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Back to Front - The same old story


World industrial production is set to fall by between 30 and 35 per cent this quarter, even worse than the 20 per cent plus fall in the last quarter of 2008. In the last year, industrial production fell in the eurozone by 18.4 per cent, in the USA by 12.8 per cent and in Japan by 38.4 per cent. The Organisation for Economic Co-operation and Development predicts that 25 million more people will become unemployed in the 30 OECD countries, rising to a 10 per cent unemployment rate.

That’s mighty capitalism for you.

Britain’s production fell at an annual rate of 7.25 per cent in the last quarter of 2008. The OECD expects Britain’s economy to shrink by 3.7 per cent this year, and unemployment to rise to three million. 900,000 households are now in negative equity.

President Obama’s trillion-dollar scheme to buy toxic assets is a ‘public-private partnership’ whereby the American taxpayer helps private investors to buy these ‘troubled assets’. It sends good money after bad. The scheme was agreed only after US Treasury officials spoke to Wall Street bankers.

That’s mighty capitalism, too.

Under this ‘Troubled Asset Relief Program’, any profits would go to the private investors and the losses would be borne, as usual, by the public. As the Nobel-prizewinning economist Joseph Stiglitz said, the US government is using the taxpayer to guarantee the downside risks, namely that these assets will fall further in value, while it hands the upside risks, any future profits, to private investors such as insurance firms, bond investors and private equity funds. He said, “Quite frankly, this amounts to robbery of the American people. I don’t think it’s going to work because I think there’ll be a lot of anger about putting the losses so much on the shoulder of the American taxpayer.”

Even finance capitalists admit now that the markets don’t work. Lord Turner, chairman of the Financial Services Authority, said, “The financial crisis has challenged the intellectual assumptions on which previous regulatory approaches were largely built, and in particular the theory of rational and self-correcting markets. Much financial innovation has proved of little value, and market discipline of individual bank strategies has often proved ineffective.” The Financial Times admitted recently, “The global financial system as we know it was forged by deregulation underpinned by a belief in free markets. That approach failed.”

But they still believe in it.

Brown wants to restore faith in the capitalist system, which is Labour’s historic role. He recently spoke to “faith leaders” (who follow other myths). He said, “Most people who have worked hard to build up their firm or shop don’t understand why any company would give rewards for failure; or how some people have grown fabulously wealthy making failed bets with other people’s money.” Don’t understand? Actually most people know that this is what capitalism does.

But most workers still want to believe in it, too.

This crisis is not caused by some external shock, like a war or an oil price rise. It is the inevitable result of the normal workings of the system, a capitalism in absolute decline.

We must understand that, and act to destroy it if we are to have a future for ourselves and our country.