What is Happening?

- The World Economic Crisis and Consequences

(By Ian Griffiths, October/November 2008)

Preface

"Did you ever think that making a speech on economics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else."

Lyndon B. Johnson to J. K. Galbraith - reported by Galbraith in 'A Life in Our Times', 1981.

Economics is often referred to as the 'dull science', perhaps deliberately so in order to deter the mass of people from developing an interest in the system, which allows those who rule the right to increase their wealth at the expense of the poor.

In this account I will attempt to describe the economic events which have overwhelmed the lives and futures of ordinary people as well as the prospects for our young men and women and our children for many years to come.

Those that rule us have designed a system of intrigue to deny us access to an understanding of the economics of capitalism. To couch relatively simple methods of profit accumulation in language and explanations, which, quite frankly, would bore the pants off any reasonably minded person, is quite deliberate.

They often use an alien language and incomprehensible words that have the desired effect of frightening people away from the financial pages and indices buried in our newspapers. That is until the inevitable crisis arrives when such words as 'collapse', 'recession', 'slump' or 'depression' suddenly become the newspapers' 'horror' headlines and the first subject of radio and television news bulletins.

Even then, the mention of these catastrophes has little effect on most people. The last recession of 1990-1992 occurred over sixteen years ago and many people under the age of forty will have either at best a very hazy or no recollection of its impact on their lives. Furthermore, not everybody initially grasps the consequences and seriousness of economic failure for individuals or society as a whole - that is until they lose their job, or are made homeless or their income and ability to purchase 'things' diminishes. These things tend to occur some weeks and months after the initial 'headlines'.

In preparing this account I have examined the basis of the imminent personal crisis that many people will suffer. It is not a bolt out of the blue but rather a continuation of a chronic flaw in the system we know as capitalism and for which there is no capitalist solution. That is to say our rulers, politicians, economic experts, bosses, Uncle Tom Cobley and all cannot repair the economic breakdown. At times they have been able to employ 'cowboy mechanics' to patch it up, then we drive a few more miles down the road but, inevitably, the engine of capitalism has stalled once more. These quick fixes will continue with ever

By attempting to describe this crisis I have had to use the language and terms of capitalist reporting that are often used to bamboozle us. Where and when possible I have tried to explain these terms but, given the full extent of events and the full translation of the jargonised language it is not possible in this short account to go further and I apologise for this enforced inadequacy. However, I hope that what is reported and explained, will stimulate thought and questions from which a lengthier discussion and understanding can develop.

Initially Printed and Published by Red Writings/ Ysgrifenau Coch, Sir Gaerfyrddin © 2008

1. Apocalypse Now?

Across the globe there is dismay and confusion as the 'what was taken for granted' of yesterday becomes the 'what we no longer have' of today.

In the advanced capitalist countries and the so-called 'emerging' economies there are people losing their jobs and, the more unfortunate ones, their homes in what will become a deluge of despair over the coming months and years.

Furthermore, it seems clear that the developing crisis is set to define the twenty first century with economic and political repercussions as cataclysmic as the landmark Great Depression which, at that time, determined the economic outlook and events of the post 1930 world.

For well over a decade we have been seduced into being the willing yet unwitting pawns in a great global game of fantasy economics. The illusion of a potential of wealth for the many has driven the creation of real and massive gains for the few.

In Britain and America, more than anywhere else, it created a 'must have, will have' society at the cost of cohesion, partnership and cooperation.

In reality, the illusion of widespread wealth came to an end in the summer of 2007 when 'repo' men started hitting the streets of America's mid west, and the 'rust belt' in particular, taking back from the impoverished all the dreams they had been so wantonly promised. Months after thousands of these poor families had been consigned to a life in trailer parks, encampments and car lots on the outskirts of major American cities the news started to seep into the British media that something was not quite right in the Panglossian “…best of all worlds”.

Whilst the collapse of so-called 'sub-prime' mortgages in the US was the trigger of a global economic collapse it is disingenuous of people - particularly Gordon Brown and his cabinet acolytes - who, when called to account, point the finger at Uncle Sam and loudly declare, “It was 'im guv!”

Gordon Brown, along with as every prime minister and chancellor since 1979, is as culpable as any current individual in America for this unfolding catastrophe. Indeed, as the economic architect of New Labour, student of Alan Greenspan and Atlanticist par excellence he is a more culpable man than some of his predecessors particularly as Britain's own sub-prime time bomb was primed and ready to explode.

It is no blind consequence that the features of the current crisis, expressed as banking failures, housing bubbles, enormous levels of consumer debt and poor savings, are significant to both the US and UK economies which are more in tune than any of the other G8 members. The British and US governments and their financial institutions have been following similar, almost coordinated, economic aims and policies for well over ten years.

However, that said, the unfolding events that we are witnessing following the 'sub-prime' collapse are no more than the 'natural' consequences of the economic system of capitalism. The system is in a permanent crisis which flows in a continuous line from the 'stagflation' of the 1970s and the collapse of the so-called 'post war boom' - the period from 1950 to 1972 when productive forces across the so-called developed world expanded rapidly. This took place particularly under the influence of emergence of new technology and production methods as well as the competitive race engendered by the 'Cold War'.

The decade of the 1970s also witnessed political and social upheaval which in turn triggered successive, yet ultimately unsuccessful, policy shifts by all subsequent administrations whether Conservative or Labour.

Throughout this account we will refer to different classes and to bitter clashes between workers and bosses, people and politicians. Readers of this document will come from different political positions and persuasions, bringing with them their own opinions and experiences. However, we must all stand back and understand the immovable reality that the opinions and the battles that rage in society are nothing more than expressions of the system itself and can be reduced to two opposing economic interests.

On the one hand sit a minority, the owners of the means of production, finance and services, big and small, whose sole interest it is to make profit. On the other sit the majority, all people who receive and are dependent upon a wage or salary and who require sufficient income to purchase not only their daily 'needs' but also the extra goods we are all persuaded to 'want'. All political, social and industrial conflict and differences represent these two human interests. In the parliaments, assemblies and legislatures of the democratic countries sit politicians who are nothing more than the elected representatives of interests.

Whether we like it or not, we all belong to one or other of these interests, dependent upon either how our income is derived or a desire to worship mammon.

2. That was That and That was Then

The whole economic history of capitalism from the post 1930s depression and Second World War world, despite Gordon Brown's assurances to the contrary of late, is one of economic 'boom and bust'.

This economic cycle represents the organic crisis of late capitalism in that no matter how much generated profit is re-invested in new productive capacity - in an attempt to create new profit or profitability - there are finite limits to market capacity.

Furthermore, it is fundamental to an understanding of the system to grasp one iron reality - capitalists only invest in enterprise in order to, directly or indirectly, generate profit, i.e. to increase their personal and corporate wealth. Any viewer of the BBC television programme 'Dragon's Den' can confirm this investment motivation. The renowned industrialist Henry Ford once declared that he was not in the business of making cars but making money.

When profit declines the capitalists cut and run and close down productive capacity. They move on to invest their capital in other profitable ventures.

Thus, we constantly see an over-accumulation of products (goods for sale) as a consequence of the over-capacity of the productive forces (too many factories), which is then followed by recession (the closing down of workplaces with workers becoming unemployed).

Put simply, when 'things' cannot be sold the capitalists pull the plug and production has to stop, and when this occurs across an economy we suffer a 'bust' or recession. Then, as a result of wholesale closure of productive capacity and a period of 'adjustment' i.e. unemployment and impoverishment for a section of society, the lower volume of capacity once more matches the demand of the market place and capitalists restart production to enjoy a new, generally, short lived 'boom.'

The First Post-War Crisis

The deep recession of 1973- 1975 and resulting stagflation (a period of hardly any economic growth combined with persistent inflation) provided a red warning light for British capitalism and its organisers. There was nowhere else other than Britain where this crisis was more paramount.

Prior to 1939, the UK was still clinging to its supremacy as the world's leading economic power based upon its tradition of being the cradle of industrialisation and manufacturing innovation combined with its huge imperial resources. By the end of the war in1945, the UK had been overtaken by and was indebted to the USA. At the same time the British Empire, for so long the super-exploited source of industrial raw materials, was in revolt whilst the domestic manufacturing capability had become hopelessly outdated and unproductive.

Also, the 1970s witnessed accelerated British decline not only due to continued American competition but also to a rejuvenated Europe. Further, there was now a new 'kid on the block', Japan with its manufacturing and export development. The process of decline was further assisted by the failure of Britain's Keynesian 'mixed economy'. In turn, this failure created a polarised society - on the one hand a powerfully organised working class, on the other a conservative ruling class, with an attitude of superiority rooted in their imperial past.

Thus British industrialists had failed, for the most part, to re-invest in new manufacturing technologies and, at a time of intensifying overseas' competition, workplaces had become outmoded, under-resourced and overmanned.

Faced with these demanding challenges, two options were undertaken in an attempt by British capitalism to remain competitive. One was to gain entry to the European 'Common Market', the EEC which was the forerunner of the EU, albeit on unfavourable terms thus aggravating future class relations. The other was an attempt to cut the costs of production by an outright attack on the conditions, wages and living standards of those in work.

The short history of the struggle that ensued throughout that decade was racked with contradictions as well as upheaval in the labour movement, i.e. both in the Labour Party and the Trade Unions.

There were trade union leaders of both left and, predominantly, right wing variants but it was the working class as a whole who became radicalised through struggle. They pushed their union leaders, those of all persuasions, much further along the road of conflict with both employers and government than most were willing to travel.

This radicalisation was also expressed within the Labour Party with the emergence of an effective left reformist current coalescing around the figurehead of, amongst others, Tony Benn, the so-called 'Bennite Left'.

By the end of the decade, what had started as industrial battles developed, on the back of the hyperinflation, into a revolt of the underpaid, public sector workers known as 'The Winter of Discontent'. In 1979, Britain had managed to achieve the largest organised working class in its history with a record of nearly thirteen million trade union memberships affiliated to the Trades Union Congress (TUC).

The impasse that emerged without a clear victory for either side, neither trade unionists nor government, saw the struggle shift from the economic front to the political arena of a General Election.

The right wing leadership of the Labour Party, having sided with the employers by attempting to shackle workers with the notorious 'In Place of Strife', their prices and incomes policy, had become totally discredited in the minds of the very people it had been elected to represent. Its defeat in the 1979 General Election fitted this betrayal yet ceded the reins of political power to the Tories. What followed was the introduction of Thatcherism in turn leading to the emasculation of the Labour movement over the following two decades.

There is, admittedly, much contention and points to debate over this briefly portrayed sequence but in simple terms it is a synthesis of the 1970s sufficient to understand the logic of what was to follow.

The Thatcher Legacy

With the election of Margaret Thatcher and her government, the ruling class had assembled a 'war cabinet' with the intention of waging an outright onslaught on the vanguard of the British working class, the industrial proletariat.

This declaration was a desperate admittance of the terror which the organised working class posed to the rule of capital in a period of crisis. It recognised, the deep economic malaise and the fact that the organisation of large scale manufacturing industry in Britain was fatally flawed. Without drastic political surgery the economy could no longer withstand impending challenges to its performance.

From a capitalist viewpoint, the recipe for disaster was the continuation of uncompetitive industrial production that had become a brake on economic growth whilst an emboldened working class was adopting a more left-wing position.

This 'class' challenge was much akin to the fear of revolution that haunted the French rulers at the start of the last century and who, as a result, held back the development of the productive forces. The fear was that if they encouraged an industrial manufacturing base they would inadvertently amass an organised, urban working class in a country with a celebrated revolutionary history and that this would ultimately challenge their authority to rule. Thus for much of the twentieth century France maintained a massive, rural, agricultural population which ultimately expressed its demands in the EEC's 'Common Agricultural Policy' (CAP) to the chagrin of other member states.

(Perhaps the events of 1968 were a confirmation of the recognition of not only the revolutionary potential and but also the nature of the terror that struck at the heart of the French bourgeoisie.)

Instead, France developed and nurtured what is termed as a 'rentier' economy during the early twentieth century, an economy based on financial services and overseas' activity, possessions and investments.

In the early 1980s, this was the economic organisation that the British ruling class determined as the road of survival for British capitalism, thereby to maintain a prominence in world economic affairs.

To achieve this end it required the demolition of much of the traditional manufacturing and extractive foundations of the British economy and, in order to achieve this goal, a bitter war with the workforce. At the same time it was necessary for the stabilisation of economic affairs, particularly hyperinflation, and the diminishing of the burgeoning trade and budget deficits. This had then to be combined with the introduction of the financial infrastructure upon which the new economy would be established.

In part, the initial raising of interest rates in the early part of Thatcher's first government as well as the tightening of monetary supply and fiscal policy to choke inflation led directly to the next deep recession of 1982 but this collapse also assisted in Thatcher's aims of destroying a section of the industrial sector.

In the US, the administration of Ronald Reagan had been elected in 1981. He was not faced with labour problems similar to those threatening the British state. American manufacturing at this stage was far more robust. He tried a different economic approach to Thatcher using 'supply side' methodology from the outset to pull the economy from the recession. This was the absurd monetarist 'trickle down' theory of tax cuts to the rich that, through their increased spending, would benefit the poor. This was combined with a huge public spending plan, albeit on weapons manufacture.

The industrial battles that resulted in Britain are legendary, non more so than the Miners' Strike 1984-1985, but it was the treachery and shame of the TUC leadership and Labour leaders, particularly Neil (now Lord) Kinnock and his shadow cabinet, that secured the victory for the Tory administration. It is they who should be held accountable for the way in which individual sections of the workforce and their communities were allowed to struggle and perish alone. (For his part, Kinnock later demanded reward from his paymasters and was appointed as a European commissioner by Tory prime minister John Major.)

In both countries, however, it was the subsequent extension of consumer credit, despite relatively high interest rates and the creation of a housing bubble, which eventually dragged the economies out of this slump and permitted economic growth to revive albeit on a reduced industrial base.

In Britain the growth in credit, and particularly the growth of mortgage credit, was assisted by the infrastructural deregulation of the banking system in 1986, known as the 'Big Bang'.

Thatcher's privatisation of the lucrative utility service industries - gas, electricity, water and telecoms - and the selling of the social council housing stock (what a former Tory Prime Minister Harold Macmillan later referred to as 'the selling of the family silver,') were also crucial in fuelling the shallow revival.

Given the parlous state of British manufacturing the Tories bluffed that industry had no significant importance and Thatcher was able to proclaim the comparative strengths of a service-based economy.

Thus, by the time the economy emerged from the new recession of the early 1990s, we had witnessed the decimation of UK steel production, the scuttling of much of the shipbuilding sector, the effective closure of a profitable coal mining industry, the dilution of heavy engineering and the enfeeblement of car and vehicle manufacture. As part of the manufacturing sector of the economy these industries directly or indirectly produced goods that added real value and wealth. The subsequent loss of employment was eventually replaced by thousands of service sector jobs created out of apparent thin air but in reality on the back of fictitious capital, i.e. credit growth.

(So much so that, by the mid 1990s, there were more people employed solely in the Asian restaurant sector in Britain than the combined total of workers active in the shipbuilding, steel and coal industries)

So, throughout the 1980s and on both sides of the Atlantic alliance, an explosion of low paid service sector employment and a continued expansion of financial services matched industrial decline.

In Britain this was translated as the expansion of retailing, entertainment, tourism, telecoms, attendant call centres and support services, even the return of domestic service, etc., that has persisted to the present.

Increased employment in the construction sector also developed as both commercial and housing starts mushroomed on the outskirts of towns and cities. The media assisted promotion of the virtue of entrepreneurship, the 'yuppie' culture, also gave rise to a disproportionate self-employed sector, encouraged by government start up grants combined with copious amounts of personal investment debt. Finally, and in contradiction to right-wing free market philosophy, there was a large extension of public sector employment.

But all this political and economic expediency was nothing more than the desperate short-term outlook that has become the prevailing expression of those in power. On a world scale the ever-persistent underlying economic problems of over-production and the overcapacity to produce remained. Further, by the end of the 1980s, British consumer borrowing had reached over 100 per cent of total disposable income thus exposing the artificial and fragile foundations of the economic growth. What this debt exposed was that for every pound in every British pocket another pound was owed to the banks or, put another way, the British consumer had spent the total of one year's available money for goods (disposable income) and, on the 'never, never', a future year's total expenditure. Inevitably, each debtor reached their credit limit and the money they owed had to be repaid. To do this meant a reduction in the amount of funds available to spend on new purchases. The result was a drastic fall in demand requiring manufacturers to cut production and then close factories, thus making the workforce redundant.

So the short lived debt and housing boom 'bubble' of the '80s had returned the economy to another 'bust' as the recession of 1990-1992 took hold. The housing market had collapsed resulting in repossessions and the emergence of so-called 'negative equity'.

British capitalism's Plan A, the mixed economy, had failed in the 1970s and, at the end of the 1980s; 'Plan B' had also been flushed down the same drain. Unfortunately for Mrs. Thatcher, there was no economic Plan C.

Therefore, the only strategy that the experts of world capitalism could employ to pull the economy out of the mire of recession was - you've guessed it, more of the same. That was a more gradual build up of more debt and then, very much more of the same. In order to achieve this, interest rates had to be lowered in both Britain and America to encourage consumers to borrow once more.

In Japan, however, interest rates were already at an all time low and over the next decade and a half the economy stalled. The population overwhelmingly rejected the box of credit chocolates was that was on offer. What followed was that Japan entered a period 'deflation'. (This feature is apposite to the current world situation and will be explained in more detail later)

The best method of explaining the British and US led credit expansions is to present the analogy of a drug addict ever desiring the next quick 'fix'. Without the swill of credit through the economic body no 'highs' of profit growth are achieved. The dosage of credit has to be increased, therefore, to continue the growth of the economic 'high'. The system now becomes credit dependent desiring bigger and bigger highs but no body, whether it is human or economic, can withstand such constant abuse. To curtail the addiction would result in violent convulsions and illness (recession) but to continue without such ailments requires increasing the doses of ever more toxic cocktail substances on which to binge. In economic terms this is inflating the bubble as opposed to 'chasing the dragon'. At some point continued substance abuse leads to overdose, collapse and hospitalisation, i.e. SLUMP!

As will be explained, the unprecedented fifteen year period of growth from 1992, an extended 'boomlet' rather than boom, (so defined because annual economic growth rates in both the US and Britain have remained relatively low - averaging 1.1% per annum compared with the 3.5% per annum enjoyed in the post-war boom of the 1950s and 1960s) has been based very much on the same drug that caused the patient of the 1980s to 'expire'.

This time, however, the credit induced regeneration was to be assisted by three historically important additional components - firstly, the results of the collapse of 'Stalinism' in Russia and east Europe, secondly, the emergence of continental Asia, particularly China, as the capitalist 'producer exemplar' onto the world market and thirdly, the development of 'globalisation'.

Together these four political and economic horsemen of the Apocalypse - credit, globalisation, the collapse of Stalinism and Chinese/Asian production - seduced the strategists of capital to believe that an ever-flowing river of profit had arrived.

The Thoughts of Thatcherism

But one more ingredient of the economic growth, common to both the 1980s and 1990s, must be identified and acknowledged. It is one that is subtle and took longer to propagate. It was a psychological and philosophical onslaught on the consciousness of the working class in the wake of the Miners' Strike. It was only possible as a result of the defeat and demoralisation of those workers of yesteryear.

The brainwashing involved the nurturing of the wholesale philosophy of 'individualism' in the minds of those of the new generation, 'Thatcher's Children', - the current thirty and forty somethings in particular. This philosophy deems that, "There is no such thing as Society. There are individual men and women, and there are families." (Margaret Thatcher, 31/10/1987).

This notion was fostered to break the tradition of community co-operation, the history of collective organisation and the spirit of neighbourly support that for the previous two hundred years had underpinned working class life. It was a 'declaration of individual independence', an attempt to nurture the 'American Dream', the aspiration of the individual and the competition of the 'ownership of things' as the determinant of achievement.

In the minds of modern fundamentalist right-wing politicians and free market economists you 'get on' by looking after your own interests, care for others is optional and should only come as an afterthought, if at all. Again, Thatcher had instruction for us all on this aspect, "Nobody would remember the Good Samaritan if he'd only had good intentions. He had money as well." (06/01/1986)

This, surprisingly, is an outlook far removed from the guardians of late Victorian and Edwardian capitalism despite Margaret Thatcher's frequent pronouncements that she was taking us back to sound 'Victorian' values. The capitalist pioneers of that previous period took a long view of history to which their edifices and legacy bear testimony. Through painful experience they were persuaded to demonstrate and develop the requirement of a welfare structure that is still evident today both above and below our 'municipal' streets.

Such a selfish outlook as that of Thatcher is alien to the notion of 'society' and the socialist, labour and trade union movements. Working class families and neighbourhoods stood together and defended each others’ interests despite their often all too evident poverty. Slogans such as 'United we stand, divided we fall' grew out of the daily experiences that these communities endured, in and outside of the workplace, throughout the development of post Industrial Revolution capitalism.

Nevertheless, it was the grand old Tory Dame Thatcher who was the first dignitary invited through the doors of No. 10 by both New Labour prime ministers, Blair and then Brown, just days after each acceded to power, - an affirmative signal to capitalism that their tenancies would perpetuate her legacy and that it was 'business as usual' or, as Peter Mandleson the new and formerly disgraced cabinet minister, now Lord (of Transylvania?), explained, "We are all Thatcherite now". (The Times, 10/06/2002)

What resulted from the manufactured and manipulated shift of thought and public consciousness was the fracturing of social cohesion and the break down of community co-operation and this has been significant over the past two decades.

Part of the problem is also tied to the housing booms and the wholesale selling of the best former municipal social housing. It resulted in a turnover of residents when some people chose to sell up and move on only to be replaced by 'strangers'. There is a perceived suspicion that such rapid and continuous mobility engenders. In areas of dilapilated municipal housing, with only partial privatisation, anti-social behaviour forced many former tenants to move out to be replaced by a lumpen criminal element. These are the so labelled 'hard to let' properties, parts of communities that have become local authority dumping grounds and ghettos of despair.

Other significant influences, which have contributed to the breaking of community resulted from de-industrialisation which forced specialist skilled workers to move on in search of employment linked also the introduction of new technology into industry thus reducing the size, concentration and influence of the labour force.

The exponents and disciples of the shallow Thatcherite worldview have contaminated every walk of life. Its selfishness is expressed in every community, every workplace and every college and university - ever more fundamental here in the training schools of business and local government administrators, those who are then employed to bed ideas into society and make them accepted as workplace custom and practice.

The result of all of this is the measurable decline in social co-operation and public standards and, on the back of a perceived purchasing power, the spread of rampant consumerism, self obsession, libertarianism, the cult of the individual and the worship of celebrity.

In a 2005 survey, 2,500 British children were asked, "What is the most important thing to be when you grow up?" In days gone by they would have replied with vocations such as fireman, doctor, train driver or nurse. The majority in this survey answered with either "Rich" or "Famous".

It was within this desperate and deplorable, constructed matrix of human behaviour that the previous fifteen years of economic growth was encouraged to develop.

Individualism, The Global Economy and the World Market

In November 1989 East German citizens breached the Berlin Wall signalling the collapse of the repressive one party state apparatus that had hitherto governed the Soviet Union and its satellite states in east Europe. 'Stalinism' - a system of government and economic organisation named after the former, monstrous dictator of the USSR - was an abominable distortion of genuine socialism that, conversely, can only be based on democracy and accountability.

The Soviet economic system, that had at one time governed half of the globe, eventually collapsed under the accumulated mismanagement of the ruling bureaucracies, internal conflicts and contradictions, quite simply it imploded.

However, in certain areas of human provision it was well ahead of capitalism - every individual living under its umbrella was guaranteed adequate housing, heating, food, clothing, health provision, education and employment. Though many of us living in Britain may think these provisions are fairly 'basic', when they are compared with the conditions of deprivation endured by millions of people in the today's capitalist emerging and underdeveloped world, these 'basics' represent absolute luxury.

Indeed, in the 1930s under the deprived conditions of the Great Depression many American and European workers and peasants found these benefits so attractive that Communist Party branches flourished everywhere.

The collapse of Stalinism brought multi-millions of people, raw materials and resources into the sphere of capitalism. The people of these countries had viewed with envy the consumer goods, the cars, the clothes, the luxuries and the cultural freedoms and expressions of the West. In turn capitalists greedily eyed the East, the states of Eastern Europe in particular, as a huge potential market and a source of cheap labour to be exploited.

At the same time another Stalinist mega-population, the Peoples' Republic of China, had arrived at a similar impasse but rather than submitting, their governing bureaucracy chose a road of managed integration into the capitalist system whilst maintaining the trappings of state power, control and repression. This is a system of government in transition, in essence attempting to transform itself into a fully-fledged military police dictatorship in the short term. It is encouraged in this direction by the advanced capitalist countries, each desperate to gain and increase individual allotted portions of its potentially enormous economy regardless of the absence of democratic and human rights.

China's rulers invited the West to participate by allowing manufacturing companies to develop the infrastructure of production whilst they provided the huge and cheap labour force for foreign companies to exploit. Thus we saw the relocation of a section of western manufacturing production and the growth of out-sourcing. Clothing, kitchen appliances - 'white' goods, electronic goods - 'black' goods such as TVs, Hifis, phones etc., plastics and toy manufacture now overwhelmingly carry the label 'Made in China'.

But it wasn't only China that was to benefit from its subsequent emergence onto the world market. In the wake of this development, impetus was also given to the established 'emerging economies' of South East Asia, in particular India but also South Korea, Taiwan, Thailand, Indonesia, The Philippines etc. as well as the Central and South American countries, particularly Brazil and Mexico, and Russia.

The Indian sub-continent including Sri Lanka and Bangladesh is another area of clothing manufacture but in India it is also heavy industry that has developed - iron and steel manufacturing and engineering as well as truck and car making - whilst the city of Bangalore became a computing and call centre specialist. The growth of the Indian economy has been as significant as that of China.

None of the Asian countries could be described as innovators of production but their strength lay initially in their ability to copy products designed and developed in the West and then to rapidly adapt their acquired production equipment and skills to the broader demands of the American and European markets.

There was one problem from the outset, and one that still persists today. A low wage economy does not have sufficient internal demand to consume the volume of goods that are produced. On a national scale, the total earnings of the 1.3 billion population is an enormous total but an individual working for less than the equivalent of £1 an hour is not going to buy a wardrobe of clothing and a selection of the other consumer goods produced in Chinese factories and on a regular basis. The charity War on Want reports clothing manufacturers in Bangladesh paying workers the equivalent of less than 7 pence an hour. Many emerging economies are dependent on exporting over 90% of their production particularly to the consuming economies of Europe and North America.

By the mid 1990s, the advanced capitalist countries were starting to import large volumes of extremely low priced goods but as earnings had not grown significantly it required a new stimulation of consumer credit to expand this market.

By the end of the decade the penetration of western markets by goods produced in Asia was phenomenal and fuelled indirectly by the deregulation of the American financial system following the repeal of the Glass Steagall Act in 1999.

All the output was achieved at a fraction of the costs of production in the West thus allowing the American and European based multinationals to reap a harvest of profit from their Asian manufacturing base year on year, throughout the decade. However, though initially dominated by this form of economic imperialism, indigenous Chinese and Indian capitalists gradually gained prominence, - for example the Indian steel magnate Lakshmi Mittal whose company ArcelorMittal, only came into existence after 1994. It is now the world's largest steel maker and is ranked at position 39 on the 2008 Fortune Global 500 list, the list of the largest companies in the world. Another Indian steel maker, Tata Steel is now the world's 5th largest steel producer and owns the remnants of the once mighty British Steel Corporation (now Corus) as well as the car makers Land Rover and Jaguar.

This manufacturing development advanced slowly at first but in less than a decade a huge globalised market place was established together with an enormous productive capacity that appeared as the Messiah of the capitalist system. So much so that Gordon Brown, then British chancellor, was beguiled. He said we had witnessed the arrival of a 'new economic paradigm' (NEP) and, by the results of this phenomena, he proclaimed the end of boom and bust.

This globalisation was enhanced and assisted by the development of 'free-trade', that is the liberalisation of overt trade barriers that previously were used by nations and trade alliances to protect domestic production from external competition.

To a degree this appears to have helped the emerging economies, principally the so-called BRICs (Brazil, Russia, India and China), but only in the sense that US and European multinationals needed free access for the cheap goods they produced in the emerging countries into their own national markets.

The poorer, less developed and underdeveloped countries have been disadvantaged by globalisation. For them, unfair trade practices, that is both new and hidden trade barriers to the lucrative EU and American markets, still exist. An example of this is the infamous length, girth and shape restriction that prevents the penetration of the European Union market by less favoured Caribbean and Latin American banana producers.

From a Scratch to Rigor Mortis

In the past, certainly in Britain, there was a definable difference in economic policy according to which political party was in power. Children of the 1950s, '60s and '70s grew up not only knowing but also experiencing that the Conservative Party was the parliamentary representative of 'big business' and the rich. Likewise, those who were rich and business leaders knew that they were not going to be favoured by the election of a TUC influenced Labour government.

In reality these differences existed only because of the socio-economic background of the membership of the Labour Party that, until the late 1980s was predominantly working class - measured by individual 'card carrying' members and by affiliated trade union membership. The pressure exerted by these foot soldiers at constituency and trade union branch level kept the party leadership in check.

It is a contradiction, however, that the leadership of the Labour Party invariably had more affinity with liberal Conservatism than the democratic socialism that was expressed by the active members of the Constituency Labour Parties (CLPs).

The right-wing character of the leadership resulted from the socio-economic background of the majority of M.P.s and 'rigged' internal elections. These leadership elections were determined by a majority voting power provided by the 'block' vote wielded by right-wing trade union barons combined with the disproportionate voting influence guaranteed to the Parliamentary Labour Party (PLP). This combined vote invariably outnumbered that of the 'left' Constituency Labour Parties'.

After 1979, and under the influence of union branches mandating some reluctant leaders, a left leaning Labour Party leadership was elected. This forced a breakaway of part of the right wing of the PLP to form the Social Democrat Party (SDP). But the left was dealt a mortal blow by the 1983 General Election defeat and its chances of revival were exterminated by the crushing of the striking National Union of Mineworkers in 1985.

The Kinnock leadership that followed, from 1983 to 1992, was not only instrumental in the miner's defeat (by not giving open and unequivocal support to the miners and their families) but at the same time he engaged in a flagrant attack on the left of his own party, particularly, though not exclusively, the influential supporters and M.P.s of the Militant Tendency. As defeat for the miners became assured, Kinnock quick-marched the Labour Party to the right behind the banner of 'New Realism' and, as a result, members deserted in their droves. In many working class communities today the Labour Party is like an empty shell inhabited by social parasites.

This was not only a defeat for the left of the Labour Party but also activists in the trade unions. The Trade Union Congress leaders, supported by the right wing leaders of the larger trade unions, gave only partial support to the National Union of Mineworkers in an attempt to force the miners' leaders to reach an agreement with the government. With the miners defeated, they sowed the seeds of despondency and defeatism amongst the broader labour movement. The common reaction they nurtured was, 'They are too strong, we can't beat them' and, 'if the miners can't, nobody can'. These notions became widespread across the broader trade union membership and right wing officials and leaders used this engendered sentiment as an excuse to support a strategy of compromise and betrayal. The Trades Councils and union branches became drained of activists and stopped meeting and in many areas have never revived. For some, union membership became nothing more than an insurance policy and a source of targeted discount cards and consumer deals.

Without the whiplash of a large left oppositional membership cracking at their heels, the Labour Party leadership became more arrogant and detached from the 'true realism' of everyday working class life. From the start of the 1990s onwards they used the advantage of the membership's detachment to destroy conference democracy and the historical constitution thereby removing any reference to ideology as well as the ability of members to affect policy.

Thus, what emerged was the Tony Blair and Gordon Brown stewardship. The ideological Clause 4 of the constitution was removed and, hey presto, New Labour was born. This was a metamorphosis from a socialist/social democrat, left of centre political party into what is at best a 'Christian Democratic' variant of centre right politics. It was authorised, backed and financially supported by big business - orchestrated and administered on their behalf by the reactionary, media mogul Rupert Murdoch.

Suddenly, and more than at any other time in political history there was a coalescing of policy and purpose between the two major parties. Though challenged by the left leaning Plaid Cymru in Wales and the SNP in Scotland, it was the Liberal Democrats in England that alone provided a viable centre ground opposition to both New Labour and the Tories. In this role, their action and policies have appeared radical by comparison.

Thus from Tony Blair's ascendancy there has been a 'Tweedle Dum, Tweedle Dee' political settlement in Britain which has been fundamental to a dampening down of an interest in politics and popular participation in elections, matters of state and local governance. This has resulted in all but the death of participatory politics.

Accordingly, there has been no effective opposition to the economic policy that, throughout all of Brown's days at the Treasury, just 'trundled along'. This was as a result of the generally benign conditions of the world economy rather than any Brown policy intervention.

Early in New Labour's first period of government, Gordon Brown devolved the power of interest rate changes to the Governor of the Bank of England, now Mervyn King, and an assembled Monetary Policy Committee (MPC) who have tended, when possible, to tweak interest rates lower to maintain the flow of cheap credit.

The Hot Money and the Housing Balloon

From 1992 to the election to power of New Labour in 1997 the economy endured a slow recovery. The position of house prices reflected the state of economic affairs.

During the 1990-1992 recession the value of houses fell dramatically with the emergence of negative equity for the first time in post-war Britain. People who had purchased their homes in 1988-1990 suddenly found that the value of houses fell to less than the original purchase price and their mortgage exposure. Together with those who, as a result of the recession, had lost their jobs there were others who could no longer afford to meet their mortgage repayments and together they saw their homes repossessed by the banks.

In many areas, house prices did not start to recover until 1996 but by the end the decade there was a sudden upward swing in property values. From 1995 to 2000 the average house price rose by a quarter from £75,000 to £100,000.

As previously mentioned, in 1999 the Clinton administration, under the advice of Federal Reserve chairman Alan Greenspan, ushered in their own version of the Thatcher 'Big Bang' financial deregulation with the repeal of F.D.Roosevelt's Glass Steagall Act of 1933. (This act had been introduced in the Great Depression to control the undisciplined bank lending that had triggered the Wall Street Crash.) The repeal prompted a rocketing of available credit. What is necessary to understand is that the US Federal Reserve Bank is not a product of the Declaration of Independence and the Constitution. It was only created in 1913 and more than any other central bank works primarily in the interest of the American financial system and banks rather than the 'people'. It is tied to its founding bankers by a thousand threads and it is from these institutions that its directors and managers are drawn.

The majority of leading world economists believed that the resulting NEP had eradicated economic history in much the same way that Francis Fukuyama had predicted 'The End of History' in his 1992 book of that name which followed the collapse of 'Stalinism'.

In the minds of these experts, the globalised market (strengthened by the multi-million population of Asia who provided their initial cheap production surge and, at some future date, consumer demand) had brought an end to recessions and had created the basis of a new, ever-expanding demand financed by recirculating credit.

In other words, they believed workers in the West could survive on wages just sufficient for them to be able to maintain and responsibly service managed credit card and mortgage debt. Although low inflation linked wage rises were insignificant they did facilitate more credit access, but only as long as interest rates also remained low.

Then, in the wake of 1999, there was a sudden eruption of financial insanity mirrored by the competition engendered between New York and London for the title of 'world financial capital'. A new peak of credit supply witnessed a flurry of consumer spending and mortgage applications resulting in UK house prices rising from 6% annually to 10% annually over the next twelve months. The growth of this profligacy was not limited to individual consumers. Every channel of commerce and administration was building debt as though it was a badge of merit. The Bush administration in America inherited a debt to the rest of the world of which stood at $750 billion in 2000. Eight years on and America now owes an incredible $2000 billion.

It was not only housing but also commercial property that was booming. To signal the intention of British financial market dominance, planning permission was granted in 2000 for the construction of the Swiss Re Tower, - or 'Gherkin' as it is now popularly known. Shortly after, permission was also given for the Willis Building and Broadgate Tower. The changing sky line of the City of London - (with the later additions of the Heron Tower, the Leadenhall Building, the Walkie Talkie and the huge Bishopsgate Tower now under construction together with Canary Wharf) - is testament to London's success in becoming the world's financial market centre and, thereby, completing Thatcherite Britain's post-industrial metamorphosis.

From the time of Margaret Thatcher's initial policy shift towards a service based economy, the value of equities (company shares) traded on UK market rose from 28% of the total value of gross domestic product (GDP) in 1986 to 88.1% of GDP value by 1995, a market turnover of £646.33 billion. The growth of such activity under Blair's New Labour, however, was astronomical so that by the time he left office in 2007 the volume of equities traded in Britain had reached an astronomical 295.6% of GDP value, a market turnover of £4,142 billion!

(What has to be remembered here is that all this supposed wealth is not a reflection of the creation of real things and value by the toil of honest workers but rather the dodgy product of casino styled hustlers and hucksters.)

Thus, although some investment was finding its way into concrete (and glass) superstructures a massive amount was pouring into speculative ventures. At the same time as the construction boom was taking place a destructive, technology shares' bubble was inflated which led to the 'dotcom' boom and bust of 2001, causing a shallow recession in America but not in Britain.

Immediately, interest rates were lowered by Alan Greenspan, who was now serving his third president, George W. Bush, as US Chairman of the Federal Reserve, thereby extending credit to an even greater level. It seemed clear at the time that a deep recession was impending and that the longer the malign, credit led economic trends were allowed to fester and a downturn postponed, the deeper and longer it would be when it developed.

It now seems clear that the fear of such a recession developing when combined with political imperatives, - (it is probable that the neocons in the White House determined that deep economic problems would undermine the popularity of the recently elected administration thus impeding its intention to wage war on Iraq) - led the Bush administration to inflate a credit 'barrage balloon' to completely unmanageable proportions.

Taking their lead from the US, British interest rates were also trimmed by the servile, New Labour government ignorant, apparently, of the consequences that would flow.

These interest rate cuts were a green light, authorised by Bush and Blair, to the shysters and loan sharks of world of finance - from the top multinational bankers and financiers down to grubby, local money lenders - to go forth and enrich themselves.

However, there was a problem with the limitations of personal debt. All individuals, in theory, can only afford to borrow a finite total on their credit cards, hold a maximum of repayable personal loans and maintain a limitation on their mortgage debt fixed by the value of the property they occupy.

Previously, in every British bank and building society branch sat a po-faced manager who vetted each account and hauled account holders in to issue a stern warning when an account was overdrawn. They interviewed and offered cautionary advice on the pitfalls of debt when you applied for a loan. This was called regulation and it ensured that every individual, business and organisation was only allowed to borrow an amount that they could reasonably afford to repay.

All that control was removed, along with the traditional managers. Bankers and their agents were allowed to 'invent' ingenious new methods of helping us to help ourselves to more and more available debt that many people could not reasonably repay. It was like giving Wild West whiskey to the Cherokees as an induced madness took hold of the population.

"Can't pay your credit card debt, Sir? Don't worry have another one." "Want a mortgage but no deposit, Madam? Never mind, take a 100% or 120% deal." "Don't earn enough to satisfy the two and a half times salary rule? No problem we'll give you five times your annual salary or better still you can self certify (fabricate!) your income."

Even with this splurge of new debt there was no sign of inflation flooding the malls and supermarkets of 2002. Instead a tidal wave of cheap goods filled our stores and a plethora of new shopping centres were built to fulfil our unending desire for more.

There was, however, the ever-onward march of property prices and the price of commodities necessary to feed the manufacturing boom of the emerging economies, e.g. metals and oil in particular. Through the early years of the so-called 'noughties' house prices rocketed so that by the end of 2007 the average price was over £190,000 - house values had doubled in a decade.

Inflation, i.e. a constant rise in the cost of 'things', is caused when there is too much purchasing power i.e. real money plus credit (termed as demand) in society compared to too few products (termed as supply) available for purchase. Consequently the prices of goods rise to match the value of broad money available.

The easiest example to quote has been the fluctuation in the price of oil. When the world demand for oil, which was fuelled by the burgeoning needs of Asia over recent years, outstripped the available supply of oil it caused the price to more than double and reach an all time high of $140 a barrel. It has fallen back this autumn to $55 a barrel as the developing recession has cut the demand in the Far East.

But the property value inflation was soon to become the trigger for the downfall. Banks make their money through charging interest on the money they lend. When interest rates are low they have to stimulate a greater volume of lending to receive the same mass of profit that was generated by earlier and higher interest rates.

Through the first years of this century they have created more complex forms of lending to persuade the gullible and the naive to take on more and more debt. Rising house values provided a borrowing vehicle as mortgage holders, particularly those with long standing loans and lower outstanding balances, were persuaded to remortgage in order to claim some of the 'newly created' value in their properties and then use this windfall to fuel spending on real goods and services.

This feature is particularly marked in the mortgage debt held by those people over fifty years of age. In the past, this age group would be approaching that stage in life when they would have successfully paid off their mortgage debt - or were close to this achievement. Traditionally, therefore, they would have a smaller proportion of total, national mortgage debt. Today, however, the British 'baby boomers' owe a staggering £207 billion.

But mortgage refinancing did not stop with this cohort alone. As time went on more and more people, even relatively new homeowners, were tempted to claim the rising value out of their property with re-mortgage agreements. A blizzard of paper was unleashed on homeowners as every day re-mortgaging offers landed on doormats. And this was accentuated by the persuasive 'buy-to-let' option available for the more 'adventurous', property speculating amateurs.

Furthermore, the banks were driven by competition and market share, to extend their lending to evermore-risky clients and businesses as the arc of capitalism rose higher and higher. Thus we witnessed the emergence onto the market place of the 'sub-prime' mortgages. These 'products' were those that unscrupulous bankers and financial agents started lending to the poorest people in society - either those on low incomes, those in fragile employment or those on state benefits. They were mortgages designed to hook customers on low repayment 'fixed rate' deals, but also with a limited time span. Despite the allegations aimed solely at the American banking system, such lending was taking place at comparative levels in Britain and keenly targeted were those people in existing debt distress.

When the life of a large number of fixed rate mortgage deals came to an end it forced the borrowers to renegotiate new mortgage products which were higher rated. The minimum repayment figures increased dramatically and it became obvious that poor people could not meet this new financial demand and so continue to service their debt. In America the result was wide scale defaults and then repossessions with banks subsequently unable to encourage new buyers into this poorer quality housing market.

This was the spark for the 'credit crunch' and the financial forest fire that has burned across the world economy, but it was not the cause - the limitations of borrowing were inevitable.

The culmination of Britain's credit binge has probably made us the worst placed country in the advanced world as we head into the global downturn. The figures involved are staggering - with 70 million credit cards in circulation plus store cards, personal loan agreements, bank account overdrafts and mortgages. The total of British household debt amounts to £1.44 trillion (September 2008).

It is well worth printing this amount as a number to grasp the enormity of our debt addiction - £1440,000,000,000 or nearly £24,000 for every man and woman, every boy and girl and every babe in arms.

This is not the total of our spending, however, because we also have to factor in every red cent of real money that the population receives in what is described as 'disposable income', i.e. after tax or 'net' earnings and state benefits. The debt total, however, represents 180% of this disposable income, which reveals that, when combined, we have used well in excess of one year's total purchasing ability.

The world shopping mall and the total global manufacture of goods was dependent upon ourselves, and our contemporaries across Europe and north America, continuing to borrow ever larger amounts and then spending as if there was no tomorrow, buying more and more unnecessary products. Now that the banks have all but declared bankruptcy, the access to more credit has been denied and we are entering a deep and dangerous slump.

On top of household debt, Britain has a huge balance of payments problem - i.e. government debt, a fragile corporate capitalisation and a working population that is over reliant on service provision and the financial sector for its employment.

3. This is This and This is Now

The Fundamental Bottom Line

We heard much talk from politicians and economic commentators over the period leading up to the current crisis dismissing the gravity of the situation and reassuring us that 'the economic fundamentals' were 'sound'. It is worth reconsidering therefore just what the fundamentals of this crisis are and why we find ourselves in this sorry mess.

In a recent article in the New Statesman, Robert Reich, former US President Bill Clinton's ‘Labor’ Secretary and now an academic economist, revealed the fundamental of capitalism, the bottom line for the survival of the system, albeit in a roundabout way, when he wrote that the US housing bubble "...had allowed millions of Americans to take money out of their homes by using their rising home values as collateral for loans. But now the bubble has burst, those homes can no longer be used as piggy banks. As a result, America's huge middle class no longer has the money it needs to buy back the goods and services that it produces." (New Statesman, 6th October 2008)

Even grudgingly, Reich cannot bring himself to use the term 'working class', the real producers of goods and thereby real wealth in society. Yet here he acknowledges the fact that the only way the capitalist system can work is by the continuing ability of workers, through their access to a bloated retail sector buying back from their employers the same goods and services that they toil so hard to create, day by day, week after week, year on year.

For example, a millionaire company director or the billionaire financier may purchase and own a few fridges, one for each of the residencies they own that are scattered about the globe. They are not, however, going to waste their money on more fridges once their need has been met.

It is the broad mass of workers who, on a day-to-day basis, seek and purchase the volume of fridges that then generates sufficient profit to justify continued investment in the industrial manufacture and assembly of such appliances.

This reality is the foundation stone of what is known as the 'market economy' but for it to be successful workers must earn enough money to be continually able to purchase the necessary total volume of goods sufficient for the system to perpetuate.

Reich goes on to point out that American private sector workers earn less today than they did in the year 2000 and that twenty first century earnings are barely higher, in comparative terms, than those which were earned in the mid 1970s - and in some instances significantly lower! It is obvious that what Reich applies to the American worker is also to one degree or another applicable everywhere else but particularly to here in Britain.

To confuse matters more, 'productivity', i.e. the quota of goods nominally created by each worker per year, has risen consistently over the last three decades despite low incomes. This results from the introduction of new manufacturing technology and methodology. This in turn has been assisted by the subservience of the trade union leaderships who have knowingly allowed workplace conditions to deteriorate without any challenge. Thus employers have been saved the cost of additional necessary investment in the welfare, health and safety aspects of the workplace. Money saved by not improving workplace conditions allows bosses to further cut the costs of production and increase productivity.

The increased profit from these productivity gains has not, therefore, benefited the worker but has been directed as dividends to the pockets of the directors and shareholders, the very people who are least likely to stimulate demand and grow the marketplace. Again it is worthwhile to quote Reich who states, "The top 1 per cent of American earners (i.e. the super rich who actually 'earn' very little, my insert I.G.) now take home 20 per cent of total national income. In 1980, the top 1 per cent took home just 8 per cent."

Reich would like us to believe that rise in inequality between rich and poor happened as one massive leap under the influence of George 'W' but, of course, it didn't. The rising gap between rich and poor has taken place incrementally over the intervening decades including the time he spent prowling the White House corridors of power.

And this phenomenon is not restricted to the recent history of the United States, much the same thing has been happening in Britain. Over the last decade or more, the size of the percentage increases in company directors' pay, their performance related bonuses and share options when compared to that of their employees wage rises have become legendary. These increases in inequality, which are also reflected in government revenue (i.e. tax) changes, have overwhelmingly favoured the rich at the expense of the middle and low-income worker. Recent research published by The Joseph Rowntree Foundation determines that inequality in Britain, after over a decade of the New Labour government, is at its highest level for forty years.

"Ah, but," say the apologists for New Labour, "There has been an overall income growth over this period especially with the introduction of the minimum wage and the elaborate tax credits system assisting the low paid worker."

Yes but, and it is a large 'but', some of the poorest people in society are also some of the biggest revenue victims. One example: As a result of increasing the government's dependency on 'indirect taxation' - a major plank of Brown's chancellorship - instead of direct (earned income) taxation, a disproportionate amount of revenue collection is taken from those least able to pay - a poor man pays the same for his litre of petrol as the rich man but by income comparison his contribution is the greater.

Taxation has been the political football of domestic politics for the past quarter of a century. Thatcher's established policy of low taxation is a hall of mirrors that appeals to individualism’s component greed and lack of social concern. All Thatcherites are compelled to neglect social welfare provision in favour of low taxation thereby making any provision cost effective. Thus all social policy is cost driven whilst support for the needy is maintained at levels commensurate with the government's low personal and corporate fiscal income obsessions. Their argument is that people require and demand 'choice' and that richer people will transfer their wealth and homes elsewhere if they were to face heavier taxation.

Tony Blair, the closet Thatcherite, took this tax mantra to new heights as, after 1997, Britain became a tax haven for every Arab billionaire, despot, each Russian billionaire, criminal, oligarch and every Asian billionaire, exploiter of child labour who 'chose' to wash up on our shores and seek economic asylum.

New Labour's Employment and Welfare Deceit

Thus there is a deliberate inequality bias at the heart of New Labour that is a reversal of Labour Party tradition and is designed to favour the rich. Policy has been used as an instrument to undermine the income and well being of the majority by turning sections of lower middle class people and working class people against each other. It is a tactic called 'Divide and Rule' a tried and tested method used to hoodwink the masses into believing that it is not the government but some of their own kind who are responsible for the decline in service provision, for their personal lack of opportunity, for their fair share of the state benefit system, for the inadequacy of their housing and their increasing poverty. The government has facilitated and institutionalised this tactic into policy and at different levels of welfare delivery.

Firstly, we must consider the unquantifiable total of immigrant labour, particularly from Eastern Europe, which has entered Britain over the last ten years. This has been more significant than the influx of Caribbean and Asian workers in the 1950s. Then, workers came to fill job shortages and, in many cases, carry out the necessary but mundane 'dirty' tasks that nobody else wanted at a time of economic expansion and relatively full, meaningful employment.

The majority of the latest incoming workers have been employed in the service, construction and agricultural sectors of the economy. In each sector they have held down some of the traditional low paid jobs on rates of pay often below the minimum wage that no indigenous worker would accept. Some of these workers have been controlled (that is bought and sold) by gang masters - modern day slave drivers - who have extracted all but blood from their charges' meagre incomes. Others have been employed by the 'agency' method where there is very poor record keeping and often-reported abuse and exploitation.

Then there is the manner by which some 'legitimate' employers have 'used' their immigrant labour. They have purposely set out to recruit incomers on low wage rates in order to undercut the long term remuneration of existing workers, particularly 'mates' and labourers, and thus over time forcing existing British workers to accept lower rates of pay and undermine pay parities. This practice has been most exploited in the sub-contract world of work.

Within this melting pot of human labour there are classifications that have been applied, - immigrant, illegal immigrant and asylum seeker. These have become translated by the media as labels of inferiority, criminality and derision yet the overwhelming majority of these people are hard working and, when given the opportunity, have been in one form of full employment or other for the period of their stay. In other words they have been necessary for the maintenance and continuation of economic growth and yet they have been so maligned by this government. In seeking popularity government ministers have pandered to the basest prejudice in society.

The result of this malpractice and denigration is that, and especially where there are have been high densities of inward immigration, these people have been used to create friction in both workplace and community, thus fuelling division and racism.

The government has been aware of the abuse, maltreatment and exploitation in employment, the undercutting of labour costs and the rise of racism. It has done nothing of a substantive nature to legitimise the position of these workers, raise the conditions of their labours, the equity of their pay and the equality of their position in society. Why not?

The asylum seeker is the most abused of these incomers. Asylum is a term applied to the protection afforded to homeless and stateless people, refugees from the barbarism, persecution, the inhumane torture and unjust imprisonment that continues to ravage the lives of people in too many parts of our globe.

But New Labour has traduced this definition, they have taken those, particularly black and Asian people, who arrive at our ports of entry with nothing and brutalised them. Without any proof of criminal history or criminal intent, all those who arrive and fail the stringent asylum criteria - men, women and children - are detained and incarcerated into our prison system. These are people who bring only their dignity and self respect and in return they request our understanding, support and tolerance.

In the eyes of many British people and given the background of the 'war on terror' such government action characterises them as dangerous, even synonymous with the most heinous and criminal acts.

The added, official, blanket description of 'economic migrant' is further designed to denigrate and create an impression of somebody who is taking rather than giving to our society.

By contrast the Abramovichs, Hindujas, Mittals, Shinawatras and the hundreds more foreign millionaires and billionaires are provided with escorted access to all and everything that they may want to covet.

Socialists do not argue for the free entry of all to Britain, criminals and bandits on the run for example, however the old cliché of one law for the rich and another for the poor is more than apposite and evergreen.

Secondly, there are those people who have had to survive on state benefits for some or all of their income over the last decade or so of Blairism.

New Labour's strategists closely studied the methods used by American neo-conservatives to reduce their unemployment figures and, more importantly, associated government expenditure. Again, in an attempt to seek the electoral patronage of 'Middle England' the Blairites have waged an obsessive and unending campaign against those unfortunate people who are benefit dependent.

The first tactic they used was to build on middle class prejudice and create a climate of detestation and hatred in order that those in work became contemptuous of those on state benefits. A willing right wing press is used to whip up reaction and they are always able to discover one benefit cheat or other together with lumpen criminals, such as the recent case of Karen Matthews, by which to create an impression of generalised and widespread benefit abuse.

Then, by these examples, all benefit claimants become labelled as lazy, 'work shy' scroungers who drain the income tax receipts of decent honest folk, undermining their contributions to the health service, education etc., - you get the picture: benefits claimant = worse than criminal.

Having set this form of discrimination loose in society many of those in receipt of benefits also become affected, embarrassed by the shame of their station they seek a road of redemption in employment, despite their obvious incapacity or inadequacy for work.

The next tactic is to restrict the benefits that are paid out by not maintaining purchasing parities that were previously established, thereby forcing benefit claimants to seek work because of increased deprivation.

There are those amongst us that might say, "Quite right too" but, and this time it is a very big 'but', these things are never so black and white.

If all claimants were single, young and fit, educated and living in one of Britain's affluent, economic growth areas where job vacancies just happened to be in abundance then the argument for some coercion might exist. But the majority of those now claiming benefits are:

Either 1. Too ill or too disabled for work in most jobs of a strenuous or stressful description that are locally available despite constant government carping.

Or 2. They are carers for people who are disabled and who need twenty-four hour support.

Or 3. They are single parents who cannot afford the exorbitant costs of a child care system that may or may not exist in their immediate locale or they would prefer to nurse their children through their formative pre-school infancy and, in an established vulnerable society, on to secondary school level.

Or 4. They just happen to have the misfortune of trying to raise a family in one of many areas of the country where there is minimal inward investment. What little there is, is often transitory in nature so that periods of tiresome, low skilled and exploitative employment are interspersed with periods of enforced idleness.

The final government tactic is to introduce 'Welfare to Work' and 'New Deal' programmes with self-appointed and self-certified employment specialists (licensed welfare spongers) contracted on government social security funds. They are dispatched to the regions to provide spurious training courses and nurture questionable 'skills' for which there is little call in local employment black spots.

Many of the young people who are press ganged onto these schemes have variable reading, writing and numeracy deficiencies that result from poor schooling and lack of opportunity. These shortcomings, in turn, result from ill-defined and damaging government education reforms despite Blair's, "Education, education, education" pronouncement. Inadequate provision for the least able has continued and is responsible for the entrenched poor literacy and numeracy statistics. What makes many young people unemployable is the lack of these basic skill shortages and then unemployment is used as the 'cane' by which they are then punished, receiving little or no income and derisory community support thus developing and deepening their low sense of self esteem.

All this denigration has been undertaken as a prerequisite of following a US administration inspired, neo-liberal agenda of 'low state' and 'low tax' whilst establishing the desired end of a low wage, high credit economy.

Unfortunately, this was the con in the neoconservative agenda hidden behind a veil of ‘rights and responsibilities’ that has caused genuine fear and mental distress to many people, fearful of losing their benefits' income. Today, the real costs and true effects of mismanagement, the social funding withdrawals and transfers will become all too apparent in these welfare 'light' economies.

Britain can now ill afford prolonged mass unemployment without a massive extension to existing borrowing or an IMF (International Monetary Fund) bailout. As a result of New Labour cuts and outsourcing there are insufficient emergency support systems - inadequate social housing stock to house those whose homes are repossessed, inadequate health resources to cope with inevitable poverty induced illness, under funded and inadequate local social service provision and a depleted and under-resourced social security system. Yet to not provide this support to newly redundant workers and their families will cause an almighty backlash against the government.

Thus we see that not only the actions of short sighted employers of both working and middle class people, manual and professional workers alike, but also the government's short terminism have conspired to pauperise the masses but only at the cost of destroying their 'market' for goods and services.

It’s Only Just Begun

The early winds of the 'economic tsunami', the term that Alan Greenspan now applies to the world crisis, have blown over. Only by nationalising and partly nationalising a section of the banking systems have the world's politicians managed to halt the downward financial spiral. These are the same people who, for generations, have excoriated and vilified socialists and the policies and virtues of benevolent state intervention. They could not have planned a more ignominious retreat from their ivory towers.

It has taken an extremely short historical time to build the dependence that every worker has on electronic banking. Twenty-five years ago it was still common for most workers to receive and take home their wages as real money in a paper packet. (Workers still have the right to request cash payment from their employers.) Most of us paid for most of our goods with the money available in our pockets and if we didn't have it at the time we did without.

Today, nearly all but the most immediate shopping is done with debit or credit cards whilst workers’ wages are transferred directly to their bank accounts. Queues develop at ATMs on Friday afternoons as people attempt to access their funds for their weekend night out. If the electronic transfers and credit facilities were suddenly to stop and ATM access was denied most people would be left with all but a couple of days' survival cash to hand. The result then would be rioting and wide scale looting in the short term with organised revolution on the agenda to follow. No wonder that governments on a world scale poured billions into the banking system to temporarily shore it up.

In the early days of autumn, the very same banks upon which we depend nearly collapsed as the dark truth became clear that there was insufficient money in their vaults. The banking jargon that was reported at the time, but not decoded in press and news bulletins, stated that they lacked 'capitalisation'. If there had been a 'run' on the banks - that is when everybody realises the seriousness of a situation they panic and rush to the bank to withdraw funds, as many customers did at the time of the Northern Rock crisis - the whole system would have become frozen in time.

There are many people who have no savings, in fact more than half the population. There are also those who drift financially from one overdraft to another and who are totally dependent on system provision. The savings ratio is around 5%, or in other words for every £1 earned in Britain only 5p is deposited in one form of savings account or another by the population as a whole, this is less than half that of many west European countries but ahead of the US whose ratio has recently been less than 1%.

Such low savings ratios whilst reflecting the comparatively low earnings in both countries have also added to the financial crisis. They also reflect overall personal debt repayment ability.

Apart from the personal financial concerns, every other sector of the economy is racked by debt. UK government borrowing is back to the figure it was in 1997 despite ten years of Gordon Brown's "prudent" policies. Companies, both large and small, survive on day-to-day borrowing as do the banks themselves who need to borrow from each other under the terms of the wholesale LIBOR rate (the London Inter-Bank Offered Rate). The same methods and comparative levels of debt are also reflected in the US as well as all other areas of the globe, to some degree or other.

To true extent of the debt is unquantifiable, the figure impossible to imagine. At every level of government, corporate and banking profligacy there has been adept creative accounting and criminal deception in order to bury real figures from close scrutiny. When, in September 2008, the bankers squealed about their 'liquidity' problems this also referred to their debt overhang or 'leverage'. All the unregulated lending that they had undertaken had been placed in nice little packages called Credit Debt Obligations (CDOs). These are like a mixed bag of bitter lemon and sour plum sweeties, bits of 'toxic', i.e. nonpayable, debt from both the personal and corporate sector bundled together and sold off as 'going concerns' to other banks. It sounds quite daft to us, but banks were selling off their own bad debt packages and at the same time buying more of the same stuff from another bank.

To make these CDOs appear 'sexy' they were stamped with a financial regulators AAA rating - (In Britain by the Financial Services Authority (FSA) and in America by S&P (Standard and Poor's) and Moody’s credit agencies, apparently to guarantee credit worthiness. This has turned out to be as meaningless as branding them with a tattoo of a sailing ship. It is important to recognise that these supposed 'regulatory agencies' are also offshoots of the same banking system and staffed by the banks' former employers and employees. (It is akin to the Chicago mafia being monitored by Las Vegas gangsters).

The loans that companies took out from banks were part of another little banking wheeze called Credit Default Swaps (CDSs) which are a kind of insurance used to guarantee a debt in case of non-payment. But these have also be sold on to speculators. They have become like gambling chips as speculators determine which CDS/company debt is bad and which one will perform.

There are probably many more types of three or even four letter debt bundles out there in the banking ether but collectively they are what the financial market calls 'Derivatives'. And, lo and behold they too have become defined as 'products' that can be bought and sold, rebundled and then bought and sold again, over and over and over - each transaction creating mystical profit as in pyramid selling.

The arch-speculator Warren Buffet has referred to derivatives as "financial weapons of mass destruction" which is something of an early warning siren of the ability to explode at any given moment.

The problem is that if derivatives do blow up we will not be talking about the financial tin hat, similar to the $700 billion TARP package that US Treasury Secretary, Hank Paulson stuffed into the recent American banking dam burst. Instead we will need a nuclear protection shield whilst sitting in a bomb crater of tens of trillions of pounds of high explosive. It is worth reminding ourselves of George W.'s outburst when it looked as though Congress wouldn't support Paulson's plan, he said, "If money isn't loosened up, this sucker (i.e. the US economy) is going to go down."

There are still mortgage related landmines out there in the financial swamp as well as the unexploded ordnance of the derivatives. Another explosive tinderbox that is lying over the horizon and yet to appear is non-performing credit card debt. Then we could mention the probability of 'sovereign' debt failure, that is there is a strong possibility that one or more of the emerging economies will crash whilst watching their export income vaporise and with there ability to service debt. There are also small, International Monetary Fund loan dependent nations who will lose their ability to generate the revenue necessary to finance their existing debt obligations and so default.

It is clear from all this that a camouflaged tripwire could yet crash the financial system more widely than 'sub-prime' managed. Over the coming weeks and months there is a likelihood of other banks failing on a worldwide basis. Thus, at the moment the best that can be said about America and the world economy is that they are just about flying but only on a wing and a prayer.

Even before September's banking crisis there was sufficient evidence to suggest that the broader economy was desperately ill and slipping into a coma.

By July, it was not apparent but Japan, Germany and the 'Eurozone' were already registering negative growth and technically entering into recession. This is proof that the world market had contracted and two major manufacturing exporters were unable to maintain their necessary volume of export sales to America.

There was an inevitability about this outcome as it was only a matter of time as to which of the two sectors of the world economy, financial or manufacturing, would crack first. The consumer spending bubble had burst. So what is now the most likely course of events?

E.R., Theatre and then the Isolation Ward?

"Events dear boy. Events." This was the reported response by the former British Prime Minister Harold Macmillan when asked what was the biggest problem of his period of office. Despite the short caretaker role undertaken by Douglas Home, Macmillan was the last Conservative leader of a bygone era. Born in the 1890s, he was an archetypal toff and carried the air and bearing of that progressive Victorian/Edwardian capitalist class who were patronizing and also visionary.

In Macmillan's case it was an illusory vision and belief in the strength of the post-war boom that led him to declare, "most of our people have never had it so good." But his demeanour, together with that of many of his contemporary opposition politicians, genuine Labour protagonists, gave politics a meaning albeit one of defending the status quo.

Today's parliamentarians of all stripes are but a pale shadow of their predecessors. On both sides of the House of Commons the benches are filled with silver tongued place seekers, self-publicists who are economically illiterate and politically inept. There is a misty stench of corruption lingering around Westminster where politics has been reduced to expediency, personal survival, individual aggrandizement and self-legacy.

These wiseacres well represent the wastrel grandchildren and great grandchildren of Edwardian capitalism now occupying company boardrooms and who, rather than being men and women of vision, are blind to their own survival.

The picture in America is just as bleak. The criminal Bush administration is counting down the days to relinquish the power, prestige and access it has abused. This in itself is a dangerous time especially if an uncontrolled world incident should prompt an immediate intervention.

Despite all the illusory tears of joy surrounding the election of a first black President, Barack Obama remains a member of a black middle class that, over too many years, has proven enormously adept at rolling on its back at the behest of white American business, imperialism and supremacy. The endorsement of Obama by Colin Powell, the only man in the Bush administration who could have sold the lie of weapons of mass destruction to the world, should be a concern for all 'liberal' Americans.

In the choice of his Vice President and that of his White House Secretary, Joe Biden and Rahm Emanuel respectively, he has signed up two committed Zionists - the latter fervently so, as well as being as much a committed 'neoliberal' free trader as any member of the outgoing administration.

Despite his electoral rhetoric and under the pressure of a section of his big business, campaign paymasters, this inexperienced leader may ‘decide’ that the poor will have to wait. This was the real fear expressed in that unintentionally broadcast aside of Jesse Jackson, which threatened ‘nut’ removal. On the other hand, the pressure of the masses could push Obama further down the road of reform than he desires to travel.

This uncertainty does not provide the preferred stable political background which capitalism currently requires in order to encourage lending and investment. For all who have set great store in a new 'liberal' American dawn, however, the experience and outcome of Nelson Mandela's prison release and his South African Presidency provides a sobering reality.

Thus we have entered the most dangerous and uncharted waters of post war history with cabin boys at the helm of the HMS Great Britain and the USS Washington. The world already has sufficient intractable conflicts, anyone of which this current batch of 'visionaries' could further inflame.

The crisis has entered the so-called real economy with the news of profit warnings, three-day working weeks and permanent lay-offs on a world scale, including China where factory closures have already caused clashes between workers and police.

One feature that will be common to all industries and all countries is that there will be fewer companies when the world economy emerges from this downturn. Some will collapse completely and their assets scrapped. Others will be picked over by descending 'vultures' that will salvage the profitable sections of the business and the reusable physical assets of the company - buildings, machinery, materials, etc. Some companies will merge whilst others will be taken over, lock, stock and barrel. Thus, there is always a tendency to the increased monopolisation of the commanding heights of the economy, those companies that can be classified as being 'multinationals'. This development also includes banks and the broader financial sector, as future wealth will become concentrated within a smaller percentage of the world population.

This process is underway in Britain. The financial sector has been shedding staff since the Northern Rock debacle and the trend is likely to accelerate in the wake of other failures and mergers, both current and future, and on the back of redundancies in the other service and the manufacturing sectors.

Lending activity, the raison d'etre of banking, has almost dried up as banks and building societies select only gilt edged projects from where repayments are guaranteed. A recent British Treasury prediction suggests that, if current trends persist, by the end of 2009 net mortgage approvals will be almost non-existent. In 2007 £108 billion worth of housing loans were released, this year the figure is down to £40 billion with just one month to go.

The construction industry has almost disappeared apart from contracted work guaranteed by public, i.e. government and local government spending.

This is an area of the economy that has been served by many immigrant workers some of whom will be already home in Poland and beyond. Other construction workers were self-employed sub-contractors whose demise will not yet be shown in a rise of benefit claims and unemployment figures.

British car manufacturing was already but a pale shadow of its former glory and has reacted to the downturn ahead of many other manufacturers. Some parts' manufacturers have already announced redundancies but as with the engineering sector, employers will be reluctant to lose any of what is now a small highly skilled workforce compared to the past. Land Rover/Jaguar has requested a government bailout and we have announcements of car plants closing down early for Christmas, Honda in the run up to Easter, whilst intending to retain their skilled staff. A sign of how severe the slump will be is when specialised workers are made redundant in key manufacturing sectors. In 2009 it is probable that the motor industry will suffer another permanent retraction.

In America the situation is far grave due to the size and geographical concentration of the motor industry. The three giants, Chrysler, Ford and General Motors are in many ways the godfathers of American capitalism around which the twentieth century manufacturing and economic supremacy was built. Like the British car industry they suffered from imported Japanese competition in the 1970s but proved more resilient to the challenge. Gradually, the small saloon and hatchback have displaced the 'gas guzzler' in the American market yet through the 1990s the big three were still competing with each other for the title of 'biggest is best' as petrol driven trucks and SUVs flooded the highways. The star of the Iraq war, the Humvee/Hummer, is the mobile gravestone that marks the death of this American muscle.

As I write, it is most likely that at least one of the three giants will file for bankruptcy, probably General Motors and/or Chrysler, unless a government bailout is put in place. If the car giants go down the knock on effect will be the loss of a million to two million American jobs directly linked to the industry and tens of thousands in its dependent services. Britain and Europe will also suffer subsidiary losses. The 'Rust Belt' has suddenly become a lot rustier.

These are the early recessional days for both countries but more capacity is likely to vanish as the slump deepens and the world's motor industry retracts.

It is the rapidity by which the downturn has struck that has shocked even the most talented of economic analysts. The effect upon the engineering specialist GKN is instructive.

For the first nine months of this year, GKN's sales were up and profits ahead on the same time last year. Then, in October it announced that profits would be down 20%! By the middle of November this estimate was revised down further as a realisation dawned that production for November and December would be a further 20% down on what was previously thought!!

The three months running up to Christmas are normally the time of the year when the US generates 30% of its gross domestic product (GDP) - This is the total of goods and services produced and consumed within a country over a twelve month period whereas if overseas investment earnings and possessions are included it is known as gross national product (GNP).

If American producers of goods and services are experiencing a similar downturn to that of GKN then it gives some indication of the depth and scale of the impending slump - it would mean the US economy has bombed in the eye of the Greenspan 'tsunami'. The fate of the rest of the world will then hang in the balance.

Every indicator suggests that the world economy has seized up from China to Brazil, Australia to Europe.

There is a sclerosis of trade routes as all but the most basic of necessities are left alone to ply the waves.

In May this year, the Baltic Dry Index stood at an all time high of 11,793 points but by the start of November it was down to 826. It is an index that tracks the cost of shipping bulk cargo around the world, such things as iron ore, coal, grain etc. It is, therefore, a barometer of global trade. At the peak of the market a 170,000-tonne bulk carrier cost $234, 000 a day to hire. Today, it will cost you less than $5,600 a fall of 98% and such a fall reflects a total collapse of global industrial buying and selling.

Economies are in recession when they record so-called 'negative growth'. The announced figures are less than -1% at present but the fall will go into more negative territory as the recession deepens. If the economies were to reflect the kind of 'drop' indicated in the production and trading figures above, capitalism will sink into an abyss.

4. Where We Are Heading and What Will Be Done

The Depths of Desperation

There are day dreaming analysts who, when faced with the evidence to date, maintain that we will experience a short, shallow recession from which the world will emerge, after 2010, in a much more robust state. Then there are those of us who, based on the evidence that we have presented, believe that we are sliding into a depression and a deflationary spiral.

There is no perfect formula for the prediction of economic events; capitalism is an anarchic system within which logic has no meaning. There are, however, facts, trends and developments which act as indicators of probability. When we said back in July that a depression was impending the daydreamers and media hacks of prominence - like Lord Desai, Ruth Lea and Irwin Stelzer, those with the closest ear of the government - were predicting a 'slowing of growth', no more than that. When we said back in January that the US was probably in recession and that a serious downturn threatened they were pooh poohing any such pessimism proclaiming that the 'fundamentals' were 'sound'. Well, we are where we are.

The last time the world experienced similar economic circumstances to those of today was in the 1930s in the wake of the financial crisis resulting from the 'Florida land boom' which acted as the trigger for the 'Wall Street Crash' in 1929. For 'Florida land boom' substitute 'sub-prime crisis' and for 'Wall Street Crash' substitute 'Credit Crunch'.

Whether we will experience as serious a development as 'The Great Depression' is not the important statement for us to make at this stage. The notoriety of the 1930s is very much a retrospective and no two developments are the same, but our prediction is that this downturn will be a deep slump that will extend over years rather than months.

In 1929 shares on the Dow Jones index collapsed in value. Stock prices lost 17% of their value over September which prompted interventions from bankers in an attempt to stabilise the market but by late October all was lost as, over three trading days, prices suffered consecutive double digit percentage falls. Over the next three years stocks continued to slide to finish at a low of 89% off the pre-crash peak.

By comparison, today's market has not yet shown the same, double digit, consecutive daily falls and there are mechanisms in place to suspend trading when drops are underway. However, at the time of writing, the US S&P 500 (some of America's largest companies) is 52% off peak suffering its biggest percentage decline since 1937, whilst the Dow Jones latest was 7,572 down from its October 2007 highest ever peak of 14,164, close to 50% down.

There is no apparent halt to the worldwide stock market slides whilst financial crisis and projected company insolvencies persist. In fact, the US stock market's fall has been gradual and persistent, mirrored across the globe in the panoply of stock exchanges that did not exist in 1929. Now, driven by erratic sentiment - hope one day, despair the next depending upon breaking news - stocks and shares are joined in a global dance of death, down today, up tomorrow, down, down, deeper and down only a day later.

It must be remembered, however, that stock markets are nothing more than national/international ‘business casinos’ where some people stash their savings in the hope that it will grow into a retirement honey pot. Every day the equivalent of billions of pounds of the surplus funds of the rich and super rich - which they have decided has nowhere else to go - is used to speculate, i.e. to gamble, jumping in and out of this stock and that, trying to buy low and trying to sell high. Stock markets are barometers of economic circumstances not usually the drivers of economic affairs and they merely reflect global events and the upward and downward trends of the world economy.

One thing is sure and will come to pass. The 1930s was a decade of economic, political and social upheaval and the coming years will prove to be no different. By 1939 there was still the same structural economic weakness to that which prevailed in 1933. The tractor that pulled the western economies out of the mire of depression was not any 'New Deal' but rather war and the huge armaments production that it demanded.

There is also one gargantuan difference between then and now and it is the geography of capitalist production.

Apart from Soviet Russia the hubs of production and consumption in the 1930s were America and Europe. Despite some industrial capacity in China and Japan much of the rest of the capitalist world remained as exploited colonies, the milch cow of Western manufacturing dominance.

At that time, Britain was the industrial giant of Europe and, together with America, suffered the brunt of the downturn.

Today, however, the economy has become globalised with industrial production and extractive industries on every continent. In every country there is a level of necessary consumption linked to monetary exchange rather than the traditional barter and exchange of a bygone age. Debit and credit cards are internationally accepted forms of common currency whilst the banking system of each and every country has a global inter-dependence. What happens in Nigeria has an impact in the Netherlands, Tokyo is affected by events in Timbuktu and this time Russia nor any other country has immunity to the contagion.

In previous post war recessions there wasn't a coordinated global collapse thus stronger, less affected economies were able to act as a motor of recovery for the failing economies of other nations. That changed with the 1990-1992 recession in Japan.

Through the 1980s, the Japanese were using the vast profits generated by their successful industrial expansion to acquire foreign assets, speculate in equities and in domestic land and property in particular thus creating classic economic bubbles. The collapse of these bubbles in 1991-1992 coincided with the emergence of Chinese production and its early penetration of the Japanese market with cheap goods.

The banks were over extended, under capitalised and then caught by the high level of defaults on property loans.

The Japanese government attempted to follow America and Britain by lowering interest rates, and thereby the cost of borrowing, as a means of stimulating the economy from recession.

The combination of these features initiated a deflationary spiral - this is the opposite of inflation and could be called negative inflation. In a period of deflation there are too many goods chasing too little demand i.e. money supply, both real money and credit. The result is that prices continue to fall in an attempt to match the demand and the purchasing desire of the market. In the first three years of The Great Depression for example, deflation was running at 10% annually in America.

Because there was a fear that any one of the Japanese banks might fail, people were reluctant to take out any of the low rated bank loans. Even government tax handouts and a public works' stimulus financed by government borrowing had little effect. The fear of further economic perils prompted the population to stash their money away anywhere other than in the failing banks, for what they believed would be another and inevitable 'rainy day'. Even negative interest rates, that is free borrowing, could not stimulate demand. The government borrowed heavily as time progressed to finance this monetary stimulus and also a programme of 'New Deal' inspired public works. There are plenty of bridges and roads to nowhere in Japan but, sadly, no substantial economic growth. The country remained in the deflationary doldrums until 2002 when growth recommenced but, with an external government debt now standing at 180% of GDP and house prices still falling, the country is clearly back in recession.

All this sounds very familiar to the current world situation. This time, however, it is not one economy with a grave financial exposure but the whole of the world banking system that has been caught up in the property bubble fiasco.

The immediate response of all governments was to address the problem of demand and this still remains their priority. In the attempt to recapitalise the banking system and underwrite loans and banking credit failure, governments have provided the financial market with incredible amounts of money. This has been used to finance nationalisations, part nationalisations, grants, loans and drawable guarantees - $8 trillion in America, £600 billion in Britain and sums to a lesser degree in individual countries across the rest of the world - all designed to stimulate bank lending.

This was followed by a coordinated 0.5% global interest rate cut but to no avail. Banks refused to re-engage in interbank lending and they have showed no desire to lend to recession threatened companies, collapsing small businesses, non-trading retailers and cash light shopaholics. Their priority is to rebuild their capital reserves that for months to come will remain perilous.

In Britain, the Bank of England cut interest rates by a further, whopping 1.5% to bring the cost of government lending down to a rate of 3% per year, the lowest figure since 1953!

The pre-budget report announced at the end of November will add a further £118 billion of government borrowing, £78 billion to this year’s total. This is the highest level of government borrowing since the 1970s when the result was failure with the chancellor running to the IMF for a bail out!

But all this is has only one design, to create and build greater individual consumer debt as a prerequisite to bailing out the whole capitalist infrastructure - insolvent banks, bankrupt governments and fat cat multinational companies, their boards and shareholders thereby to maintain them all in the lifestyles and grandeur that they are accustomed to.

Let us consider Alistair Darling's grand design for saving British capitalism.

Quite simply 1. The government has pumped £600 billion of taxpayers, our, money into the banks. Incidentally, this is money that has never been available of late for improving the standard of our services - for health, education, care of the elderly etc.

Accordingly 2. It now requires each taxpayer to take out an amount of that same money from the banks in the form of high rated debt in order that they, the banks, can make profit from these transactions.

In other words 3. Each tax paying adult will pay the banks exorbitant credit interest for the privilege of borrowing his or her own money back. The very same money which, by a proxy (i.e. volunteered by the government without consultation or consent), they have just given the banks to save the system and the fat cats' bank accounts from failure.

Finally 4. Plus, everybody will pay more back in tax to the government for years to come in order to recover the original £600 billion sum that has just been donated to the super rich.

What a privilege. This is a 'sting' of huge proportions that puts Robert Redford and Paul Newman's film escapades to shame.

This desperation demonstrates that governments are stuck between a proverbial rock and a hard place whilst the ground beneath their feet continues to move.

The November G20, Washington summit meeting was a farcical attempt by French President Sarkozy to influence America into orchestrating an immediate 'Save the World' coordinated action plan.

Again we return to the ultra-sensitivity of the French ruling class with regard to 'saving ones' own skin'. In the wake of the meeting, the French ambassador to the US, Pierre Vimont, implored that, without some action, "social relations" would deteriorate (read: anarchy and revolution) in all parts of the world, thus revealing the subtext of the talks in Washington.

Prior to plans for this meeting Sarkozy had visited the US capital in his capacity as EU president in October, hoping to press George Bush to declare his hand and provide some leadership out of the world's financial problems. Bush, however, is a 'busted flush' cardsharp who America and the world have seen little of since the financial crisis struck in September. He has been 'hunkered' down in the White House nuclear war shelter waiting for Obama to give him the January all clear. Only then will some movement be seen from the new political and economic order.

Barak Obama has declared that he is an economic 'protectionist', that was up to and until this autumn's catastrophe. His initial response will be to calm world concerns and talk of a united policy of action and it is possible that some coordinated action will emerge in order to 'protect' the interests of the 'rich club' of countries.

But, and depending on the speed of new events, it is more than likely that he and other leaders will eventually turn to 'coordinated' self protection. They are more fearful of the 'social relations' of their own populations than the world's huddled masses. Therefore, in the longer run they are more likely to initiate new protectionist 'beggar my neighbour' economic policies. This will only serve to drive the slump deeper.

Gordon Brown's recent economic survival package was primarily planned for the survival of Gordon Brown and, furthermore, it too is protectionist by design.

Popular tax cuts and handouts designed to drive the British population to shopping centres before Xmas, so to save retail business from collapse, is an overture for competitive tax cuts across Europe. Value added tax (VAT) is a spending tax which has been used in the European Union to provide some competitive stability so that no one country can create or achieve a retailing advantage. In cutting VAT by a significant amount sufficient to stimulate spending (it would need to be over 5%+) he will be encouraging the more affluent French and Belgian consumers to book early Christmas Eurostar crossings. (Some economists estimate that up to 45% of France's fiscal revenue is derived from VAT thus any market share loss at this time would be used to rack up other differences between the two countries.)

A small 2% cut to VAT would serve no purpose other than creating an illusion that the government was doing something. Canada made a 2% cut to its Goods and Service Tax in 2006 and it had no impact on consumer spending.

The problem that has to addressed is that of 'demand' which will then stimulate growth/profit. Even by giving an immediate thousand pounds cash handout to each and every adult to increase their consumption would only create a one off, shelf clearing exercise for retailers. The day after we would be back to the same demand problem. Consumer spending must continue day after day, week after week to have the desired affect on growth. As previously stated, growth is an impossible dream for capitalism because to maintain it at the miserly level of the one or two percent it was at prior to the collapse, governments, bankers and bosses would either have to rack up consumer borrowing to the previous unsustainable levels, or almost double workers' take home pay.

Thus, by lowering interest rates and at the same time cutting taxes Brown is attempting a halfway house measure that will run out of steam before the end of the January sales. In early November, the Japanese government gave a direct handout worth $6000 to every household, regardless of their wealth, together with a mortgage support package. A month later and there is little to show for such measures.

For all governments there appears nothing else to do but throw massive amounts of confetti money at their citizens (both used and newly printed notes as well as credit based) to encourage spending on the high street but it can be to no avail.

Once people realise that such largesse will eventually lead to heavier taxation and higher prices, i.e. inflation in the longer term, there will be mutiny over this bounty.

In a deflationary spiral retail prices continue to fall so that the consumer is constantly making do with what they have and awaiting a 'bargain basement' price before making that necessary purchase. There is no countering such sentiment.

Over coming months we are likely to here 'very sincere' announcements from world leaders of new stimulus packages, further rate cuts, more tax cuts, borrowing and 'great' public works but we are not likely to see any significant improvement in the situation.

The Consequence of Profligacy

Within a short period of time all this failure will have severe implications for the emerging economies and the underdeveloped world as much as it has for the developed countries.

The populations of the east European countries may well cast a nostalgic eye on the staple security provided by their Stalinist past with a section of the population demonstrating the demand of a return to the 'old ways'. This will strengthen the pseudo-Stalinism being employed by the Putin/Medvedev regime in Russia and will further undermine the overt, and covert, American influence in the region.

In the emerging countries there is a stark divide between the 'haves' and 'have nots' whose neighbourhoods are often sited within throwing distance of each other. There is now a prospect of tension between and within communities as the export tap is turned off and the fountain of wealth runs dry.

The Indian subcontinent is a tinderbox of conflicts that will now become stark. Debt racked Pakistan is void of any substantive political leadership providing the potential for an Islamic fundamentalist regime gaining control of its nuclear weaponry.

It is India itself is that has been the motor force of the region sustaining incredible economic growth peaking at 9% over the past decade. There have been incredible changes in income and opportunity for a section of society. The middle class administrative and business class has expanded yet the poverty and deprivation suffered by millions persists. India can now launch rockets into space yet cannot create a decent road network between its states and cities thus crippling the supply to its internal market.

But the corrupt Indian ruling caste took its lead from American and British banking partners dishing out credit to its middle classes whilst realising super profits from labour market exploitation, including child labour, at every point of production.

Now that credit has crunched the internal market will collapse with astounding rapidity and brutal results. As the boom has developed so social workers have noted a marked increase in the Indian suicide rate, overwhelmingly linked to debt. It is estimated that every month 1,000 - 1,500 farmers kill themselves as a result of crop failure and debt, the preferred ending a large draught of insecticide. But over the last months there is a marked rise of suicide in middle class professionals, financial brokers and business people. The Financial Times recently reported the fatal plight of a Mumbai family; a 70-year-old man, his wife and his middle aged son and daughter who between them had 73 credit cards whilst the siblings had also taken out a personal loan to start a new business. It is this level of borrowing that is alarming when concentrated in a small percentage of the population but when it is also linked with the developing effects on employment and the standard of living of what is an overwhelmingly youthful population, one brimful with the aspirational diet of western culture, you have a recipe for social explosions.

It is more than possible for Indian, Pakistani and Bangladeshi ruling elites, fearful for self-preservation, to steer the anger down the road of barbarism - of the religious, inter-ethnic and nationalist conflict and pogroms of the type witnessed throughout the post-independence history. There is a real concern of new international warfare in the region not only as a result of worsening Hindu vs. Muslim relations and Kashmiri nationalism but because of the rapidly changing economic and political circumstances. This will provide the means for feckless rulers to distract and direct the masses' attention towards external phantoms.

The continent of Africa is the 'goldmine' of future industrial expansion, its natural resources barely discovered and untouched after 200 years of capitalist expansion, empire and 'independence'. It is a continent where in the Cold War ideologies clashed and largely failed its people. It was where America and Britain in particular propped up wasteful corrupt rulers and governments in order to exploit resources and where modernity has but a fragile foothold.

The last decade has witnessed predominantly Chinese but also Middle Eastern influence, preparing for their turn as the next super exploiters of resource.

Yet the horrors of life suffered and endured by the peoples of Somalia, the Sudan, Zimbabwe and the Congo Basin are a fate that could await any area of the continent with a potential reversion to tribalism and barbarism ignoring all imposed frontiers.

China's development is akin to the early rapid accumulation of industry and worker density that established and fixed the industrial revolution in Britain and then, in turn, every other industrialised nation.

It is because, at this stage, Chinese industry is labour intensive and has drawn that labour from the rural poor, the peasantry. It has been a transhumance of human livestock of enormous proportions, one that has corralled and created almost instant concentrations of urban population. The living and workplace conditions endured by these industrial pioneers have educated them more than any textbook of syndicalism. As with the rise of Chartism and the forging of worker representation in the Welsh coalfields of the 1800s the Chinese working class are starting to stir, they are organising independently and gaining the confidence to engage in struggle. In the southern boomtown of Shenzhen hundreds of redundant workers engaged in sit-ins and clashed with riot police. Even the hundreds of taxi drivers of Guangzhou have clashed with police after an official beat one of their number.

Fearful of this potentially mighty revolutionary force the communist party leaders are engaging in their own version of political tightrope walking. They have indicated that they have to maintain a bottom line growth figure of 8% per year. As previously stated, at this stage of their development the BRIC economies are heavily reliant on exports that are dissolving before their eyes. The Chinese internal market is unlikely to provide sufficient demand to achieve such growth. The population currently has a per capita purchasing power parity that is one eighth of the average of the advanced capitalist countries. Nevertheless, in the desperation of being seen to be doing something, the government has injected the equivalent of £376 billion in a stimulus package as we write.

At this stage the politburo will be wary about committing state forces to confront workers as and when they demonstrate about wage cuts, job losses and factory closures. The national police chief has called on all officers to mend relations with ordinary people and be careful of how they use force to settle disputes. On the one hand they are mindful of world opinion but on the other they do not want to accelerate the process of workers' unity and action, for fear of its revolutionary potential.

In many countries, particularly those of Central and Southern America especially following the election of leaders such as Chavez, Morales and Ortega, it is possible that we will witness social and political revolutionary uprisings over coming years. The rise of these left rulers, the continued presence of the Cuban model and existence of active anti-American imperialism/capitalism movements means that the models and vehicles of change are ready established for such developments in America's back yard.

These are working people who are well educated in the role of imperialism and well experienced in the methods of exploitation and oppression. They are searching for alternative ways to organise society on a more equitable basis.

It is the advanced capitalist countries, however, which now face the most uncertain of futures.

In America and in Britain more than other European countries there is a nurtured and acceptable minimum standard of living and desire for individual success that has prevailed and has been strengthened over the last decade.

It is a standard that is based on property ownership and everlasting job security flowing from the proclaimed eradication of economic 'boom and bust'. This has now been proven to be a cruel illusion for the many disciples of consumerism.

In the fictitious world of New Labour, safeguards were supposed to provide a guaranteed stream of purchasing ability and the opportunity for social mobility. These are the essence of what is now to be taken away from many of those who have been duped by their falsehood of everlasting economic and individual progress. It is unclear what their reaction will be in the first instance.

The workplaces should be the key battlegrounds for confronting those, both bosses and government, who have created this catastrophe. We are in a period of weak trade union leadership, however, and their initial reaction has been to run for cover, unable to explain the nature of these events.

The TUC and union leaders have played a disgraceful role of collusion with both bosses and government throughout the Blair/Brown years. The big unions' leaders, the TGWU and Unite/Amicus, have attempted to portray themselves as left wing but only within the confines of their rhetoric. They have been bewitched by the fairy tale economy, carried away by its superficial froth rather than preparing their members for the inevitable reality. Unfortunately they are hewn from the same dead wood as their political counterparts and colleagues. They will offer no advice of worth and no support of substance to their members. They have already capitulated and are like Napoleon's generals on the retreat from Russia.

It is the workplace convenors and shop stewards who will either trudge in the footsteps of these labour aristocrats or stand and fight to defend their members’ interests. There is no doubt that the action taken at this ground floor level is that which will have the best chance of preventing asset strippers taking away the guarantees of future employment.

They will have to re-read the history of previous struggles to employ the successful tactics of sit-ins and occupations, of secondary action in company and industry related factories both in their own countries and internationally, they will have to re-engage with the 'illegal' activities of flying and secondary picketing. This will be a fight for the survival of the capacity of their industry.

Without this workplace leadership and the re-honing of workers' consciousness and solidarity through organised struggle there are any number of uncharted directions in which the anger of individuals and then groups might be channelled. Many of these byways and blind alleys will be regressive, expressing the worst characteristics of human action and casting consciousness back into the dark ages.

In 1930s Europe it was the equivalent of today's migrant workers and Asian small businessmen - the Jewish and Romany people - who bore the brunt and results of the initial anger and dismay expressed by a section of the majority ethnic, white working and middle class. Right wing newspapers, politicians and the demagogic utterances and actions of fascists whipped up their prejudices. Based on the experience of the rise of Nazism, it is unlikely that today's ruling class would finance and support such a development, as they did in desperation then, certainly not at this stage.

There is, however, a tangible degree of racism in almost every traditional working class district fuelled by a perceived inequality and a perception of favoured access by immigrants to both local and national government provisions and benefits.

The expression of racism is ever present in society and is often based on an irrational, historic fear and a crack-brained delusion of supremacy. In the previous years of the twentieth century it was challenged by the strength, principles and ideology of the labour movement that was present and influential at every point of the daily existence of working people. Today, there are very few points of local contact with sufficient reason and authority to shape a generalised opinion within a community. Even within the workplace the voice of the trade union movement has become increasingly marginalised, ignorant and effete so that it little affects the consciousness of the individual worker and his neighbourhood.

But this rise of racism is also linked to a general lowering of working class consciousness and behaviour.

Though emanating from the upper middle classes the hedonistic expression and appalling public behaviour that has infected society over the last decade has been widespread and created more casualties amongst working class people than those who are more affluent, particularly so amongst young adults.

Hedonism is a peculiar feature of the order of all bankrupt societies or periods of historical excess as they reach their zenith. In the latter years of their existence or before profound crisis and change, such negative behaviour becomes commonplace at all levels of society. So it was with classic civilization, the eighteenth century and the 'Roaring Twenties' of the last century.

The political class also displays this crazed behaviour but in other aspects becomes more and more removed from the people. They become haughty, arrogant and self-indulgent believing in their ‘preordained right’ to rule.

Neither a green nor pleasant future?

There remains one final consequence, which is common to all people, all countries and all continents. It concerns our fields and forests, our wild and our cultivated environments, the birds of the air, the fish and the lakes and rivers, seas and oceans in which they swim. It affects the highest form of mammal right down to the most primitive insect; it is, quite simply, the condition of the planet in total.

The industrial revolution was a necessary and formidable leap for mankind. It resulted in the development of the productive forces that provided the means for so much human achievement but it also was, unknowingly, the harbinger of human destruction.

For too many decades humankind was ignorant of the impact that industrial activity was having upon the world environment. That the smoke belching from factories in one part of the world would contaminate and denude forests and vegetation thousands of miles away. That the bi-produce of our endeavours would seep into our rivers and streams and transform seas into toxic soup. That the very air that we breathe would poison our wildlife and our children. That the sum total of manufacturing activity would transform our atmosphere and climates with potentially irreversible results.

For the capitalist system of production now to be able to engender the future growth and profits it so desperately craves for its survival, its masters and mistresses would have to deny all knowledge of environmental disaster and decay. They would have to embark on a course of rampant exploitation of the remainder of the world’s resources, particularly those connected to the supply of power. Armageddon will have arrived.

The disturbing thing is that a section of ruling class, the neocon industrialists and their political puppets currently ensconced in the White House and Pentagon are environmental deniers.

Furthermore, the production level necessary to bring the multi-millioned populations of the BRICs up to the required standard of living and so become the motor force of the capitalist world economy, as they appear to be destined, is an impossible dream on the basis of the use of current Chinese power supply technology and heavy industrial production. By so doing they will have created a toxic weapon of mass destruction, final.

Taken together, the planet - all its continents and countries, all its seas and its oceans - is facing its darkest hour. Profit is the only logic of the capitalist system and it can no longer be relied upon to deliver an acceptable form of existence to all but the very privileged few - a few million at the expense of billions of the earth's inhabitants. The voodoo economic professors of capitalism, stunned by the downturn, unable to analyse their failed system are like zombies in a trance. All they do is to repeat the failed mantra of "future growth". But the stabilising of their economy would be at the expense of a sizeable proportion of the population who will have needlessly perished, some in the most horrific poverty or circumstances. Quite simply we cannot afford such a paucity of life and outcome. The world's population cannot survive such methodology; there is a need to stop our rapacious greed and consumption now.

All these factors, the economic, political, social and environmental are all part of the decline and fall of the system and represent the objective conditions for profound change. They have matured over many decades and are a recognition that the economic order has well outlived itself, gone beyond its limits and has rotted through its very fabric.

For centuries there have been individual visionaries who have not only predicted such outcomes and change. Some have also provided the ideas by which human beings can better organise and administrate the world on an equitable basis.

Unfortunately the vision that previous thinkers developed was ahead of history. The masses of those former periods were ill-equipped, disorganised and lacked sufficient quality and quantity of leaders.

Now the destiny of humankind is clear. We need to use the planet’s resources to provide a better quality of life for all within a more sustainable environment. The only factor necessary for change and the one which is needed to complete this mission is the subjective factor, that is the people, those in sufficient numbers who are willing and desperate for change and to be organised behind a leadership equipped to eradicate the old order and direct the construction of the new. This is the most pressing demand for society.

In the three decades that preceded World War II, the education of individual workers was limited. Most had left school by the age of fourteen with limited ability - a schooling in the three Rs together with general understanding of God, King and country. This was a working class who, overall and in the direst of times, was too untutored and inexperienced for the seizing power and the administration of a modern society.

It was the educated children of the middle classes who were groomed for that destiny and for the professions - the scientists and doctors, the managers and civil servants. These were the chosen ones who were schooled in allegiance to the system, defence of the social order and trained in the method of administration. It was the middle classes who, in that time of economic crisis, were able to maintain the control of the ruling class. But, as history teaches us, this was only achieved with such a massive human and material cost across a war torn Europe and Far East. In essence they actually failed.

Today, as a result of the advances in education and welfare provision made under the pressure exerted by organised workers in the immediate post-war period the situation is transformed. The legacy of the working class and peasantry of the 1930s is that their grandchildren and great grandchildren are the ones who are educated and have achieved professional status. This factor has been replicated, over and over, across the globe in every country and every corner. There is a more than adequate knowledge and aptitude for rule within the broad masses and, if we realise our historic destiny, it exists in sufficient density to take this planet forward to a wonderful and harmonious future.

The pendulum of history moves from left to right with greater frequency as the crisis deepens, we now live in a period of sharp turns and sudden changes. There will be great opportunities for working people to grasp their own destiny.

In the late 1930s it was the threat and imminence of war, which stimulated the production of the means of war - heavy industry producing conventional weapons - which overcame the economic impasse but replaced it with the blitzkrieg for Europe's desperate masses.

At this time, and because of the nature of the modern weaponry, a war is unthinkable. Those who would have most to lose in the reality of mutual self-destruction are currently controlling the weapons. However, with the political uncertainty that will unfold over coming years it is not beyond belief that such a destructive potential could arrive into the hands of madmen and those who seek eternal salvation in an afterlife. This would prepare the world for their desired end, not ours.

In the 1930s one visionary of human achievement, Leon Trotsky, wrote, "...life is beautiful, let future generations cleanse it of all evil and oppression and enjoy it to the full."

For such a dream to become reality we must not fail in building the subjective means to ensure a long and prosperous future for all humankind, and reader therein lays our destiny.

Addendum: Since the writing of this document it has been announced that the USA entered into recession in December 2007! Thus preceding the sub-prime financial crisis. This poses the intriguing question of chicken or egg? Perhaps the answer will be found, inevitably, in a chicken omelette.

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