collapse of
Despite Nigel Lawson's ef- the Blackpool, forts at Tories' economic policies are With the the rocks. on mortgage rate at 14%, infla- tion (excluding the cost of housing) at over 7 percent, and the balance of payments heading for a £23 billion deficit for the year, the government's 'economic miracle' has become an Alice in Wonderland tale. Even Lawson's strongest supporters in the national press are losing confidence as rifts widen between Law- son and Thatcher's main economic adviser, Alan Wal- ters. It is useful to look back at the situation in 1988, the high point in Lawson's chancellorship. Output in the manufacturing sector appeared to be increasing sharply, and the Tories found themselves sitting on a "budget surplus' (more money was com- ing into the exchequer than was being spent) - as a result of mas sive revenues from privatisation and higher than expected in- come from North Sea oil. Un- employment was beginning to fall slowly, resulting in an increase in tax receipts for the Treasury. Declaring that their economic strategy had been a resounding success, Law- son and Thatcher took the brakes off their austerity policy and in the context of relative- ly low interest rates, cut income tax by 2p in the pound and slashed the tax bill of the rich. This was in line with their longer term plans for expanding the economy through 'market' or 'consumer-led' mechanisms. So what has gone wrong for Lawson? Certainly the decision by West Germany to increase interest rates in early October didn't help. The most recent rise here came in response to this, but since the 'Lawson boom' started there has been a total rise in in- terest rates of 40%. Lawson has been faced with similar con- tradictions and long term problems as other chancellors. British capitalism's manufacturing base means that levels of in- creased consumer spending - or 'demand-led growth' as the Keynesians call it - have not been matched by the increases in output that Page 8
FEATURES Lawson's "miracle' Wall Street - more influential than Lawson's rhetoric Keynesian theory British economy "overheats' and at comparatively low levels of activity. the expense of more costly British ones. weak rates - to support the pound.
assumes. In short, the very quickly
The post war years saw 'overheating' take place against a background of relatively full employment. Governments deflated and pushed up unemployment, but to levels that tion. rarely exceeded half a million. The Lawson 'economic miracle' took place against an unemployment rate that was only slightly below two million and contained huge regional variations. The result of 'overheating' has been a significant increase in inflation and the mounting trade deficit, as consumers armed with credit cards buy foreign goods at
In trying to bring about a 'soft landing". Lawson has had gradually to increase interest rates. However, his handling of the economy has resulted in loss of confidence by international finance and the cashing of sterling deposits in favour of other currencies. To attract back these speculators, Lawson has had to offer them the recent increases in interest openly
The weakness of the British manufacturing sector in relation to other capitalist economies has been recognised by most long marxists, although their analysis of why has often differed. They have pointed variously to the strength of the working class, to the backwardness of the British ruling class in its obsession with financial capital at the expense of manufacturing capital, and the ex- istence of an archaic social struc- ture. This is not to deny the im- portance and influence of general and international developments in capitalism - but rather to acknow- ledge that within the generalised crisis affecting the capitalist world there are certain par- ticularities about the British economy. Labour governments have at- tempted 'corporatist" solutions to modernise industrial production. They have set up wage-cutting in- comes policies and huge govem- ment planning agencies, seeking "planning agreements' with big business, but not tackling the power of financial capital or the stranglehold on industry exer- pound' "high cised by the demanded by the City. This same reformist approach has tradition- ally dominated the thinking of the Labour left, although proponents of the Alter- native Economic Strategy of the 70's did debate the merits of exchange control and protectionist import duties to safeguard 'British' industries against 'foreign' competi- The Tories have had a quite different ap "supply side proach to dealing with the problem of British capitalism. In the early 1980s they deliberately crashed the economy - under the banner of monetarism - to create a "shake out' much of the excess capacity in the traditional sectors of manufacturing. They also set out through use of unemployment and anti-union laws to impose a dramatic reduction in labour costs. At the same time they have promoted the 'enterprise culture' in the most profitable sec- tors - such as electronics and fast foods, and encouraged Japanese-style labour discipline. They have continued to give the City a free hand, and indeed promoted it. They have attacked demands to join the European Monetary System - where the SOCIALIST OUTLOOK no 19, November 1989
THE RICH ARE GETTING RICHER
AND THE POOR
ARE GETTING •I CAN
POORER. LIVE WITH THAT! $ BY MAL pound would be linked to other currencies, particularly the Deutschmark, rather than allowed to float against the Yen and the Dollar.
This strategy has produced an industrial graveyard in parts of the North and a new industrial aristocracy in sections of the South East benefiting from high levels of unemployment in manufacturing industries and the super profits pouring into south-east commuter areas from the City. Behind this, needless to say, in view of the way the British electoral system operates, is the recognition that the Labour vote can rise in the North without affecting the Tory majority south of Birmin-
Yet the Tories have dug a hole they will find increasingly difficult to climb out of. Lawson has talked about interest rates going higher if necessary, knowing full well that this will altack those sections of the working class that the Tories have depended on in their promotion of a "home owning' democracy.
The mortgage payments on a semi in Peterborough have probably risen by at least €150 a month since the beginning of 1988. This spells big trouble for Thatcher on the pay front. In addition, a further increase in interest rates could throw the whole economy into recession with unemployment rising once again.
At the time this article is being written, the world stock-exchanges are beginning to lurch up and down again and the Tories are plunging in the opinion polls. Yet the Labour frontbench team have little original to say on the economy. John Smith said he wouldn't make the same "mistakes' as Nigel Lawson, and is in favour of 'credit controls' - which we assume would even affect the Labour Party's own new credit card! — and of joining the European Monetary System immediately.
While lending all possible support to those sections of workers already responding to these latest developments by taking industrial action or submitting even larger pay claims continuing escalation of wages disputes, we must combat the wretched line emerging from Labour's front bench, and elaborate some socialist answers to the economic crisis. There is an urgent need for the left around the Socialist Movement to initiate a serious debate around a socialist economic policy that goes beyond the left Keynesian Alternative Economic Strategy of the 70's.
Martin Allen SOCIALIST OUTLOOK no 19, November 1989
EAT UR ES cross the border to the USA to find work. beginning to be seriously challenged for the first time. political price. The one-party system is dead. cal test. brutally repressed with hundreds killed just before the Olympics of that year.
DK:It seems the new President, Salinas, is doing a bit of a Thatcher' on Mexican society. What is his programme?
First you have to understand the Salinas overall project which is backed by the dominant sectors of the ruling class and US imperialism. He sees himself leading a Mexican transition to democracy that is not so radically different to processes going on in other Latin American countries. The Spanish experience particularly inspires him and Felipe Gonzalez is his role model.
The central task he has set his govemment is nothing less than a decisive change in the old clientalist, semi-welfare state. This state was born out of the radical Mexican revolution 70 years ago. The axis of PRI political domination is the incorporation of mass trade unions and peasant organisations into the state structure via the PRI one-party system. The system did produce 60 years of political stability in a continent where political instability is more commonplace, but at the cost of low labour productivity holding back more modern industrial development. The leader of the Mexican TUC, Velasquez, physically expresses this arrangement. He has been in office for 50 years!