Whole sections of the 'west' are in recession or near zero growth. This was not caused by some kind of mass activity by working people. It wasn't caused by governments in one or several countries spending too much. What has caused the recession in the first instance is that the financial sector ran up huge debts, far, far in excess of public debts and deficits, as it went in for some wild speculative behaviour - a good deal of which involved them selling debts to each other!
We might ask why did they do that? They did it because one of the problems that capitalism has, is that it is locked into making profits. That's what it does. That's what it's for. However, when it makes profits, its bosses know that they have to do things with those profits over and beyond spending them on luxury goods for themselves. If they don't, their own firms will start to be not sufficiently modern and the surplus money that they have will decrease in value. So, part of the capitalists' drive is what they call 'investment'. They hunt for places to put the money. However, they will only do this if certain conditions are met, most of which revolve around the idea that the money they invest must bring them more money in return ie be profitable. Any other kind of investment is charity or bad business.
So, the speculative bubble which burst in 2010, was in essence an attempt by financial capitalists to find more and more profitable opportunities. In the anarchic lunacy which is called 'good business', more and more of them borrowed money to buy debts which they thought would be profitable for them. (If I buy a debt from a moneylender I will collect the payments people pay him for having borrowed money from him. Nice. But if the people who are supposed to pay the interest are unable to pay, not so nice.) They did this because the returns on putting that capital into other ventures were lower and/or slower. Capitalism doesn't act for the general good. It would have been better if capitalists had invested in housing, hospitals, alternative energy but in a 'free' society, no one tells capitalists to do this, so instead they cook up crackpot schemes like hedgefunds and the like.
One of the underlying reasons for the crisis happening at that time was that at the end of the line of debt were people who were being laid off from work. They were being laid off from work because, capitalists don't fix their rate of production according to planning, they do it by projecting sales. However, this works according to boom and bust: produce more and more until there is saturation of the market, then sack as many people as you can ('cutting costs') who immediately become less able to pay their mortgages, their insurance or buy things. So the economy goes into slump, bottoms out, until wages, rents and primary goods get so cheap, more and more capitalists start to think they can take the risk to produce stuff and try to flog it.
What has happened this time round in the boom bust cycle is that the capitalists have a huge great brake on the system: their own debts. However, as you know, the big lie - no The Big Lie - that has been put about for the last two years is that the big brake is government debts, ie the money and the interest payments that are paid out for our benefit on education, health, welfare - and, though I don't agree with it - defence, because theoretically it's there to defend us.
We are meant to believe that the reason why the economy won't or can't 'grow' is because Labour ran up a deficit ie its outgoings per year on money borrowed was too high. And we aren't supposed to think that capitalists are unwilling to 'grow' (ie invest, employ people and sell more goods) because the finance sector in particular is in the worst indebtedness it has ever, ever been in. So, though its managers and owners pay themselves salaries and bonuses worth millions, they can't and won't lend money at a sufficiently fast and high rate for manufacturing and service industry capitalists to be able to invest in plant, new machinery, or start-up funds to take on workers.
Meanwhile, the global take home pay for workers continues to go down in real terms (ie in relation to people's bills) and go down in relation to the amount of money we can call profits. So simply put, the vast majority of people have less money to buy the goods that the capitalists would make and try to sell, if they could. The main pressure downwards on pay comes from government initiated pay freezes, unemployment, part-time, short-term employment and lack of union organisation to resist this pressure.
So there is a double squeeze on capitalists - banks who won't lend them money at a low enough rate because they are scared stiff that they (the banks) will crash; workers with not enough money in their pockets for capitalists to think it's worth trying to make stuff for workers to buy.
In my dream world, Labour would be saying all this. They would be spelling it out with diagrams, films, and leaflets. They would be showing that a tiny group of people held and are still holding the world to ransom on account of their speculative lunacy and greed. They would be showing that each time Osborne and all the press pals say that it's the deficit that's the problem they would say, Oh no it isn't, it's the private debt. Every time Iain Duncan Smith and his press pals point the finger at this or that 'benefit cheat' or 'welfare dependent underclass', Labour would point the finger at the vast debts seizing up the system causing much more damage than a few people working a small time racket. They would point the finger at the vast millions people earn who manage these debts and who are of no productive use whatsoever. They are parasites. And they would talk about the greed-dependent overclass who got us into this fix.
They would and they should say that this government everyday blames and punishes the victims of the bankers' and financiers' greed. And they would show that it is the system of basing everything we do, need, eat and drink on profit that caused the problem in the first place. As I said, capitalists base all their actions on profitability. They don't base it on general need or for the general good. That's why the financiers went off thinking that they had created a new alternative world where money could create money and there would be no consequences.
We have to think of other ways in which we can create a society that is not based on profitability, otherwise all that will happen is that we will go on and on destroying people's lives through unemployment, poverty, lack of welfare and permanent small wars — which one day might burgeon into even bigger ones.
Thanks to Michael Rosen for permission to republish this piece which first appeared on his blog.
Get our weekly email