As tens of thousands of workers brought much of London to a standstill on 15 March – alongside hundreds of thousands more, around 600,000 striking in total – chancellor Jeremy Hunt announced his something-of-a-nothing budget. A ‘minimalist masterclass’, Bloomberg reporters called it.
With his head in the sand to the real problems and crises across British society, his budget was mainly an attempt to satisfy the fears and concerns of ‘the markets’ – the spivs and speculators.
It was the third economic ‘plan’ in a year. Anything that didn’t result in the PM or chancellor resigning and Britain paying a new ‘moron premium’ on its gilt/debt repayments (as Kwarteng’s budget did), would have been a success for the crisis-ridden government and Tory Party.
But there is still no gloss that the Tories can put on the cold reality of the situation in Britain, that Hunt’s budget did nothing to address. Despite calls from the likes of the Institute for Fiscal Studies to spend £14 billion on pay rises for public sector workers, or to give the NHS the funding it so desperately needs just to get by, Hunt preferred to scrap plans to make mega-rich sovereign wealth funds pay corporation tax as they do even in the US!
More Tory cuts
Real terms cuts to public services and further attacks on disabled people surprised no one, but increasingly even sections of the capitalist class are becoming alarmed by the deteriorating health of workers in Britain, which is an additional reason for the woeful productivity of British capitalism. Productivity growth is at its slowest since the 1820s, and even the government’s own Office for Budget Responsibility admits British standards of living have seen no improvement in 20 years. Life expectancy is deteriorating in a society getting rapidly sicker.
The Bank of England’s predictions for no real economic growth by the end of 2025 is a brutal reality check to the Tories’ ‘think happy thoughts’ attempts to revive what is, in the eyes of the capitalist class globally, an ailing economy with increasing public and private debt.
But it’s not just Britain. Recent events have seen the first tremors of a new stage of global economic crisis, brought on in the main by the record levels of both sovereign and corporate debt. The consequences of the huge debt levels in the economy are now beginning to be felt as central banks attempt to ‘turn off the taps’, and end ‘cheap money’ via rapid hikes in interest rates.
In the space of just a few days, the second and third largest bank failure in US history took place and the US authorities stepped in to close Signature Bank and Silicon Valley Bank (SVB).
While Signature had placed one too many bets on crypto, SVB was a victim of the impending crisis in the tech bubble. A crisis fuelled by loss-making companies propped up by cash-burning venture capital that used SVB as its bank of choice. SVB itself invested heavily in what is supposed to be the safest and strongest possible asset, long-dated US government bonds.
However, the rapid increases in interest rates in the last year by the US Federal Reserve to counter inflation caused huge drops in the value of the lower-interest bonds. SVB faced a ‘doom loop’. It tried to sell bonds to raise cash quickly enough to meet its depositors’ withdrawal requests, leading to a run on its reserves, before authorities stepped in to close the bank and try to stop further bank runs.
The idea that SVB was unique and an isolated incident was quickly jettisoned as the Fed and US government stepped in with emergency insurance coverage for all depositors. They also established a new liquidity loan facility for banks to borrow from.
The US Fed, alongside other central banks, has introduced a new daily ‘credit line’ to improve dollar access and liquidity for banks across the world.
US banks, in panic, borrowed $164.8 billion from Federal Reserve backstop facilities in a week. A record high, up from $4.58 billion the previous week. The previous all-time high was $111 billion in 2008.
In Europe, Credit Suisse has been the headline victim so far, but won’t be the last. A $54 billion lifeline emergency loan from the Swiss government was still not enough to bolster the bank, which has been in a state of crisis for over a year now.
In a hastily put-together bailout in all but name, it was bought by Swiss arch-rival UBS with backing and insurance again from the Swiss government.
But in the same fashion as the lifelines given to banks failing in the USA, the can has just been kicked down the road. Described by economist Nouriel Roubini as a ‘too big to fail monster that is 220% of Swiss GDP’, Credit Suisse is still riddled with all the problems – debt, bad bets, and assets – that led to its demise.
$17.3 billion of Credit Suisse’s riskiest bonds, meant to give bondholders equity/shares in the event of a default, have been wiped out. This ‘crossing of the debt rubicon’, as a Bloomberg commentator labelled it, and the potential precedent it sets, has sparked outrage from other banks and further contagion fears.
Central banks, governments, and the biggest banks have desperately taken on more debt to hold off this current rupture. Even if they succeed temporarily, the crisis in the financial markets is increasing the already developing trend towards world recession in the ‘real economy’. We are in a new period of increasing geopolitical and economic fragmentation, trade and currency wars, inflation, stagnation, climate crisis, and corporate and sovereign debt crises.
As always, the capitalists will try to make sure it is working people globally who suffer and are made to pay for the effects of the sheer brutality of capitalism.
Further sovereign defaults, like Sri Lanka, will become the new norm. But so will the development of revolutionary opportunities as the working class reacts.
What is clear more than ever is the need to take the huge wealth, resources, assets, and power that rests in the hands of the capitalist class into public ownership through nationalisation.
But not the ’nationalisation lite’, that in 2008 left all the power and control in the hands of the very bankers, spivs and speculators that sparked the crisis, while ordinary people were made to pay.
Socialists fight for the nationalisation of the banks and major companies and industries that dominate our lives. Democratically controlled – with majority trade union representation at all levels, drawn from workers, including from the unions in the industry and the wider working class and labour movement, with the government also represented – the economy, including the banking system, can be run to meet the needs of the majority.
To end ‘business secrets’, which the bosses say should be kept hidden to maintain ‘competition’ and ‘not to frighten the market’, there should be a complete opening of the books to elected committees of workers, trade unionists, and communities. Let’s see where the profits have really gone, what the financial situation really is, and only pay compensation on the basis of proven need, to protect workers’ pension funds, and so on.
Socialist nationalisation should be just a first step towards the unification of all the banks into one democratically controlled system, to provide the vital lever to take on the many problems and crises affecting working-class people in Britain and internationally.
On this basis, working people can begin to reorganise society on socialist lines, to provide what is needed: jobs, services, health, and housing, for all. To be able to live a decent enjoyable life with the freedom to develop, learn and explore the many untapped talents and potential that exist among the working class.