for 16-24 year olds was four times the rate for older workers. In a situation where very few new jobs are going to be created, the prospects look bleak for the 600,000 young people entering the labour market this summer.

Working for nothing

One of the reasons why unemployment isn’t much higher, we are told, is because many companies are ‘reluctant’ to lay off workers. Instead, companies are developing ‘innovative’ ways to help us keep our jobs. Christmas saw the longest breaks for years: many enforced and at no-or-reduced pay.

Honda is in the process of reducing wages by up to 50% as well as stopping production altogether for four months. JCB asked its workers to take a £50 a week pay cut to avoid redundancies … and then promptly laid off 2,500! And, most recently, British Airways has sent a letter to all staff, asking them to take unpaid holiday or even work for free. On top of that the company has already reduced its workforce by 2,500 through voluntary redundancy and natural wastage, and is looking to lose another 4,000.

This kind of practice will become more and more widespread as capital attempts to profit from increased fear of unemployment amongst the working class, aided by its union stooges who are often at the forefront of negotiating these sorts of deals. It feeds on the corporatist idea that nobody benefits if the firm goes out of business. How can strikes stop a firm going bankrupt? But workers are not bound to this or that firm, or even this or that country. They exist as a global class and they can only fight back on this basis. By spreading their struggles as widely as possible, workers threaten the parts of capital that are still profitable. Rather than risking the loss of profits, these capitalists (usually through the medium of state support) can sometimes be pushed to make concessions to workers at the heart of a particular struggle. It goes without saying that these are only temporary victories, but they allow the proletariat to gain confidence in its struggles. Only when the working class begins to feel its collective power can it begin to pose the question of ending this bankrupt social system and building a truly human society.

Ishamael 19/6/9.