Economics of the Pay Freeze Workshop, 14 June

The OFFUM - Organising for Fighting Unions Manchester - workshop with Graham Turner, GFC Economics, was an exceptional event. The fact that a good half of those present bought a copy of Graham’s book, The Credit Crunch, Housing Bubbles, Globalisation and the Worldwide Economic Crisis, [Pluto Press, June 2008] is one measure of how well it was received.

Graham’s standpoint is resolutely pro-trade union but not in a tired, defensive way. Rather, here is fresh ammunition presented as a mountain of up to date facts and figures by a professional of high standing.

It is too much to claim that we could take all of it in and give a report that does it justice. Graham’s book is the place to go for that. But from my notes, I got the following. If any one wants to add comments, please do.

The boom of recent years has been based not on higher real wages but the expansion of credit. Now that the boom is over and we are left with the worst economic prospects in living memory, the credit crunch means that accepting a pay freeze is a recipe for taking the economy into a still deeper and longer recession.

The inflation that is hitting us is real and serious. Food prices are going up because of world wide food shortages – worsened by speculation. These shortages stem in large part from the growing marketisation of food production and the introduction of non food cash crops. Above all the price increases are the result of one third of all corn that is being grown going for biofuel because it is so profitable to do so. With global fuel prices it is even worse. Peak oil, that is oil production globally having hit its maximum, the claim by the Russian giant ‘Gazprom’ that oil could hit $250 a barrel is not fantasy. Wages not only have not contributed to inflation but because of the weakness of unions in recent years, have barely kept up with inflation. Profits share of the national wealth has increased and despite the financial crisis, earnings in the city are still rising.

At the same time, some prices, mainly imported manufactured goods, are still falling despite the weaker pound. This is measure of the fat profit margins of the retailers and the competition between them. But this situation also reminds us of how many manufacturing jobs have disappeared during the recent boom. It’s normal for such jobs to go in a slump but that shouldn’t happen in a boom. In Germany, now the largest exporter of manufactured goods in the world, the number of jobs in manufacturing has been rising. The conclusion is that the much praised expansion of Britain’s economy under Blair and Brown is particularly dependent on finance and construction, the two most vulnerable sectors at the moment. The challenge for us is to ensure wages to sustain demand.

As for the collapsing property market, the probable consequence of the bursting of a credit bubble that has being growing for so many years is that property prices will keep falling for a long time. There is a close parallel with the collapse of the property boom in Japan in 1990 which has led to falling property values ever since. While, as one of us put it to Graham, this means that houses become more affordable for young people, a better solution is to boost young people’s buying power and to have the government buy repossessed and empty properties and use them to recreate council - genuinely affordable – housing.

Is Britain moving to the right?

Boris Johnston, racist toff, is the mayor of one of the most multi-racial cities in the world

The Tories have just won their first by-election in quarter of a century in Crewe

The BNP now have a seat on the London Assembly, having got more than 5% of the vote

In the European elections next year the Nazis are very likely to win at least one seat in the European Parliament, possibly two or three

The Tories have re-established themselves as a credible force and look set to win at the next election, probably 2010.

On the face of things, we are back to a re-run of the years up to 1979 and the victory of Margaret Thatcher.

Is Britain moving to the right?

Well on the face of it, yes. And quite a few are acting as if they thought it was all over. I’m thinking of much of the left which at the moment is behaving like a rabbit in the headlights. One reaction I got when I asked a group of CNDers how we could stop the Tories getting in was to say

“We’ve got the Tories already”

This from a left labour MP’s widow. You can see how the thinking goes: the left’s candidate, John McDonnell, failed to get thirty MPs – 10% of the PLP - to support him to stand against Gordon Brown in the leadership election on who to succeed Tony Blair. Last time the Tories on, in 1979, a huge movement led by Tony Benn, almost won control of the Labour Party. Twenty seven years later, the left looks much, much weaker. The Labour leadership could hardly be more right wing. Take Hazel Blears “Labour needs to be the party of the affluent as well as the poor”. Peter Hain talks about the “need to capture the aspirational vote” > An insulting idea when you realise that Hain assumes he already has "the non-aspirational vote" – presumably the working class vote.

Meanwhile as Britain reaches levels of inequality not seen for a century, child poverty and pensioner poverty increase while earnings in the City continue to rise – yes it’s true – you might want to argue that the rich have got enough parties already. It’s the poor who need one urgently.

Though the government doesn’t use what they call the “P-word” – privatisation - talking instead about public-private partnerships, academies, outsourcing and the like, it is, as we know, full steam ahead on privatising education, welfare and health.

And last week, George Bush was being greeted by Gordon Brown who promised to stand side by side with him on the war in Afghanistan, keeping troops in Iraq and threatening Iran. No change there we can see from Blair.

But it’s wrong to think that the Tories couldn’t be worse than what we have. As we speak, they are reflecting on the prospect of an economic recession gathering pace and working out how to get working class people to pay for it: cuts in benefits, job cuts and the like. Having defeated Labor what is there to stop them?

Gordon Brown is different from the Tories. He sees himself as a socialist, free market socialist. That is, someone who wants to soften the impact of the market on the poor. His philosophy is called “supply side socialism”. Traditionally, Labour had accepted the market but has been committed to the nominally socialist Clause 4 in its constitution and to maintaining a so-called mixed economy - a state sector as well as private corporations - ensuring full employment by managing demand, in line with the ideas of the economist John Maynard Keynes, who argued that the market couldn’t be relied on to stabilise at the level of full employment and so government intervention was needed to ensure that demand was boosted to stimulate the economy and create enough jobs.

All that was rejected in the crisis of the 1970s. Anthony Crosland’s 1975 “The party’s over” marked the shift to what was then called monetarist and is now called neo-liberalism. Brown follows in Crosland’s footsteps. He sees the way to help people is to increase their competitiveness, that is boost their power in the labour market. Hence the slogan popularised by Blair but thought out by Brown, the architect of ‘New Labour’, “Education, education, education”.

So, as the world slides into recession, we don’t know how long or how deep, the New Labour project - supply side socialism - looks finished. But what consolation is that if we get the Tories?

So shall we just all go and throw ourselves over the nearest cliff?

Well, not too quickly. Things are not quite as they may seem. If everything was going as it did in the late 1970s, then the Tories would surely be emphasising their right wing credentials.

The collapse of New Labour isn’t because people support the Tories as they did in the run up to Thatcher's first election victory as she promised to cut the role of the state and break the power of the unions, a clear stand to the right of Labour. In fact, the question who is most right wing, Tories or Labour is quite a hard one to answer. Boris and Ken competed on who could be the most right wing on “law and order”. Johnson was talking about put conductors onto buses. Surely that’s an old Labour idea? In Crewe it was Labour that attacked the Tories as being too soft on immigration.

What is happening is the end of what Bill Clinton taught New Labour at the beginning of the 1990s. It’s called triangulation. You look at where you supporters stand on an issue; you look where your opponent’s supporters stand and then you take a position in the middle – the third point of the triangle – to steal what is called the middle ground. Of course, both sides can play this game and that’s what Cameron has been doing with some success.

The problem comes when your own supporters get fed up with being taken for granted. Which is what is happening.

As one pollster put it after the by-election,

“For Labour though it’s worrying that they [Labour] have slipped badly among ABC1s [upper and middle and lower middle classes], it’s the slippage among C2DEs [working class] that takes it into the territory of total collapse.”

The conclusion to draw here is not that Britain is moving to the right but that the majority of people in this country are to the left of New Labour on the key issues of war, privatisation and housing.

This isn’t to argue that the right wing, anti immigrant, law and order propaganda spewed out by the government and the media haven’t had an impact. When Gordon Brown calls for “British jobs for British workers” it shifts some people. The endless talk of the problems caused by “foreign nationals”, “foreign criminals” - note the language used – this has an effect. 60% of people say there are too many immigrants.

Brown has the support of the majority in the opinion polls on introduction of 42 days detention without trial. But it’s interesting that when David Davies, a right wing pro hanging Tory resigns to fight a by-election on the issue he gains a wave of support as a politician who doesn’t slavishly follow the opinion polls.

On most social questions there has been a shift to the left over the last thirty years – most of it under the Tories. On questions such as “would you have a problem if a member of your family married a black person?” or "What is you attitude to gay people?" there has been a clear move towards more progressive views. On the questio of class, most - or a near majority of - people in this country describe themselves as working class, despite politicians telling us that classes no longer exist.

Over 75% say that the gap between rich and poor is too great. The anger over the abolition of the 10p tax band in the run up to the May elections was widespread. There is a core of people who haven’t been pulled by the right wing propaganda it is a large core, one that can make a difference. And if the left doesn’t rise to the challenge, then the BNP will exploit the failure to do so. If we look at Stoke where on present trends the BNP will control the council in the next 2/3 years we see the danger: a collapse in the traditional unionised well-paid employment base, mainly large factories in the case of Stoke, and a complete failure to provide anything other than minimum wage jobs in their place. Stoke had 60 Labour councillors out of a council of 60 back in the 1990s.

The worst thing we can do at the moment is to accept the argument not to rock the boat lest we let the Tories in. Falling in behind Labour means putting up with the wage freeze and all the demoralisation of workers that follows – and gave Thatcher her chance back in the late 1970s.

There are lots of ways that we can mobilise people around:

§ electorally

§ in the unions

§ against the fascists

§ against war

We can’t let the prospect of a Tory victory paralyse us. If a left government lets down its supporters the right are bound to benefit. But that doesn’t mean people give up. Less than four months ago a right wing government was elected in South Korea by people disappointed by a left government. Last week a million protested on the streets of Seoul, the capital. Last year Sarkozy won the French presidential elections. We have seen big protests last week on the streets of France, "Operation escargot” ‘Operation Snail’ by truckers and farmers.

Here in Britain, Gordon Brown could transform his chances overnight by announcing the withdrawal of troops from Iraq and Afghanistan, stopping all privatisation and starting to build council houses. He won’t. That means that there is a growing and urgent need to create a left alternative to New Labour.