Budget overshadowed by market crash and COVID-19 - we won't pay for another capitalist crisis

Updated: Mar 26

Socialist Alternative issue 6 editorial

Just a few short months have separated the election of a majority Conservative government and the onset of what looks set to develop into a new historic crisis of the capitalist system. Now dubbed ‘Black Monday’, 9 March saw a huge collapse of the world’s stock markets. In Britain, £125 billion was wiped off the FTSE 100 - a fall of almost 8%. Meanwhile, in the US, the Dow Jones closed down 2000 points - the worst fall in its history.




A day that began with panic on the markets ended with the Italian government dramatically announcing a new nationwide lockdown - banning all public gatherings and imposing new travel restrictions. The Coronavirus crisis is spiralling out of control. Capitalist governments that have implemented devastating austerity for more than a decade - forcing working-class people to pay for the 2008 crisis - now find they are unable to cope with a growing public health emergency (see page 15).

But this developing pandemic is also unmasking the deep and unresolved economic contradictions that underlay the so-called recovery - built as it was on the unprecedented injections of liquidity into the economy that came through bail-outs, Quantitative Easing and sustained low interest rates. Meanwhile the US-China trade war and the growing division of the world into competing spheres means the kind of coordination that took place among capitalist regimes the world over to save their system following the 2008 crash now seems impossible - even when faced with COVID-19.

All this means the virus now looks likely to be the trigger which tips the global downturn which had already set in into a fully blown recession. Even among capitalist commentators there is skant optimism that 9 March’s stock market crash will mark a temporary blip, only to be followed by a hasty rebound and recovery.

This is the context in which Johnson’s government will deliver its first budget. An event that will now be overshadowed by growing economic gloom and a public health crisis. Since sacking former Chancellor Sajid Javid last month, Johnson has attempted to shift his image away from that of a traditional Tory austerity politician. Under the direction of Cummings, he has instead placed Rishi Sunak in the 'number two' position. Sunak, himself a former banker with Goldman Sachs and the son-in-law of India's sixth-richest man, is an odd choice for a Prime Minister positioning himself as a 'man of the people'. But really this move is all about Johnson exerting far more direct control over the treasury’s decisions - part and parcel of him remoulding the Tory party in his own image.

Regardless, the capitalist press have taken to pronouncing this budget as a signal for a new age of 'interventionism', where the Tories will recognise their past mistakes and chart more humane course away from the austerity that characterised the last decade. To this end, Sunak has pledged to halt the 2% corporation tax cut, along with rumours of a potential tax on high-value properties to be announced in the autumn.


Bosses and the budget

The budget is set to reveal a complicated relationship between the ruling class and Johnson's wing of the Tory party. No doubt, the Tories are still the political representatives of the capitalists, doing what is necessary to defend their profits and their system. Nonetheless, the more forward thinking corners of the elite, around the Treasury and mainstream capitalist think tanks have expressed doubt about the prospects for the budget.

Their message to him has been simple: austerity cannot be ended in a situation of capitalist crisis like this. Any Tory chancellor basing their strategy on low taxes for the rich, high spending and strict budgetary targets will set themselves an impossible task on the basis of capitalism. This is what lies behind the delay of the real meat of the budget until the autumn, using the Coronavirus as a convenient cover. As Torsten Bell, chair of the neoliberal think tank the Resolution Foundation pointed out, “The idea that it all gets magically easier by the autumn goes against the laws of history” (Financial Times, 27/2/2020).

In fact, if the current market crash does develop into a full-blown recession as seems likely, the ruling class, including Johnson, will inevitably attempt to foist the cost of it onto working-class people. Not only will that mean no move away from austerity, it is probable that it will mean attempts at a devastating ratcheting up of punishing cutbacks - at the same time as companies threaten closures and layoffs. Any fresh cuts will be made to services already at breaking point, to workers’ pay after a decade of wage restraint, and to welfare claimants who face daily hunger as things stand. Preventing such devastation requires the development of an almighty movement of the working class, for which there is already much potential.

In reality, in times of severe crisis, the wealthy elite under capitalism is regularly divided, torn down the middle on the question of how to defend their system. The divisions that brought the Tory party to the brink of tearing itself apart over Brexit have not gone away. At the time of writing, on 10 March, more than 26 Tory MPs are planning to vote against Johnson’s deal with Huawei for 5G technology - many of them the hard ‘brexiteers’ who previously formed part of his support base. Meanwhile, measures being touted as part of the March budget are controversial among big business and their political representatives. For example, there is significant business opposition to Sunak's pledge to scrap ‘entrepreneurs' tax relief’. Now, any company with gains below £10m would have to pay their full (but still meagre) capital gains tax of 20%. As socialists, we recognise that this policy, even if enacted, would provide no serious challenge to the power of big business. In fact, it could do a favour to the giant monopolies that dominate the economy by reducing competition from smaller firms.

Many employers, particularly around the construction industry have also registered their opposition to Johnson's newly-planned immigration system. As Sarah Wrack points out in this issue of Socialist Alternative (see pages 8-9), Johnson has tried to bolster his rule by pitting workers against one another on a racist basis. But the further toughening immigration controls is opposed by those capitalists who fear it will damage the profitable exploitation of migrant workers. In reality, migrants do not push down workers' wages and conditions; bosses do.

Home Secretary Priti Patel, when she is not (allegedly) driving staff members to attempted suicide due to bullying and discrimination, has responded to ruling-class fears of labour shortages by pointing to the 8.5 million people who are what she terms ‘economically inactive’ in the UK.

Of this figure, just 1.56 million are actually officially unemployed - though it is also true that there is a vast army of ‘underemployed’ workers who are currently unable to get enough hours to pay their bills. But employers would rather not foot the cost of training such workers in areas of skills shortages. Moreover, given the choice, they would rather bring workers from abroad who they believe will face greater precarity and therefore be easier to exploit. If Patel’s supposed ‘reserve army’ of 8.5 million was really to be used it would actually mean forcing a heightened number of retirees and disabled people into low-paid and precarious employment. It would mean an intensification of the benefit-capping regime of the last decade, which has already inflicted misery and thousands of excess deaths in its wake, exposing the cruelty of Tory austerity.


Johnson's gamble

As we pointed out following the last general election (see “Vicious Tories win with lies – but mass struggle looms on the horizon”, Issue 4), the election of Johnson's government does not reflect the British working class as a whole shifting to the right. In reality, a shift to the left has taken place overall since the 2008 economic crash. It was only possible for Johnson to gain this victory on the basis of Brexit and appearing to offer, on the basis of leaving the EU, an end to austerity. Talk of “there is no magic money tree” in the style of May no longer cuts it for working-class people.

Johnson, for all it is worth, has understood this. His entire approach hinges on catering to it. This is a dangerous strategy though. By adopting some nominally anti-austerity language, talking of 'levelling up' and (marginally) increasing taxes to fund public services, he risks increasing the confidence of working people to demand more, to demand a more substantial break from austerity policies. The ruling class is terrified of this scenario, and the Tories would squarely fail to deliver on it.

This all reveals a government desperately trying to hold together an electoral coalition that has, from day one, been weak. Many Northern working-class people who lent their votes to Johnson will be liable to abandon him in the event of him betraying their aspirations for economic improvement. A new crisis means his inability to do so will be all the more stark.

It is clear that Johnson’s ‘honeymoon period’ is already coming to an abrupt end.


Cracks showing

Even before the COVID-19 outbreak, despite Johnson's bravado, his government inherited a weak economic situation. The Bank of England had estimated growth of just 1% over the next few years – far below anything that could be considered 'healthy'. Despite a slight uptick in January, 2019's last quarter saw zero GDP growth! With the world’s economy now spiralling into a possibly very serious recession, these growth forecasts, while themselves gloomy, are actually likely to prove extremely over-optimistic.

Chinese exports, the lifeblood of global capitalism, have decreased by one-fifth since the outbreak, which could be set to increase even more. Chaos has broken out in the financial world, in a way not seen since the collapse of Lehman Brothers 12 years ago.

Through his 80-seat majority, Johnson has projected an image of strength for himself. Behind his faux 'strongman' image, though, the cracks are already beginning to surface. Divisions in the Tory party have been revealed more and more, including on the question of the budget. At the same time, the budget itself is built on sand. A crisis-prone economy, a sceptical ruling class, and continued uncertainty surrounding EU trade talks could spell crisis for Tory rule. It is vital now for working-class people and youth to be organised and prepared to say: we will not be paying for another crisis!

A revitalised workers’ movement, with a fighting leadership will have to be built, ready to take on the bosses' offensive through determined trade union action and mass movements on the streets.

Workers need political representation too. Keir Starmer, who is unfortunately predicted to win in the upcoming Labour leadership election will not answer this need. In fact, his election would mean a slide back towards Blairism, potentially delivering even more votes to the Tories in the process.

Socialist Alternative calls for a critical vote for Rebecca Long-Bailey and Richard Burgon. But electing the most left-wing candidates for the leadership is not enough. For Labour to begin acting as a genuine vehicle for working-class struggle, it would be necessary for these figures to be prepared to lead a battle to totally transform the party. That would mean uniting workers and young people around a programme which includes no retreat Labour’s anti-austerity and pro-public ownership policies from its 2019 manifesto - and which instead goes further. It would also mean backing RLBs call for open selection of MPs. But instead of welcoming back arch-rightwingers who have left the party as RLB has also unfortunately pledged, she should instead lead a campaign to kick out the Blairites - transforming the currently right-wing dominated Parliamentary Labour Party.

And most importantly, what’s needed now is a socialist programme - which can pose an alternative to the chaotic and crisis-ridden capitalism - the continuation of which can only mean untold suffering for working-class people the world over.

What we say

Organise local conferences of resistance, in order to discuss the way forward in planning coordinated action against the Tories.

No to Johnson's racist immigration plans. Defend migrant workers' right to stay. Workers must unite and fight across borders.

We won’t pay for another crisis! Organise to fight all austerity measures and attacks on the working class End capitalist chaos. For democratic public ownership of the banks and major corporations that dominate the economy. For public spending to be controlled by elected committees of workers, young people, retirees and students.