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?