Ruling class in crisis

As we go to press, Rishi Sunak and Liz Truss, the two short-listed candidates to replace Boris Johnson as Prime Minister, are competing for the votes of the reactionary elderly racists who make up the overwhelming bulk of the 160,000 members of the Tory Party. On 7 July Boris Johnson finally resigned as Prime Minister after the ruling class despaired of the litany of lies he and his ministers were telling Parliament and the public over the Pincher case and sent for his executioner, Lord McDonald. Allowing him to continue would undermine illusions in parliamentary democracy at a time when maintaining them was crucial for political stability. That Sunak and Truss were both up to their necks in the mire of cronyism and corruption that characterised the Johnson administration will not matter to the Tory electorate. It will instead want to hear fairy tales about Britain’s global role, tax cuts and future prosperity, all leavened with some comforting prejudice against migrants, asylum seekers and benefit claimants. But behind the crisis gripping the Tory Party lies one far deeper: that of a British imperialism in long-term relative decline.

It had seemed that Johnson could ride out the storm over Pincher (see below) as he had over the appalling handling of the coronavirus pandemic which had cost tens of thousands of lives, the naked corruption in the handling of PPE supply contracts, and his willingness to break a treaty he himself had signed to ‘get Brexit done’. He could even shrug off Partygate when the Metropolitan Police was forced to investigate numerous illegal parties held in 10 Downing Street during periods of lockdown – but then backed off after it issued one fine to Johnson for just one of the many parties he had attended.

The Pincher scandal

Johnson had appointed Chris Pincher, a long-standing friend and supporter, as deputy chief whip despite (as it subsequently emerged) knowing that a complaint of sexual assault made against Pincher while he was a junior minister in the Foreign Office had been upheld following a formal investigation. Pincher resigned his post on 30 June following a revelation that he had sexually assaulted two men in the Tory Carlton Club. For several days, Johnson and his ministers told an ever-changing story of what the Prime Minister had known about the Foreign Office investigation. But the ruling class had had enough. On 5 July Lord McDonald, who had been the senior civil servant in the Foreign Office during the investigation, wrote a public letter to the Parliamentary Commissioner for Standards stating that Johnson had been personally briefed about the investigation and its outcome, both of which Johnson had denied. The writing was on the wall. On 6 July Chancellor Rishi Sunak and Health Secretary Sajid Javid resigned, triggering an avalanche of resignations by members of the government anxious about their future on the parliamentary gravy train. By the morning of 7 July, 57 ministers and their hangers-on had gone; the government could no longer function. Yet Johnson with his overweening sense of entitlement still needed persuasion to go; Tory MPs desperate to avoid a possible general election decided that although he was unfit to be prime minister, he was fit enough to continue until his replacement had been chosen. A competition to appoint an interim prime minister would have immediately ripped the Tory Party apart and so MPs acceded to Johnson’s demand that he stay in post until that point. As it was, the shortlisting process for the ten initial candidates revealed so much mutual antipathy that the last of three televised hustings had to be abandoned because of the amount of vitriol in the first two.

The crisis of British imperialism

The crisis in the Tory Party is a refraction of the insoluble crisis of British capitalism: its parasitic character has made it increasingly incapable of withstanding the economic and political challenges of US or European imperialism as an independent global imperialist power. In 2009, FRFI reported that:

‘The massively increased role of financial capital, increasing speculation, and the ever expanding credit bubble built on a relatively declining productive base, which were the forerunners of the crisis, were the result of the overaccumulation of capital in the heartlands of capitalism. “Financialisation”, to use fashionable terminology, is the product of a crisis of profitability in the capitalist system, the lack of profitable investment opportunities for capital. The expansion of the financial sector does not produce additional value but appropriates/ plunders a greater and greater proportion of the value produced by the productive sectors of economies throughout the world. Britain’s relative industrial decline has been combined with a dynamic, aggressive imperialist expansion of commerce and finance overseas.’ (David Yaffe: ‘Parasitism remains at the heart of British capitalism’, FRFI 210)

This development continues at unprecedented levels. In 2020, overseas investments totalled £12.486 trillion (Pink Book 2021), more than six times GDP for that year. Alongside this, however, liabilities grew further: to £12.997 trillion. Net investment income had been in surplus in the years up to the financial crisis of 2007/08, thereby offsetting significant trade deficits. Since then it has been in deficit, apart from two years (2010 and 2011) when it showed a small surplus. In 2020, the pandemic year, this deficit was £29.4bn. Alongside this, the deficit in trade in goods has continued to rise: from 4.9% of GDP in 2008 to 6.1% in 2019 and 6.3% in 2020. While this has been offset by a surplus in trade in services, the overall balance of payments has remained in deficit. Between 1991 and 2006 the balance of payment deficit never exceeded 3% of GDP; between 2007 and 2020 it has only been below that figure three times, and exceeded 5% in each of the three years 2014-16.

Britain’s relative decline

The vulnerability of British imperialism to the international financial disturbances that are a constant feature of the overall global crisis is revealed by its economic performance since the 2007/08 financial crisis relative to other comparable economies. The Resolution Foundation’s report Stagnation Nation (July 2022) points out that although the productivity gap between the UK on the one hand, and France, Germany and the US on the other, had narrowed between 1990 and the financial crisis, it started to widen again from 2007. Between 2007 and 2019, the productivity gap between the UK and Germany and France together has nearly tripled, from 6% to 16%. UK labour productivity over this period has grown by an average of 0.4% per annum compared to an average of 0.9% among the richest 25 OECD countries. According to the OECD, the growth rate of the British economy in 2023 will be the lowest among the G20 richest countries with the exception of heavily-sanctioned Russia. The level of business investment in 2022 Q1 was 9.2% below where it was in 2019 Q4, the last quarter before the pandemic.

In June 2022 the UK inflation rate was 9.4% and expected to rise to over 10%, compared to Germany’s 7.0% and France’s 5.5%, demonstrating a growing instability in the face of unforeseen developments abroad. The Resolution Foundation speaks accurately of Britain’s relative decline, but like so many think tank reports of the past, ignores the real driving force of the British capitalist economy: its parasitic relationship to the rest of the world and especially under-developed countries mediated through the City of London and its network of tax havens in UK dependent territories. The impact of this relative decline on the conditions of the working class is all too evident:

  • The rate of fall in real wages is now the highest since 2001; public sector workers are particularly hard-hit with average wages having risen by only 1.5% in the past year.
  • Even before the record levels of inflation today, real wages and disposable income per capita have been stagnant since 2005, just before the financial crisis.
  • In Wales, the Midlands and the North East average incomes fell between 2004 and 2019, while they grew by 8% in London.
  • Income inequality has continued to rise and is the highest among the major EU countries. While the minimum wage has reduced differentials between low and middle income groups, the gap between the richest and the middle income groups has continued to widen.
  • In a graphic demonstration of the punitive attitude to the unemployed, people on unemployment benefits in Britain receive an average of just 20% of their previous income after two months out of work; this is the lowest among OECD countries where the average is 65%.

The stagnant economy is not the only problem that concerns the ruling class. The consequence of Sunak’s emergency state spending during the pandemic was to raise the level of government indebtedness to new heights: in 2021, it reached £2.38 trillion, 102.8% of GDP, a rise of £490bn and 19 percentage points since 2019. In 2006, just prior to the financial crisis, gross state debt stood at 40.4% of GDP. At the same time, government deficit still remained at £187bn, down from £274.4bn in 2020, but at 8% of GDP far higher than before the pandemic when it was 2.2%.

While much of this was down to the March 2021 £350bn package to deal with the pandemic, the fact is that the weakness of the British economy has forced the government to step in again and again to shore up the system. First it established the £12bn NHS and social care levy, to be paid by a 1.25% increase in National Insurance which disproportionately penalised the lower-paid. This however was and is utterly inadequate given the continuation of the Covid-19 pandemic. Then it had to respond to the cost-of-living crisis by raising the National Insurance threshold by £3,000 to bring it into line with the tax threshold of £12,750. More recently it has set up the ‘energy profits levy’ to provide £15bn relief to those on benefits and low incomes – in effect, a state subsidy for low pay. What the government gives on the one hand, however, it takes away with the other: a 1.9% increase in funding per pupil in state schools will be a real terms cut of at least 7%, as will the pitiful 2.1% increase in funding for school meals. Forecasts of the overall rate of taxation have been revised upwards twice since March 2020, and the overall tax burden will be the highest since World War II because of ‘fiscal drag’, itself mainly due to the impact of freezing the tax threshold during a period of inflation.

Labour – a ruling class party

While the Tory Party implodes, the Labour Party has spent the time burnishing its credentials to persuade the ruling class that it would be a much safer pair of hands in government. Purging the left and ensuring the submission of those that remain within the Party has been one element of the leadership’s strategy to win the next general election. Having turfed out thousands of members, the leadership has made it clear that any criticism of NATO would be incompatible with membership. It is evident that Jeremy Corbyn will not be allowed to stand as a Labour candidate in a future general election. The 11 left MPs who rapidly unsigned a Stop the War statement which offered a mild rebuke to NATO’s role in fomenting the war in Ukraine have signalled that they are not going to be a serious opposition. Leader Sir Keir Starmer’s instruction to Shadow Cabinet members not to attend RMT picket lines was taken a step further when Shadow Foreign Secretary David Lammy initially condemned British Airways baggage handlers at Heathrow airport for voting to strike in an effort to reverse a 10% wage cut imposed during the pandemic. Shadow Chancellor Rachel Reeves has spoken of ‘ironclad’ fiscal rules on government expenditure under Labour, borrowing only to invest and establishing an ‘Office of Value for Money’. It was Rachel Reeves as Shadow Secretary of State for Work and Pensions who said in October 2013 ‘Nobody should be under any illusions that they are going be able to live a life on benefits under a Labour government…we will not allow people to linger on benefits.’ Given that basic Universal Credit (UC) is set at such a pitiful level, that the level of housing benefit has been eroded to force workers to accept slum conditions coupled with the Bedroom Tax and the Overall Benefit Cap, there is certainly no inducement to live on benefits – but there are no plans by Labour to raise UC to a level beyond destitution either.

The ruling class will be pinning its hopes on Sunak beating Truss and her desperate attempts to present herself as a contemporary Margaret Thatcher. But Sunak suffers three major disadvantages: he is not white, his family is immensely wealthy, and he knows that the economic crisis rules out the tax cuts that Truss is manically demanding. Truss is undoubtedly stupid – her belief that the Baltic countries could be reached through the Black Sea made her a laughing stock at least among Russian diplomats – but she is immensely ambitious, abandoning a supposedly vital G20 meeting in order to put forward her candidacy. She is also popular among the Tory Party membership, and her promise that she will increase defence spending to 2.5% of GDP by 2026 and 3% in 2030 will go down well, as will her crass belligerence towards the EU, Russia and China. That someone so obviously talentless stands a serious chance of becoming prime minister illustrates the extent of the decline of the British ruling class. All that it can hope for is a period of political stability while it forces the working class to pay for the crisis – and that is hardly likely.

Robert Clough

FIGHT RACISM! FIGHT IMPERIALISM! 289 August/September 2022