The heavy defeats of Tory candidates in the Selby & Ainsty and Somerton & Frome by-elections on 19 July reveal widespread loathing for a corrupt, racist, anti-working class government. That the Tories retained Boris Johnson’s former seat in Uxbridge and South Ruislip by a mere 495 votes was attributed to local opposition to the extension of the Ultra Low Emission Zone (ULEZ) into Outer London in August. Whether or not this leaves Labour in a position to win a general election in 2024 should not distract from the fact that in government Labour would maintain the current offensive on working class living standards, preserve the growing number of repressive powers available to the state, and seek to add ‘efficiency’ to the ever-expanding range of anti-migrant laws and make them even more inhumane. Labour would be as reactionary as the Tory government it replaces, yet there is no indication of any serious working class movement emerging to challenge the Tories, let alone the Labour Party. ROBERT CLOUGH reports.
The results of the three by-elections were widely predicted. There was doubt as to whether Labour would win Uxbridge after the Tories made the ULEZ extension a central issue. In his unbridled ambition to win the seat, Labour candidate Danny Beales declared he was against the extension even though it was a Labour policy led by London Mayor Sadiq Khan. Beales’ brazen opportunism failed despite a swing to Labour of 6.7% as Tory voters stayed at home: the turnout was a mere 46% compared to 68.5% at the 2019 general election. It was a similar story in Somerton & Frome: despite a headline swing of 29% from the Tories to the Lib Dems, turnout was just 44%, far below the 75.6% of 2019. In Selby & Ainsty in Yorkshire, much was made of the fact that Labour overturned a Tory majority of 20,000, but this was on a turnout of 44.7% compared to 72% in 2019.
Stagflation
The failure of the Tory government to make serious headway in reducing the high levels of inflation despite continuous increases in interest rates reveals the depth of British capitalism’s accumulation crisis. GDP growth in the three months to May 2023 was nil, and the economy as a whole is no larger than it was at the end of 2019. This is the return of ‘stagflation’ – inflation with no real economic growth. The CPI inflation rate in June was 7.9%, while food prices rose at an annual rate of 17.4%, down only a fraction from their peak of 19.2% in March. By contrast, the Eurozone’s inflation level was 5.5% in June, down from 6.1% in May. In June, the Bank of England raised interest rates to 5.0%, the 13th time it has done so since December 2021, when the rate was 0.1%.
In January, Prime Minister Rishi Sunak committed to halving the rate of inflation by the end of the year. At the time, it seemed simple to achieve: the Office for Budget Responsibility had predicted that the expected fall in energy prices during the year would yield an average CPI inflation rate of 3.8% in the final quarter, down from 11.1% in 2022 Quarter 4. However, the weakness of British capitalism always made that uncertain.
The profitability crisis
Given poor underlying profits, sellers push up prices to levels which seem to maintain adequate money rates of profit. To allow commodities to be sold at these higher prices, the buyers must obtain credit, for like sellers, buyers are also stuck for adequate funds, and they cannot continue their own investments if they cannot buy inputs. In such circumstances, the underlying fall in the real rate of profit would become apparent much more quickly, forcing firms out of business and leading to a wider economic crisis.
However, the more this credit process expands beyond its real value basis, each note or coin becomes worth less and less. The same good requires even more money to be handed to the price-raising seller – the inflation of prices. For a time, using credit, borrowers can manage to purchase the means to carry on their own production. The sellers in turn temporarily deceive themselves into thinking they have saved their skins.
Now, however, the banks see their loans reduced in real value by the inflation they have promoted. Alarmed, banks at first try to offset inflation by pushing up their own interest rates, but as the real value of their loans is undermined by greater inflation, they push their central bank to raise the general rate. The privileged position of borrowers no longer helps them meet their suppliers’ pricing, and they let their production stagnate. Those companies surviving through relatively better money profits become an ever-decreasing sector of the economy: the mass of small and medium-size producers with little collateral to offer the banks, cannot use credit to escape price rises in this way, and face poor financial returns head-on, risking collapse.
Underlying this greater than ordinary inflationary period is the pressure of a persistent long-term tendency for the real rate of profit to fall because increases in investment in labour-saving machinery displace workers who are the only source of value and surplus value. The constant pressure on profits provokes a constant demand for credit, and thus a regular inescapable increase in the general price level. This is nowadays deceitfully passed off as an official ‘target rate’, an acceptable rate of inflation to lenders heralded as a government policy success! This official rate indicates that the credit mechanism is working without fatally undermining the value of lenders’ loans. However, the long-term tendency for prices to rise periodically accelerates because of secondary disturbances, currently the complex of post-Brexit/post-Covid/Ukraine war pressures. For instance, the need to ensure adequate profits means that capitalists involved in trade between the EU and Britain have to raise their money prices in order to offset the costs involved – otherwise the chains would collapse as individual companies fail to make sufficient profits. However, these secondary factors are clung to as ‘explanations’ by the bourgeoisie themselves, who refuse to consider their own system fatally flawed.
Impoverishing the working class
Conditions of inflation test the relationship of class forces. The ruling class happily takes advantage of the results of being its own creditor, as prices rise and reduce the real value of wages, and with it, working class living standards. The interest rate increases made to protect creditors, banks and financial funds not only raise mortgage costs but also private rental levels to meet the parasitic demands of landlords. In all this, there is a constant battle between capitalists of all types – industrial, manufacturing, banking, and real estate owners – to get their share of the loot in the face of tightening margins. The function of the state is to ensure that it is the working class that pays for the consequences through:
- Direct cuts in wages. While the media headlines led on the fact that total pay had increased by 6.5% between February to April 2023, in real terms it fell by 2%;
- Increased housing costs – whether through higher mortgage interest rates and an increase in private rentals by 5.1% in the year to May 2023;
- Cuts in state services which force the working class increasingly to provide for its critical needs at its own expense;
- Reductions in state benefits that pauperise already-impoverished sections of the working class which include increasing numbers in work.
The capitalist class has to increase working time, intensity and productivity to extract more surplus value from the working class. The legal assault on trade unions is essential to this process, as is the continued erosion of the right to protest. These are functions of the state, independent of which party holds governmental office. Labour has confirmed that it would repeal only limited parts of existing anti-trade union legislation and keep the 2022 Police, Crime, Sentencing and Courts Act as well as this year’s Public Order Act.
The continuing chaos in the ranks of Tory MPs has not changed the balance of class forces. The pittances that are the Sunak government’s Cost of Living payments and the one-off energy support grant have been sufficient to avoid any serious opposition to deepening working class impoverishment. Hopes for significant resistance through the series of strikes that built up from summer 2022 have not materialised – the trade union leadership, with a weakened membership, has seen to that. Intermittent days of strikes sometimes separated by weeks have not been serious campaigns. The willingness to settle for pay increases at less than the rate of inflation has been a common factor. The ‘Enough is Enough’ campaign set up in autumn 2022 in anticipation of what was heralded as a ‘Winter of Discontent’, and which was supposed to be central to workers’ resistance, has disappeared.
Labour – a party of reaction
Meanwhile, the left continues its cowardly retreat inside and outside the Labour Party. Labour’s National Policy Forum rubber-stamped Starmer’s ‘growth, growth, growth’ priority for an incoming Labour government. This will require the continued pauperisation of the already desperate. The refusal to abolish the two-child benefit policy or the bedroom tax recalls Shadow Chancellor Rachel Reeves’s infamous 2013 dictum that ‘nobody should be under any illusions that they are going to be able to live a life on benefits under a Labour government…we will not allow people to linger on benefits.’ Left MPs like Zarah Sultana and Ian Byrne, both founders of ‘Enough is Enough’, are now subterranean. They, along with the rest of the Labour left both past and present, have ensured that there is no organisation or movement representing the interests of the working class.
SWP’s Alex Callinicos complains that austerity reinforced ‘entrenched social and economic inequality’ and reduced the capabilities of the state, but then opines that ‘in a demonstration that we have a ruling class that learns nothing, we face renewed calls for austerity’ (Socialist Worker, 19 July 2023). The point is that the ruling class knows exactly what it is doing. Year after year, it has pushed the working class back, forced it to work harder for less pay and in worse conditions, and disciplined it with the threat of state pauperism. It saw how a Corbyn-led Labour Party dissipated a widespread anti-austerity sentiment with its ‘for the many, not the few’ bromide, and, more recently, how tightly the trade union leaders have been able to control the wave of strikes. Above all, the ruling class knows that its interests will be ruthlessly pursued by a future Labour government that will continue the pressure on the working class in order to raise the rate of exploitation. Labour’s ‘fiscal discipline’ will translate into war on the working class.
It is now possible to see the damage caused by Corbyn’s refusal to seriously confront the ruling class. He promised a campaign against austerity – and promptly instructed Labour-led councils to set legal budgets which necessarily meant cuts. He ducked a fight over Palestinian rights, capitulating constantly to the Zionist lobby. The crisis of working class leadership remains unresolved. To develop one, socialists have to start from an understanding that the crisis is so fundamental that the nostrums beloved by sections of the left – state investment in green new deals, taxing the rich – are an avoidance of the real issue: creating a working class consciousness of the need for socialism. Political education and practical campaigning on the fundamental issues that the ruling class is forcing on us is essential: against the pauperisation of the working class, in defence of political rights, against all forms of state racism. There are no short-cuts.
FRFI 295 August/September 2023
