The next economic crisis … are we ready?

Tricky questions for activists and their leaders

Mid September is the tenth anniversary of the collapse of Lehman Brothers, the American transnational “investment” bank. Some say the collapse was the real signal for the 2007-9 financial and economic crisis that spread quickly and globally and, ruined the lives of millions of workers around the world.

What appeared to be the cause was the USA’s sub-prime housing loan default contagion. But that left begging a simple question: what was happening to the real incomes of so many workers that there was no choice but a sub-prime loan for a house to live in?

In Australia, the new Rudd Labor government, elected in 2007 off the back of 2 big campaigns, the Your Rights at Work Campaign, and the campaign for government action on climate change, inherited the management of the crisis, as its contagion spread through 2008-9.

Since then, in the period of “recovery”, rising inequality, driven by legalized wages repression, and dramatically deteriorating living and working conditions arising from climate change have occurred. For the majority everywhere it is as if there has been no recovery.

What does it mean that 21st century capitalism cannot deliver equality and environmental renewal even when it is “recovering”, or “not in crisis”? Is there any evidence that there is a capitalism that can exist without crisis?

Its possible, probably likely, that the next economic crisis is not far away. Especially in the light of Trump’s trade wars and his destruction of debt free spending power in the USA. And there are the dramatically worsening effects of the climate change crisis that interacts with that.

In Australia, the next global economic crisis may coincide with a new government that says it will break from the “trickle down economics” that is helping to bring it on.

What will the next crisis do to inequality and environmental degradation? What will the twin crises do to the lives of tens of thousands whose circumstances have been worsening while the extreme rich get richer?

Other questions flow. Should we pretend that its not going to happen? Can the crisis be averted? And, what will it do to the growing Change the Rules Campaign especially its key demands for new and “fairer” rules that enable workers and unions to reverse inequality? Can campaigning organizations prepare for such events so that the momentum they have been building is not lost? Can crisis be used to increase momentum for deeper and more meaningful change?

Such questions are relevant for all organizations and movements of the people against the “powers that be” and their government. Unless the preference is to pretend or hope that it won’t happen.

How do we know there will be another economic crisis soon?

The key word is “another”. Big economic crises are intrinsic to the way in which capitalism works, including contemporary global capitalism. They come along every 7 to 12 years and then leave in their wake millions of people whose lives are more or less impoverished by them. Experience, not just statistics but those also, tells us that recovery is for the few. Increased impoverishment contributes to the next crisis.

What was done in 2007-9?

Governments “dealt with” the crisis in various ways. Transnational corporations and global banks worked closely with governments to get a “make the public pay” policy working.

In response, Obama, governing “the home” of the crisis, dirtied his nappies by rescuing the big end of town.

In Australia, Labor’s Rudd-Swan-Gillard team applied a minimal Keynesian style solution that softened for many in the Australian 90% the worst effects of the crisis: immediate government spending and a bank guarantee. Their approach inflicted little, if any, pain on those in the 1-10% who were the protagonists in the processes that gave it birth.

Just a few years later Abbott and Hockey created their ongoing solution: harsh austerity. They were rejected for that but, under Turnbull and Cormann, this approach is not yet defeated.

And the next time around?

The next crisis will not be good for the vast majority of Australians. Some will cop it worse than others and, worsening climate change will add to an even more desperate plight for the 90%, far more than the 10%.

More specifically: what will happen to wages and inequality? To job security? To Newstart and other social security payments? Will there be new cuts to public education, public transport and public health care? Will there be development funding controlled by First Nations communities to replace the racist, bureaucratic controlled CDP? And the nation building character of the Uluru Statement? And what about the serious problems we all see in parliamentary democracy?

We know the current government, because it has the form and the genetic make-up, will insist on more austerity to far more than those suffering from it since 2008-9. Actually, there is no sign the Turnbull government is making specific preparations to prepare for the next recession. Admitting that a crisis is building would acknowledge that they have not been managing the economy very well. Their mantra that they, as an LNP government, are more competent to handle the economy better than an ALP (plus Greens?) “alternative”, was not true of the last crisis.

Labor as an alternative government?

If there is a change of government, the ALP and its co-governors (cross-benchers) will inherit (again) an economy in or about to enter crisis, through no direct fault of their own, and the massive task of climate change reversal.

As the alternative government, the ALP would prefer that the crisis hits before they win government. Then they can blame the LNP for it.

What will and should they do? Should they repeat the 2008-9 formula but with improvement (remember “pink batts”)? In whose interest should they govern? What will the powers that be in the Business Council and other employer organizations expect of them?

What about unions and “Change the Rules”?

What should our union movement prepare for and demand? Is the prospect of crisis union business? Is this the business of union members? Are our union leaders actually on to the problem?

Right now our union movement is investing primarily in a massive effort to bring down the Turnbull government, especially through the “on the ground” field campaign in marginal electorates through the Change the Rules Campaign. The ACTU trialled the campaign in the recent by-elections in the seats of Longman and Braddon. Without these union driven Change the Rules Campaigns it is arguable that Labor would not have held these seats.

The spread of these campaigns to other electorates is strengthening.

It is likely that a Labor government would push extra reasons for minimal changes only to the broken rules of the Fair Work Act 2009?

How much should our movement accommodate this, if at all? Is this just a decision for key union negotiators, as in 2007-9? The employers will expect moderation. And the “lefty” Deputy Leader of the ALP, Anthony Albanese, says Labor must work better with business. In 2007-9, as Workplace Relations Minister, Julia Gillard brought the employers into the consultation process on an equal footing. Together the spirit of consultation produced the “broken rules” that have hamstrung the workers through the years of “recovery” since. Through Albanese, is the ALP in 2018 setting itself up to repeat the dose?

Some final points: sleep walking or pro-active toughening?

Australia is a middle sized capitalist economic power. Anyone who believes that we don’t have much to worry about because of strong “growth” in the USA, continuing strong demand from China and new market possibilities in India is deluding themselves.

The character of the next crisis will be shaped by three forces, the first of which will shape the other 2.

First, from within the intrinsic global instability of the system, the contagion might start from within the financial sector again. Or, maybe from even deeper economic processes that are dependent on human labour power. The USA, again, might be the source, or somewhere else. Trump’s deliberate trade conflicts might add specific characteristics that were not so relevant 10 years ago.

The government of the USA and its interactions with “Wall Street” and other transnational corporations will be significant. What will the most powerful transnational corporations demand? Will they intervene modestly, deliberately allowing “the market” to clear out its blockages? Or, will they approve a mild Keynesian type stimulus, based on increased government social spending and money supply, especially in a form that protects their wealth and control.

Third, there will be the response of the organizations of the 90%, the working class – unions, leftist political parties, environmental, women’s and anti racist movements, and their various organizations.

Will these they allow the crisis to run its course, complain loudly, and “trust” in government to manage the process? They might advocate modest intervention in which tripartite processes of working together see it through?

Or will they intervene – put the people’s pressure on – to oppose the core dynamic of the crisis, and any tendency to resolve it by making the 90% suffer for it? What will be the demands that would make a people’s programme that protects the people”? How might such an alternative programme and effective strategy the developed?

This can only start by acknowledging how real the threat of crisis is in the first place. And behind the economic crisis there is a class based political power? Would a crisis pregnant with the possibility of new people’s power in government be encouraged? Or dampened?

Author: Don Sutherland

I am a retired left wing and labour movement activist. Before that I worked for a long time in the Australian union movement in union education, Australian and international solidarity and organising. I am also active in Cuban solidarity, the SEARCH FOUNDATION, and promoting discussion, debate and action about green socialism based on workers control and social ownership.

One thought on “The next economic crisis … are we ready?”

  1. We face the same old objective problem we faced before 2007, the 90% lack a class conscious grasp of the wage system, to wit:

    Capital is what we call wealth. Wealth has two sources: labour and nature. A capitalist is a person who owns the collective product of his or her employees and/or natural resources. Private ownership of this wealth separates the collective product of labour from its producers and alienates nature from humanity through its privatisation. The producers of wealth maintain their lives through selling their skills to capitalists. The price of a commodified skill is called a “wage”.

    Money is just the commodity used to trade commodified wealth. Capital is the social product of wage labour. Alienation begins with the separation of the product from the producers and the commodification of nature–psychological consequences flow from this separation.

    The psychological consequences, embedded in the social relation of power Marx called Capital, provide the ruling class with an enormous brake on progress toward our collective emancipation from the bondage inherent in the wage system. The fact that “a fair day’s wage for a fair day’s work” remains the principle mainspring which makes the union movement tick is evidence of social psychological conservatism which weighs like a nightmare on the minds of the 90%, making them sitting ducks for the next political manipulator looking for career opportunities in the political and/or industrial hierarchies of class rule.

    We can attempt to change all that through our daily encounters with our fellow workers, including through the #ChangeTheRules campaign. In my opinion, all else is useless wheel spinning.

    Assuming we can actually make a significant dent in the aforementioned conservative consensus which promotes acquiescence to the rule of Capital through a fair system of exploitation i.e. wage labour, the next question will be, “What should we replace that mode of producing and distributing the wealth of nations with?”

    How would a socialist mode of production and exchange differ from today’s wage system?

    In a classless society where the collective product of labour is owned in common and managed democratically from the grassroots, you just need to decide how best to distribute the wealth you produce. I’m ok with distributing it on the basis of need. However, I can also go along with distributing it on the basis of socially necessary labour time put into creating the social store of goods and services. For instance, a producer puts three hours into the social store and can withdraw two hours from it, the other hour being devoted to supplying the needs of those who cannot participate in wealth creation e.g. the sick, the very young or very old.

    How do we know how much to produce and what to produce?

    We start from where we are at the time common ownership is established. We see what we need from what is being used from the social store. If something isn’t needed, it is no longer produced.

    Marx had a different aim in the proposals he made for labour time vouchers in his Critique of the Gotha Programme than the suggestions he made for the French Workers Party in their 1870s election campaign. In the Critique.. the idea was to imagine how a classless socialist society of common ownership of the collective product of labour would function as it first emerges from the wages system. Unlike a wage system (where, as we learn in ‘Value, Price and Profit’, the worker is employed for the price of his or her labour power in the marketplace for commodities), the whole social product of labour belongs to its producers. The price of labour power, its commodification, is done away with under socialism and with it, the alienation of the product from the producer.

    Part of Marx’s critique of generalised wage labour has to do with the way wages appear to the producer. You can see this critique in VPP and in the oft quoted section of CAPITAL vol I on fetishism of commodities. This observation is also elsewhere in Marx’s works. The wage system produces the illusion in the worker’s mind that s/he is paid for what s/he produces The reality is that s/he is paid the price her skills will fetch in the marketplace. Wages have nothing to do with what is produced by the worker, they are merely the price of his labour power.

    There are no taxes, as such, in a classless society as the governing structure is no longer class divided i.e. a political State. What the producer puts into the social store of goods and services is his or her socially necessary labour time and what s/he takes out of the store is an equivalent amount goods and services, all based on the notion that one producer’s time is as precious and necessary as another’s. This dynamic makes production and consumption transparent, quite different from the old wage system with all of its commodified mystifications, including the money commodity. How much labour time is in a buck or a pound or a can of ale? As Marx suggests, an hour deduction or two would have to be made from this demystified in/out dynamic to provide for replacement of the means of production, care for the sick and other communal needs. Later down the track, once the communist mode of production is well rooted, the society would probably decide to shitcan the voucher system and move on to system based on: from each according to his ability, to each according to her need.

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    Dialogue of the evening:

    Terri Lee: Should the wage system be eliminated how would the exchange for goods and services take place? And what about more complex, “high-priced” transactions? In my profession, for example, “bartering” (exchanging services for anything else) is considered unethical — and I think that view is correct.
    11 hrs · Like

    Mike Ballard: My proposal is to use time as a measure. We put time into doing jobs which are considered to be socially necessary and withdraw a near equal amount of time from the social store of goods and services. Let’s say we decide that building homes are necessary. So, some of us put our skills over say four hours a day four days a week into producing homes. With those four hours we provide say one hour to provide goods and services for those who aren’t able to participate in producing what is considered socially necessary. The other three hours are ours to use to get goods and services from the social store.

    That’s the general outline. Specifics would have to be worked out amongst the political equals within the society i.e. all adults, Terri Lee. I’ve written more about my views on my blog.
    11 hrs · Like · 1

    Terri Lee: Thanks for the reply Mike. But tell me, if you would, how you would account for the differences in training and skill required to do different jobs — or perform different tasks? Some tasks require little or no formal training while others take years to master.
    11 hrs · Like

    Mike Ballard: Thanks for asking, Terri Lee. Time in training should be either supported out of that extra hour of a producer’s time or seen to be necessary labour time in and of itself. The reality is that in an advanced, industrialised society we are linked in such a way that if one industry isn’t operating, it affects the whole wealth producing division of labour. If the garbage isn’t being picked up the neuro surgeon will not be able to perform that essential operation, indeed as the garbage piles up, the society as a whole will become ill and if the neuro surgeon is there to perform that operation the producer who is on the operating table (possibly a person skilled in garbage collection) will suffer health consequences.

    Recognition of the realities of social labour and the division of labour which is necessary for the society to function makes the case for the labour time of one to be considered of equal value to the labour time of another.

    Of course, this is not a popular notion amongst those who would wish to live within top down hierarchies of political power. For them, capitalism or feudalism better fits in with their desires. I would say though that these desires are most likely embedded in their own socialisation and maturation within the societies they have matured within.

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