The "green shoots of recovery" that we heard so much about lately, are to the profit system what pink elephants are to LSD: it takes a certain dose to even catch a glimpse of these beasts!
However, looking at the economy with the eyes of the 2,000 Teeside Corus workers, who have just been told that they will no longer have a job by the end of this year - meaning permanent unemployment for most in the foreseeable future - these "green shoots of recovery" are just a cynical lie.
And this is not just the case of workers at Corus. The same is true for the many tens of thousands whose jobs have disappeared into thin air over the past few months, the many more who know for definite that their jobs are facing the axe in the coming weeks or months, and the hundreds of thousands who have to make do with a reduced income, despite having to cope with a bigger workload and even, in some cases, with longer hours!
But then, of course, most of these workers never had a chance, either, to see the benefits of the "boom" that the same politicians and commentators used to hail in the previous years. Because, while speculation had a lot to do with this boom, the flood of money which fed that speculation really came from the extra profits squeezed by the capitalists out of their always increasing exploitation of waged labour - through casualisation, in particular.
Nevertheless, what we are faced with today, is a capitalist crisis which is destroying large chunks of production and services in the economy and, by the same token, the livelihoods of millions. To talk of "recovery" in this context, even in the form of "green shoots", is not only nonsense - it is an insult to those who are at the receiving end of this devastation.
"Green shoots" or "Yellow weeds"
Among the legions of pro-capitalist economists, there is a minority who, at times, do not mince their words regarding the failures of their dysfunctional system, regardless of whether this may displease businessmen, politicians or media barons.
Nouriel Roubini, an established US economist, is part of this minority. Commenting recently on a report saying that 460,000 US jobs had disappeared in June alone, he estimated that, taking into account the jobless who are ignored by official statistics, this figure was probably closer to 600,000 (more on this in this issue's article on the USA). By comparison, taking into account the difference in size between the US and Britain, this is almost 50% more than the last available monthly increase in joblessness here!
But Roubini then added that this "report suggests that the alleged 'green shoots' are mostly yellow weeds that may eventually turn into brown manure.(...) It's clear that even if the recession were to be over anytime soon - and it's not going to be over before the end of the year - job losses are going to continue for at least another year and a half. Historically, during the last two recessions, job losses continued for at least a year and a half after the recession was over. During the 2001 recession, the recession was over in November 2001, and job losses continued through August 2003 for a cumulative loss of jobs of over 5 million; this time we are already seeing more than 6 million job losses and the recession is not over. (RGE Monitor, July 2nd).
In other words, while the alleged "recovery" is not anywhere near, and even if it does come, the job slaughter will go on as if nothing had happened. This is to say that such a "recovery" will, at best, benefit companies and shareholders by boosting profits and dividends, but certainly not the labouring majority of the population.
Another economist, who is well-known for his unconditional advocacy of the "beauty" of the capitalist market, the Financial Timescolumnist Martin Wolf, has also torn to pieces the "green shoots" claim. In an article entitled "The recession tracks the Great Depression, published on 16 June, Wolf quotes several research papers which try to make sense of the present crisis, by comparing it with the Great Depression of the 1930s, on the one hand, and with a number of post-WWII crises, on the other.
The first conclusion drawn by these papers is that, on a worldwide scale, the present crisis is "tracking or doing even worse than the Great Depression in most decisive respects: the decline of industrial output is comparable, both on a world scale and in each individual rich country, and so is the decline of world trade, while "the decline of stock markets is far bigger than during the corresponding period of the Great Depression.
Having said this, Wolf, who is a great admirer of Brown's and Obama's financial bailouts, explains that "what gave the Great Depression its name was a brutal decline over three years (..) This time... the policy response uggests that the disaster will not be repeated". However, Wolf goes on to stress that there is no guarantee whatsoever that the bailouts will be enough to "offset the effect of financial collapse and unprecedented accumulation of private sector debt. What is most likely to happen, adds Wolf, is that "robust private sector demand will return only once the balance sheets of over-indebted households, over-borrowed businesses and undercapitalised financial sectors are repaired or when countries with high savings rates consume or invest more. None of this is likely to be quick. Indeed, it is far more likely to take years, given the extraordinary debt accumulations of the past decade.
Wolf's conclusion is that "those sure we are at the beginning of a robust private sector-led recovery are almost certainly deluded. The race to full recovery is likely to be long, hard and uncertain.
Speculation back on the agenda
Among the evidence produced by the "green shoots" worshippers to give substance to their mirage, there is the so-called "buoyancy" shown by stock markets since March, as share prices appear to have jumped up by 20-30% or so over the past 4 months (20% in the case of London's FTSE100 index). But what sort of evidence is that?
First of all, this does not mean that business is back to normal on the financial markets. Not only is the money market (where loans are traded) still as good as frozen, but the same shares whose prices have been increasing recently would still need a much larger increase (by another 56% for the 100 companies making up the FTSE100 index as a whole and by about 300% in the case of most financial shares!) to return to their mid-2007 level, when the first cracks of the financial crisis appeared in the open.
Besides, as Nouriel Roubini, points out, "the recent rally in global equities, commodities and credit may soon fizzle out as an onslaught of worse-than-expected (..) news take a toll on this rally, which has gotten way ahead of improvement in actual macro data. (RGE Monitor, 2 July) So, to put it in a nutshell, in Roubini's view, there is no rational link between the rise of share prices and the state of the real economy, which remains dire.
There may be no rationality in this stock market madness - which is nothing really new - but there is a logic, which is quite simply the logic of profiteering. The ups and downs of share prices have never been determined by the real state of the economy anyway. They have always been determined by the bets placed by market operators on the expectations that other market operators have of companies' future profits - and neither expectations, nor bets on expectations, can be considered as reliable mirrors of the state of the economy. So, the divorce described above by Roubini, between stock markets and the real world, is not exceptional - it is nothing but the norm for financial markets But, in Roubini's assessment, this divorce is so great that the "worse-than-expected" news that he expects so soon, will more likely than not derail this "rally", with unpredictable consequences, because another brutal fall in share prices could result in all kinds of disruptions in other parts of the economy, far beyond the financial sphere.
In other words, this "rally" on financial markets is purely speculative. The mad machine of capitalist finance is back "at work" regardless of the social and economic catastrophe which is unfolding around it. But by the same token this means that billions of pounds are being gambled on the markets. So, after all, and contrary to the "desperate" pleas of so many bosses - who cry poverty to justify slashing jobs, cutting wages or demanding from workers than they should work for free - the capitalist class still has plenty to play with!
So much so, that what has happened on the stock markets is also happening on commodity markets, at least for some commodities. The fact that oil prices, for instance, have been increasing so rapidly lately, turns out to be not a consequence of increasing demand (or shortages) worldwide, but of increasing flows of speculative funds roaming commodity markets in search of a quick buck. Never mind the fact that this will eventually be paid for by another cut in the already reduced living standard of the majority of the population!
Hot state money
As to where these speculative funds come from, it is not hard to guess. In addition to massive bank bailouts which have allowed the financial system to remain afloat, while helping bankers and the biggest shareholders to cover their losses, the state of every one of the rich countries has been printing huge amounts of new money, one way or another.
In the case of Britain, £125 billion worth of new money was printed by the Bank of England and channelled directly into the coffers of the biggest banks, insurance companies and the financial arms of the industrial mammoths. This was achieved by buying part of their piles of long-term bonds. Unlike the valueless "toxic assets" which have brought so many banks to their knees, these "high-quality" bonds were either government bonds or bonds issued by profitable companies. Only, as the credit market had dried up because of the financial crisis, these bonds could not be sold without making a big loss, nor could they be used by their owners as collateral to borrow fresh money. By buying these bonds, the Bank of England provided their owners with more fresh cash than they could ever have got elsewhere.
The rationale for this huge handout to the big companies, was that this new money would help to "kickstart" the credit system and make it easier for companies and consumers to borrow. As a result, consumption would start to grow again, deficient companies would have enough breathing space to prepare themselves to take advantage of a rising demand for their goods and jobs would be "saved' as a result. Likewise, mortgage lending would resume, house prices would stop falling, households would no longer be pushed into negative equity and would be able to borrow against their houses once more, thereby boosting consumption.
Except that none of this has happened. The Bank of England's billions were duly absorbed by the companies targeted by Darling. But none of that money has materialised where it could have been of some use for consumers. Lending to companies has decreased in every single month since the beginning of this year. House mortgage lending remains at just about one-third of the pre-crisis level. Not only are mortgage and credit card lenders increasing their rates, none of the promised help has been available for the 1.1 million households who are officially in negative equity, nor for those threatened with repossession.
Instead, the beneficiaries of Darling's "quantitative easing", are having a field day, investing their fresh cash in speculation of all kinds. The case of the stock market and oil market are not isolated. There is also a wave of acquisitions taking place quietly behind the scenes. It may be true that such acquisitions, whereby the bigger sharks swallow their smaller rivals, are part of the standard features of all capitalist crises and there is no reason why the present one should be an exception in this respect. But the fact that this is happening with the help of state money - and results in more job cuts in the name of "efficiencies" - exposes the hypocrisy of the government's policy.
Another example of the lending made by a finance system, which is largely drip-fed by public funds, was provided recently, when a corner of the heavy veil of secrecy which covers the dealings of the banking system was lifted by the papers in mid-June. In this case, this was about the Cayman Islands - a British overseas territory and world-famous tax haven - and it revealed the extent of the wealth which is available, but remains hoarded by the capitalist class and, therefore, diverted from where it could be used for the benefit of the economy.
Because, despite Brown's triumphant speech, at the end of this year's G20 "April fool" summit, which was supposed to herald the final demise of the world's "tax havens", the Cayman Islands (52,000 inhabitants) remain the headquarters of choice of nearly 10,000 speculative funds! What the papers revealed was that these speculative funds had no less than £180 billion in outstanding loans with British banks. Yet, despite this, the same speculative funds had been allowed to withdraw more than £100 billion out of their deposits in British banks over the previous 12 months (almost half of the total). The question one might ask is: how much of this colossal withdrawal was funded by the government's "quantitative easing" and how much of the loans made to these funds has been funded by the various other banking bailouts?
Brown's manure
Not only are the alleged "green shoots of recovery" a cynical fairy tale, but the so-called "evidence" showing that profits are on the rise in areas like oil speculation, the stock market, etc.., are as many warning signals that, as Nouriel Roubini puts it in the text quoted earlier, these "green shoots" may well turn into "brown manure", by creating a self-feeding mechanism in the present crisis, which could make it even worse. And the most obscene aspect in all of this is that this threat of aggravation in the crisis is actually created, in part at least, by the very same injection of funds by the state which is supposed to "save" the economy from its bankruptcy!
Yet, while they are handing out billions to the finance sharks for their speculative games, Brown's ministers tell us that the state has no money for anything as far as the basic necessities of the majority of the population are concerned - whether it be to keep workers in employment by creating jobs which would be socially useful, or at the very least to provide the jobless and pensioners with a living income, or to stop the banking predators from depriving troubled households of their homes.
On 21 May, Britain's "credit rating" was put on the "watch list" of international credit agencies, on the grounds that the government was spending too much compared to its expected income. Obviously, if Brown was spending more than the government could afford, it was only for the capitalists' benefit, but certainly not on social budgets. Nevertheless, politicians and "experts" proceeded to take turns to explain that sacrifices would have to be made and that everyone would have to share the burden in the name of national solidarity. As if the working class had not already taken far more than its share of the burden, through job and wage cuts, while the wealthy were being lavished by the state out of public funds!
More or less at the same time, a media campaign began to raise once again the worn-out scarecrow of public sector pensions, which according to this campaign - but this is also an old CBI tune - were threatening the state with bankruptcy. Colossal figures were mentioned to back up this ridiculous claim. But nowhere was it said that since public sector pensions are unfunded, they rely entirely on active scheme members' wages and cannot, therefore, ever be in deficit - unlike the funded schemes which depend on the ups and downs of financial markets.
Unless, of course, public sector jobs are cut so drastically that the number of active members will no longer be enough to fund payments to pensioners - in which case, the state would indeed have to fund the difference, by increasing its contribution per active member. And this may well be what is really behind this campaign, judging from a June publication by the Chartered Institute of Personnel and Development (the organisation of personnel managers) which estimated that "the fiscal squeeze implied by government plans will result in a total of 350,000 job cuts in the public sector overall between 2010/11 and 2014/15. This will be preceded by around 30,000 job cuts in local authorities in the next year. But, in that case, the real problem to raise should not be the additional cost to the state of public sector pensions, but the intolerable treatment of 350,000 public sector workers thrown onto the junk pile in order to maintain the profits of the capitalist class!
Even more intolerable - and cynical - were the findings of a parliamentary report supposedly on pension poverty. It did not conclude the obvious - that Britain's state pension, the lowest in the OECD club of rich countries, should immediately be increased. Instead, it chose the cheapest way for the state, by recommending that the present compulsory retirement age of 65 should be scrapped altogether - no doubt, to ensure that workers die on the job, thereby saving both the state and pension funds, the need to pay them any pension!
So far, the government has been very discreet about the real nature of the austerity measures it is preparing to foot the bill of its largesse to the capitalist class. But what has filtered through so far is unmistakable.
When Darling's came back to his ministry, after the government reshuffle in the first week of June, he declared his priorities as follows: "Unemployment will carry on rising this year and next, and we must step up our efforts to get people back into work, by which he meant that the system of coercion known as "Job Centre Plus" would increase its pressure on the unemployed. Except that since there aren't any jobs, not even the old casual non-jobs into which this system used to coerce the jobless, its objective will not be really to "get people back into work but to force them off the register! Besides, Darling's other priority being to make government's money "work harder, he intends to step up "public sector reform" - which, leaving out the jargon, means adding to the jobless count with another round of massive job cuts in the public sector, and therefore getting people "out of work" rather than "back into work!
Most telling of all, was the announcement of a document described as Brown's "pre-election manifesto", at the end of June. This was preceded by Mandelson's admission that the Treasury intended to skip its usual "spending review" for next year - meaning that the last thing the government wants to do, in the run-up to next year's general election, is to expose to voters the full extent of its austerity plans - which probably says it all, about the attacks against working people it includes.
Nevertheless, the small print in the "positive" image that Brown strove to project in his pre-election manifesto, speaks for itself. For instance, what appears to be his flagship measure is an extension to the housing programme which will include 20,000 so-called "affordable" homes (that is "affordable" for those with a regular job and a good salary) and 3,000 council homes, for a total budget of £1.5bn. But its very modest cost will not even be funded out of new government money: it will have to come at the expense of existing programmes, such as a social housing refurbishment programme, and at the expense of the transport and health budgets! The cynical irony in this "commitment", of course, lies in the derisory number of homes involved compared to the 4 millionpeople on councils' waiting lists, and the tiny additional budget allocated to these 4 million, which is less than 10% of the money spent by Darling on the smallest government-controlled bank! But what this glossy manifesto does not say, is that its "new increased" house-building target (around 55,000 homes per year), which is portrayed as an improvement, is actually 20% lower than its previous building target (70,000 a year). Moreover, the proportion of council homes which was meant to be 2/3 previously, has suddenly fallen to below 25% - when it is precisely affordable rented council homes which are most urgently needed!
Brown cannot even manage to produce an electoral promise which does not turn out to be a disguised cut, so is not hard to imagine what his avowed cuts will mean.
If the working class does not want to foot the bill for the "green shoots" of profiteering, it will have to produce the "red shoots" of the class struggle.