THERE are three reasons why a managed exit by Ireland from the eurozone is the most urgent economic priority. But first consider this reality.
He was referring, in particular, to the impact of eurozone polices on peripheral countries. But much closer to the centre, France — whose credit rating was downgraded late last year — is now deeply mired in a second recession, with no obvious way forward. The Economist has called France “the time-bomb at the heart of Europe”.
In the late summer of 2010, I argued in these pages and elsewhere that if Ireland did not change course, matters would be taken out of the government’s hands. They were. The “inconceivable” happened. The “inconceivable” may be happening again.
The austerity doctrine imposed the burden of adjustment to the post-2008 economic collapse on the labour market. It is an indefensible misuse of economics that the eurozone “authorities” should seek stability on the back of tens of millions of unemployed — this month’s eurozone unemployment figures reached yet another record.
It is equally indefensible that, within an economic epoch characterised by intellectual capital and innovation, youth unemployment should now stand at an average of 25% — and more than double this in some of the peripheral countries which are most in need of their intellectual capital and capabilities.
At this stage in the present recessionary cycle, there is no sense in what is being done to the economy — and what is being planned for forthcoming budgets. After five austerity budgets the deficit has been reduced, at a terrible cost, and with much further to go. The country has been brought to the brink just to impose further cuts of €300m — of which half is slated to come from health including disability services that are already bleeding.
“Adjustment” to an economic shock is never painless. Adjustment to the post-2008 crisis required deleveraging the banking system, restructuring the economy and restoring competitiveness. However, the larger point is that the whole Irish political system proved incapable of delivering a consensus around how we could ourselves undertake these “adjustments”. Instead, it ceded responsibility to our “partners” — and it has used the power of strangers to enforce regressive and counterproductive policies. The policies reflect the self-interests of other and larger powers.
The economies of a still growing number of countries are being impoverished while countries at the centre — Italy and France — are caught in the headlights of a still lengthening recession across the eurozone. The only response has been “we need more integration”, or, to put it another way, more and more power and control to the centre. But it is the policies dictated from the centre that are the cause of the problem, and which are now subverting what the wider European project was originally all about.
Ireland is caught up in this nihilism. We have learned the hard way that no one at the centre is much interested in Ireland, except as a nuisance in terms of its corporation tax (which is now under very real threat). Also, as a “poster child” for policies that have failed and whose failure has, as the IMF have repeatedly pointed out, jeopardised global economic stability.
So, to return to the three primary reasons for a managed exit by Ireland from the eurozone.
The first arises from the fact that, facing into an unprecedented economic crisis, the eurozone “authorities” required countries with very different economies and burdens to conform to the stability and growth criteria — a maximum 3% budget deficit and a 60% debt/GDP. These were originally “indicative”. And yet, in the face of a seismic and accelerating economic crisis, these indicative criteria were transformed into articles of faith, to which all had to conform. It made no sense.
Furthermore, the intellectual underpinning of austerity which the eurozone “authorities” adopted was the Roghoff/Reinhart theorem — that is, above a debt/GDP ratio of 90%, countries enter a kind of “black hole” from which they cannot escape. This has been discredited. Nobel Prize-winning economist Paul Krugman and others have argued that the line of causation probably does not run from “high” debt to low growth but rather from low growth to rising debt. Common sense would indicate that this was surely the case in the post-2008 eurozone.
These fundamental errors were reinforced by the destructive time-table initially required for adjustment. In the case of Ireland, being compelled to even attempt to meet the “stability” criteria by 2014 was deeply damaging — it further exacerbated the underlying problems of adjustment. The eurozone authorities were wrong in their myopic fixation on reducing debt and effectively ignoring what is key to the whole ratio, namely, growing GDP, while simultaneously pushing ahead with, and incentivising, structural reforms.
Instead, there has been a succession of crisis summits involving people with big jobs talking about people with no jobs being “more flexible”.
In recent months, the eurozone authorities have started backtracking: Grudgingly accepting the evidence that their short- term austerity doctrine has been enormously damaging to the eurozone and to global stability. It is a bit late for them to be making speeches on “rebalancing austerity”.
It is little comfort to Ireland or its economy to have “good” school reports from a troika comprised of European institutions whose policies were deeply flawed and an IMF that has no business lending its credibility to an ideologically driven agenda.
It defies common sense that an Irish government should still feel obligated to defend such policies and attempt to impose two more years of “fiscal consolidation”.
Talk of “exiting the bailout” is wide of the mark. The burden of ‘troikanomics’, including onerous debt-servicing costs, stretch into a future that is dominated by those who preached the austerity doctrine in the first place.
Ireland’s growth capacity has been compromised; the best and brightest — our engineers and architects, doctors and nurses, teachers, entrepreneurs — have left and the morale of those remaining is being destroyed. This is not “adjustment”; it is tantamount to self-harm.
The second reason for a managed exit by Ireland is that these same policies are doing enormous damage to two of the most fundamental pillars of a stable and functioning democratic economy. Healthcare and education are the foundations for sustainable growth, innovation and social solidarity. The cuts being imposed arising from the doctrine of austerity are not evidence-based. At the micro-level, in schools and local health provision, they are doing damage that will take years to reverse. The only force that is driving these cuts is short-term book-keeping to appease the troika.
The third reason relates to the damage that is being done to the wider EU project. Ireland is, by its history and conviction, empathetic with Europe and with European solidarity. Austerity has, however, reinforced German hegemony within the eurozone and there is little evidence of the solidarity that was once at the heart of the European project. The UK’s disenchantment with Europe has become significantly more marked. Recent survey evidence demonstrates a deep-seated and widening gulf between the peoples of France and Germany. Expectations of recovery are no longer taken seriously by people in the eurozone.
Recovery cannot be built on a lack of confidence or disillusionment. Ireland has become dependent on the powerful and the peddlers of myths. It does not have to be dependent. It can contribute far more to the European ideal and the single market, outside of the eurozone. Denmark is a case in point.
There is no longer any appetite for the argument that only further integration will solve this crisis. This is a self-serving argument and finds no resonance among national populations. There is always a danger to democracy when the elite — the ‘authorities’ — become semi-detached from the beliefs of the people from whom they get their legitimacy. Riot control is a poor and an obdurate response to the reality that the ‘authorities’ have lost the argument.
In a world a little braver, a bit more far-seeing and one which was capable of learning — and moving on — Ireland would host a meeting of the peripheral countries. They would hammer out the basis for a managed exit from the eurozone for all or some. Those who aspire to national leadership would come out from behind the barricades of “There is no alternative” and would take up again the freedoms and responsibilities of which they are trustees.
Three things all serious people know are true
This post was written by Kevin O’Rourke
A holy trinity — or perhaps a troika? — of beliefs has guided policy since 2010. These are that austerity is expansionary; that the sky will fall in if ever the debt to GDP ratio exceeds 90%; and that the way to do austerity is to cut expenditure rather than raise taxes.
All of which is very convenient if what you really want to do is shrink the state.
We know how well the first two nostrums have performed when confronted with empirical evidence, so you might think that people would be just a wee bit cautious about stating the third as gospel truth. But no, here is Mario Draghi:
First, fiscal consolidation should be based on reductions in current expenditure rather than increases in taxes. Unfortunately, many of the fiscal consolidation measures were implemented in an emergency situation, with most governments choosing the simplest route, which was to raise taxes. And here we are talking about raising taxes in an area of the world where taxes are already very high, so it is no wonder that this had a contractionary effect.
Paul Krugman helpfully reminds us where this belief came from, and what happened next. The ECB is constantly telling us that it has a narrowly restricted mandate, with its primary concern being inflation. In that case, then surely the least that we are entitled to expect is that it keeps its views about the composition of fiscal adjustments to itself?
Bitcoin is a fantasy. The Internet’s currency—a secure, private, decentralized type of money that makes possible anonymous and virtually costless transactions across borders—contains the seeds of its own destruction. More than anything else, it resembles a Ponzi scheme—and the wild claims made on its behalf reveal a great deal about a libertarian strain of thinking with deep roots in the American psyche.
As Farhad Manjoo relates in his entertaining (but dubious) foray into the market, bitcoin is the brainchild of a person (or persons) called Satoshi Nakamoto. Computer users can “mine” bitcoins by instructing their computers to solve complex problems generated by the bitcoin network. As more bitcoins are produced, the problems become more complex, requiring more computer power to solve them, and this limits the total number of bitcoins that can be created over time. Bitcoins are themselves simply strings of numbers. Once you own a bitcoin, you can transfer it to someone else (as a gift or to purchase goods) over the Internet. You can also convert it into dollars or other currencies on various exchanges. A central registry keeps track of where the bitcoins are located, so you cannot spend a single bitcoin over again by trying to transmit the identical code.
The currency was launched in 2009. It has traded for less than 1 cent. As recently as a year ago, a bitcoin was worth less than $5; this week the price of a bitcoin reached $266, an increase of more than 1,000 percent over the last three months, but then yesterday plunged to $105 before finishing off at $165 last I looked. More than 11 million bitcoins circulate, and so their aggregate value is fluctuating between $1 and $2 billion—a tiny fraction of the trillions of dollars in currency but not bad for the infant brainchild of an anonymous brain.
Bitcoin may be useful for certain types of transactions, especially illegal ones. But bitcoin’s defenders argue that the experiment has proved that a currency can come into existence and function without any government role, so designed as to make inflation impossible and bank transfer fees unnecessary. These features are supposed to make bitcoins irresistible for consumers. Meanwhile, stripped of the power to manipulate currencies to advance nefarious ends, governments will collapse, and we will live in an anarcho-utopia.
This is wrong, both theory and experience tell us. Bitcoin is not the first unregulated or private currency. Until central banks were invented in the 17th century, the money supply was unregulated even if governments did stamp coins. Other unregulated or private currencies have emerged from time to time—think of cigarettes in prison camps. Gold, silver, bank notes, and all kinds of other things have played similar roles. Paul Krugman wrote a famous Slate piece about a private currency that was invented to facilitate the exchange of services in a baby-sitting co-op.
Felix Salmon and many others have pointed out that a currency cannot succeed with a supply that is fixed, or if it grows too slowly. A currency is used to enter transactions; the more transactions there are, the more of the money you need. As the economy grows, a fixed-supply currency becomes worth more in terms of goods and services, and people begin to hoard it—expecting that if they wait a little longer, they will be able to buy more. Once hoarding takes over, circulation ends, and with it the function of the currency. Hoarding accounts for the large increase in the value of bitcoins; hoarding also sank Krugman’s baby-sitting scrip.
An even more fundamental problem with bitcoins, and indeed any private currency, is that there is no way to limit its supply. True, bitcoins cannot be manufactured beyond the limits set by Nakamoto. But there is no way to prevent future Nakamotos from creating bitcoin substitutes—say, bytecoin, or botcoin. If merchants are willing to accept bitcoins, they will be willing to accept the substitutes, especially as bitcoins become scarce and consumers scramble for substitutes. Nakamoto must have realized this because there are not enough bitcoins to substitute for the currencies around the world. The currency can only succeed if it is expanded or supplemented. But if there are no constraints on substitute digital currencies—and there aren’t—then the value of bitcoins will plummet as the subs begin to circulate. And once it becomes clear that there is no limit, people will realize that their holdings could become worthless at any moment, and demand for bitcoins and the other currencies will collapse, ending the experiment.
Unless a bitcoin has value as a currency, it has no value at all, and its price in dollars will fall to zero. A regular Ponzi scheme collapses when people realize that earlier investors are being paid out of the investments of later investors rather than from the returns on an underlying asset. Bitcoin will collapse when people realize that it can’t survive as a currency because of its built-in deflationary features, or because of the emergence of bytecoins, or both. A real Ponzi scheme takes fraud; bitcoin, by contrast, seems more like a collective delusion.
Given this, why all the enthusiasm for bitcoin? Partly, the technological ingenuity of the scheme, of course. And people have misinterpreted the run-up in price as a sign of success rather than failure. But more fundamentally, bitcoin unites futuristic left-wing Internet anarchism—the fantasy that the Web can provide the conditions for a governmentless society—with the cave-dwelling right-wing libertarianism of goldbugs who think a stable money supply can be established without government involvement. It is proof for both that government is not needed for much, or at all.
Yet history shows that private currencies always end in tears; if central banks sometimes abuse the trust we place in them, the alternatives are worse. The strangest feature of the bitcoin saga is that people who are so suspicious of government put their trust in Satoshi Nakamoto, who could be anyone, or anyones—eccentric academic researchers, mischievous Fed economists, DARPA, U.N. globalizers in black helicopters, a criminal syndicate, a bored 11-year-old Ukrainian genius. If Nakamoto is as amoral as he is ingenious, then he pocketed the early bitcoins and laughed himself to the bank.
The ruling class has no alternative to austerity and the drive to create a pristine capitalism. Not only is that impossible, but, as shown by South Africa, the working class is beginning to revolt. This is an edited version a speech by Hillel Ticktin, editor of Critique, on November 17
Capital will kill and destroy: that is its nature
If one looks at the current situation, one would have to conclude not that we are coming out of a crisis, but that the ruling class is becoming more and more afraid. Mervyn King, the governor of the Bank of England, says that the real position is getting worse. Why is he saying that? One could say, of course, that he is coming to the end of his term, and that he has to say how bad everything is. But it is clearly more than that. There really is a degree of pessimism now within the ruling class itself, which he is expressing.
The second aspect of the situation is that austerity has more or less become the dominant mode of discourse. Barack Obama represents the left wing of the ruling class, and even he frames his policy within it. Except that his austerity is not the same as the Tea Party austerity, which seems to rule in the Republican Party and would have been the policy if Romney had won. Nevertheless, there will be a form of austerity, whichever side you take in mainstream politics at the moment.
In this country it is obvious that Ed Miliband has more or less accepted that line as well. In fact it is the line that was set in the 1930s – the Austrian line, as it was called. Paul Krugman has said that austerity is in effect a means of control. Behind the word ‘austerity’ one can hide the form of control, hide the fact that there is a ruling class that is doing very well, and that society is, if anything, becoming more unequal, not less so. That can be hidden behind the word ‘austerity’ – that is what Keynes said and what Krugman has been saying.
One might have expected Keynes to have said that if he had been a reformist. But he was nowhere near the left, and was strongly anti-working class. However, one has to accept that the ruling class, in order to survive, has to make concessions at certain times. And in order to make concessions they have to recognise their own real position, and make it clear that by making concessions they are retaining control. It amounts to removing the veil of commodity fetishism and saying, ‘Yes, we are here in control, despite these concessions’.
However, the austerity line is the reverse: it amounts to a refusal to accept what is real. Yet it is the dominant viewpoint now. In 2007 I attempted to analyse the different forms of capitalist control – both those that are inherent in the nature of capital itself and the substitutes employed at this time – and see how far they could be maintained. Austerity is part of that.
At the present time no alternative policy is being put forward. Krugman is isolated and the Keynesian approach is not being advocated, except in a very limited sense. Obviously, it was used in 2008-09 to pump money into the system, and it did save the world economy from going into a bottomless slump. Without that taking place the system really would have collapsed. What would have happened afterwards we do not know. But they simply had to act, but, having done so, they are now reversing the line.
They are not prepared to countenance the Keynesian solution, and so the only place left is austerity. Various people, including Krugman, are saying that the policy is mad. It is mad because it is impossible. Welfare cannot simply be abolished, which is what it requires. Apart from anything else it would mean a collapse in demand, and at a technical level it would mean reintroducing debtors’ prisons. How else do you deal with a situation where millions of people are near to starving and where there would be riots? So, it is impossible, simply because the population would not accept it. Of course, the ruling class understands that, and a number of economists who advocate austerity are not that stupid either. But I have to say many of them are – much of what has appeared in the press is simply nonsense.
In attempting to balance the budget, they are actually restoring the reserve army of labour. In other words, they are returning to a classic form of capitalism, as outlined in Capital volume 1. This is particularly prominent in volume 3, where Marx examines the nature of crisis, although it is also present in volume 2 of Theories of surplus value.
However, there are at least some sections of the ruling class who see that it is impossible to actually do it. That if they try to do it, it will increase the momentum towards change, or cause riots; as in South Africa. The trade unions and working class may start to act as a unified class and that would be highly dangerous. This is the contradiction at the heart of capitalism itself.
It was not like that in 2007. They had not yet got to this point, and nobody knew people were quite so mad. That the Tea Party is mad is obvious, but that the mainstream ruling class would actually proceed in this manner – the Conservative Party in the UK and the CDU in Germany – was totally unexpected. That is a paradox and, of course, a weakness. It does serve the purpose of providing a cover, as it puts forward a false enemy. It appears to be a policy which can be reversed, but they do not want the alternative policy: that is to say, they cannot re-inflate the economy; they ruled that out from the 70s onwards.
Why was there a shift towards finance capital at that time? Some people argue in terms of the falling rate of profit, but there are many arguments against that viewpoint. I think that they simply ruled out reflation because it would lead back to the 70s. If the working class got back to anywhere near full employment, it would start being able to act collectively as a class again; it would become far too powerful. So it is not that they cannot do it: they will not do it. They simply will not take the Keynesian road.
One can also look at the question more generally. I am thinking in particular of what was said in 2007 by Bill Gross, head of Pacific Investment Management, which holds more than $1 trillion in government bonds. It may only be half of what the Chinese hold, but it is still pretty important. It was he who declared that British bonds were toxic, and it was this that justified the government’s policies of austerity. The influential viewpoint of that company was one of the reasons that the US credit rating was downgraded.
Speaking at the 2007 annual general meeting of his company, he said that it was “far better to recognise that only twice before during the last century has such a high percentage of national income gone to the top 0.1% of American families”. This was long before Occupy, and not from a person on the left. It was “far better to understand”, he continued, “that society should place an initial emphasis on abundance, and the state should continually strive to distribute the abundance more equitably”. One might think that the following might perhaps be a quote from Skidelsky, in his phase as a leftwinger, but it is still Gross: “… when the fruits of society’s labour becomes maldistributed, when the rich get richer, and the middle and lower classes struggle to keep their heads above water, as is clearly the case today, then the system ultimately breaks down”. He continues: “… boats do not rise equally with the tide; the centre cannot hold.”1
This from a member of the Republican Party who has to be considered an integral and central figure in the ruling class. But that was in 2007. The situation is clearly much worse today, in terms of income distribution, for example.
The most important aspect of the crisis is the fact that money is not capital. That is to say, there has been a build-up of money which cannot be invested, and when that happens value does not create more value. There is no self-expanding value and money which does not self-expand is not capital. This build-up of trillions around the world is obviously the problem today – the reason why things are getting so desperate and people are starting to demand the government adopts a different policy.
However, the level of unemployment has not risen in the way it did during the great depression. In America it may not be wonderful, but it is a lot better than it was in 1933. That is so precisely because of the policies adopted, which in part has meant that around the world, particularly western Europe and the United States, companies have tended to keep workers on, while effectively decreasing their wages, or have allowed workers to retire early.
The effect is that, although unemployment has risen, it has not done so as fast as it did in the great depression. That is why most economists do not refer to the current situation as a depression, although it does constitute one from Marx’s point of view – a point also made by Krugman. A depression is not a matter of one or two quarters without growth, but long-term stagnation, in which there are ups and downs.
The point is that in the recent period the capitalist class has been doing very well: profits have actually gone up during a depression. Well, that cannot last, but it is actually what has happened. So if Bill Gross were to repeat his remarks today (although I am not sure he would) he would have to go even further.
This affluence does not just apply to the top of the capitalist class; it also applies to managers. The income of the top percentile in Britain, the top 11,000 earners, has increased by 50%. As a result, top managers who were previously receiving, say, £2.5 million a year are now getting five million. Not bad. So for some people it has been a rather good depression.
There is increasing antagonism towards people who pocket so much money, although it is not class antagonism as such. Yet the whole argument around companies that are avoiding tax is really a blind alley. That is the nature of capitalism – companies and individuals must always strive to minimise their tax bill. Instead of making a big deal about a managing director who is making 10 million, why not just tax them at say 95% or even 99%? They would still be doing very well compared to most of us.
The reason that will not happen can be explained by the nature of capitalism itself. Obviously, the logic would not just be to tax the capitalist class, but for the state to redistribute their entire wealth to the working class. But that would not be capitalism. So campaigning on the basis of this or that company, or this or that terrible capitalist who does not pay their taxes is really just a way of avoiding fighting the system.
However, that is the kind of form that resistance has taken, and that clearly is where we are today. But the left just seems to go along with this miseducation of the population. In fact why is it ‘responsible’ to pay tax? Why do we want to pay for more wars?
An interesting aspect of this is that in the third world we can see control beginning to fray. There is an obvious case of this in South Africa, and I would like to say a few words about that. A central question is the crucial role of Stalinism in maintaining the system. Now obviously, the Soviet system no longer exists, and the Chinese Communist Party is a kind of afterlife – market Stalinism, Stalinist capitalism, or whatever one calls it. It is a form of derived Stalinism.
In South Africa, Stalinism is still playing a key role. The fact is – and I have to say this because people do not generally understand it – in 1994, the capitalist class preferred to put in a non-racist government. The whole concept of racial capitalism is simply wrong. The theory was that, in order for capitalism to develop in South Africa, the capitalist class had to use racial discrimination.
I do not intend to go on about this, as I have written a book about the question,2 but it does appear to me to be simply wrong. But it was the basis of the South African Communist Party’s ideology that took a nationalist line rather than a line against capitalism, putting off the day that capitalism could be overthrown to some time in the future. That, as you know, is the hallmark of Stalinism – there is always some reason why communism is always something for the day after tomorrow.
In South Africa the SACP adopted the line that the essential thing was to end racial discrimination, but the capitalist class would be unwilling to do so. In fact, it meant that they could stop paying white workers between 10 and 20 times what black workers were paid. From the point of view of the capitalist class, this was simply an incubus that they did not need. The result was that the rate of profit was not high and they regarded it as preferable to abolish the wage difference, which is what they did. As a result, profits have gone up, and so it was a successful change from the point of view of the capitalist class.
The South African government includes not only members of the Communist Party, but those who to a large degree they have been influenced, or controlled, by the Communist Party. The major trade unions have also been controlled by the SACP. So when there is an industrial dispute it has been compared to ‘playing tennis with yourself’ – on one side of the net there is a minister who belongs to the SACP and on the other an SACP union leader.
The unions are closer to Soviet-style unions, except that it is cleverer than that, because they do go on demonstrations, they do demand higher wages and they go on strike. But it is easy to put wages up every year because the real wage is something different. Although it is hard to work out the real figures, one could argue that sections of the workforce have either the same wage as in 1994, when the government came in, or a lower wage.
That is the way South Africa has been run for the last 20 years, and why people should have put up with that is not very clear. But things have finally snapped.
The point of going through this description is to show that the form of control rested to a large degree on Stalinism: the way they actually control the unions and the propaganda they are putting forward. When the government arrived in 1994, and before then, there were slogans all over the place calling for socialism – there was a level of socialist consciousness. But the overall understanding of what socialism would mean and how it would take place was very low, and a lot lower than it was in the 1950s. The level of understanding among the left was very poor.
Unless you understand the nature of Stalinism, you will not understand what has happened in South Africa. And unless you have a more general theory of the global economy, with Stalinism bound up in it, then you will not understand the current economic situation either. The world is in transition – away from capitalism, whilst remaining within capitalism – and there are three sets of laws in operation: the laws of capitalism, the laws of transition and the laws of decline.
In South Africa there are people now in power who talk about socialism, who have spent many years in jail fighting the apartheid regime and who appear to be honest. Some of them are honest and genuine, of course, although many are now millionaires. There is the wonderful example of Cyril Ramaphosa, the former general secretary of the National Union of Mineworkers, who is now a multi-billionaire and director of the company against which workers in Rustenberg have been on strike. He is not the only one.
The point is that there is a highly complex situation, with obviously a very low level of education, including socialist education. The ANC government has one of the worst records on education. According to The Economist, it comes somewhere like 120th in the world. So it is not surprising that it has taken 20 years for people to react. It is little wonder that people do not understand socialism when there is a government of multi-millionaires proclaiming themselves to be communists and socialists, presiding over an economy where the majority have very low wages.
That includes the opposition within the African National Congress milieu. Even someone like Julius Malema, the expelled former leader of the ANC Youth League, who calls for the nationalisation of the mines, is simply an opportunist. He is personally very well off and in fact seems to act as a spokesman for outside interests.
Despite this complexity we are now seeing the beginnings of a revolt. So far it is taking a trade union form – demands for higher wages, for more workplace control and so forth; and concessions have been made. And it is not just in the mines. It began in the platinum and other mines, but now it has spread throughout industry and even agriculture. There is a generalised revolt of workers in South Africa, precisely because of the conditions they have to endure, and without there being any understanding, any theory whatsoever, about the underlying causes.
Since perhaps the 50s and 60s, there have been perhaps two countries where Trotskyism has been some kind of force. One was Ceylon, where a Trotskyist faction entered into government, and the other was South Africa. In the Western Cape in particular Trotskyism was dominant on the left, even when it was not dominant in the country as a whole. It is no accident that quite a significant number of Trotskyists come originally from South Africa. The late Neville Alexander came from that tradition, and was immersed in it in Cape Town. But now it has been degraded, and the level of discussion is very poor. So I do not think you can expect very much more to happen at this time, but it does give hope: if the working class is acting as a whole, then that provides impetus for a left to be formed. One that is to the left of the Communist Party, of course.
Global profits have tended to go up since 2009. But here you have an important source of those profits – the third-world extraction of minerals – being threatened. If you look at the FTSE 100, the Financial Times bellwether of companies, a large proportion of those whose profits are under threat are in mining. There is an acceptance that capitalism is in trouble, which is not surprising: they are in trouble and they are going to be in trouble.
Hence the importance of South Africa technically, politically and economically. The interaction between South Africa and other countries on the continent means the revolt will spread. There are many migrants in South Africa because even the low wages paid to workers there are higher than in other African countries. So it is not surprising that workers try to get into the country, and that is why the population has grown so fast in spite of the Aids epidemic. In the 50s, the population stood at around 12 million, and now it is over 50 million. Life expectancy went down under president Thabo Mbeki, dropping to something like 45, but, now that proper HIV medicine is available, it has gone back up to 51.
South Africa is an example of what is happening, and the degree to which they control is being challenged. What I have argued is that, on the one hand, there are the classic means of control: commodity fetishism and the reserve army of labour; on the other hand, they have already been partly shot through. In the period from 1945 to, say, 1972, there was no reserve army of labour in Britain: it is hard to talk of what existed as a simple reserve army, when there were welfare benefits and what Marx would have called a surplus population. But now the intention is to fully restore the reserve army of labour – and for that the reduction of welfare benefits to the absolute minimum is necessary.
Any such attempt will, of course, result in big problems for the capitalist class. Workers will fight for their rights and the fact that capitalism has been overthrown, even if the result was Stalinism, has meant that it can be seen through and exposed, and this will continue to happen as long as capitalism exists. Anyway, the point is that the revolt will spread – it must spread. The stories of what happened, that people were shot down and tortured, are well known. So we can expect the revolt to spread to other countries on the continent – and I would think to other continents too.
If all the mosquitoes were to die off, how many frogs would die? The Same principle applies to our financial system. Our economy is just like an ecosystem; you remove a massive part, and all you can do is watch the dominoes fall. Shock therapy on a colossal scale hurts very badly. You need to transition slowly so that it isn’t an avalanche. What we have is a landslide into poverty and ignorance.
How many more austerity incisions must we suffer, which will only further lay waste to our economy and do nothing to close their budget deficit. How long will it take, before people, realize “Hey, this doesn’t work.” In every single country subject to Austerity, growth has come in below expectations and in almost all cases has resulted in negative growth.
The system as applied at present does not work and will not work now or in the future.
Make your voice heard and make it count.