Making austerity work in Britain for Dummies (Anti-statist version)
!Quelle Surprise! Like Greece and Spain before it, the UK finds austerity can only result in more austerity:
U.K. Tories to Press Ahead With $16 Billion of Welfare Cuts
The Conservative Party will press ahead with plans to cut 10 billion pounds ($16 billion) from the welfare budget and reduce spending by most other departments as it extends Britain’s austerity program into a seventh year.
The cuts to the benefits budget will go ahead as long as they meet safeguards sought by Work and Pensions Secretary Iain Duncan Smith, who has clashed with Chancellor of the Exchequer George Osborne on the issue since the party came to office in 2010. Duncan Smith and Osborne published a letter today saying the differences had been resolved.
“We are both satisfied that this is possible and we will work together to find savings of this scale,” the ministers said, according to excerpts released by Osborne’s office.
Osborne will address activists at the Conservatives’ annual conference in Birmingham, central England, later today, seeking to assure voters that his party will spread the pain of austerity across society. He’ll accuse the opposition Labour Party of focusing too much of that effort on the rich.
“There’s unfairness if people listening to this show are about to go out to work and they look across the street at their next door neighbour with blinds pulled down, living off a life on benefits,” Osborne said in an interview with BBC Radio 5 today. “Is it fair that a young person straight from school who has never worked can find themselves getting housing benefit to live in a flat when people who are working, perhaps listening to this program, are still living with their parents” because they can’t afford to move out, he asked.
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Osborne is seeking to extend spending reductions across government departments as a 2010 effort to rid Britain of its budget deficit by 2015 is pushed back a further two years. Britain spends more than 200 billion pounds a year on welfare, accounting for 30 percent of total government spending. The Treasury said in March that welfare cuts of 10 billion pounds are needed by the fiscal year that runs through March 2017 on top of the 18 billion pounds of savings already announced.
See this is the problem with austerity — the more you cut, the more you must cut. Folks, if the fascist state is subsidizing capitalism by accumulating debt, cutting fascist state deficits only weakens capitalism.Since the fascist state is propping up profits through its accumulation of debt, if this debt accumulation is reduced, it sets off a vicious cycle which can only end in each round of cuts making necessary the next round of cuts.
Plan B for dummies
If we are at the point where the only thing holding off collapse is fascist state debt, we can pretty much figure out who goes first:
Everyone without a reserve currency, raise your hand.
Okay. Now everyone without a massive current account surplus, raise your hand.
Finally, everyone without both a reserve currency AND a current account surplus raise your hand — Anyone? Anyone?
HINT: I’m looking at you Britain!
Depending on where you are in this chain of potential sovereign default risk, it is increasingly likely everything you try to do that is consistent with the continuation of wage slavery is going to end up pushing you further into a deepening hole of risk. If you have a reserve currency, you are least at risk; if you have a large trade surplus, you are at moderate risk; but if you don’t have either …?
Well, let’s just say if you don’t have a reserve currency or a trade surplus it is time for Plan B:
Okay, so first off anyone who does not have a reserve currency as its national currency should adopt one pronto — fuck national pride. And fuck your Welfare Queen too! Moreover, for what we are about to do next, you will want the most liquid and most important reserve currency available on the world market — the American Dollar. You know:
“In God We Trust, All Others Pay Cash”.
Don’t leave traditional fascist state economic policy without it. So even if you use euros, you’ll probably want to allow the dollar to circulate freely and legally as money in your economy as well.
This will mean you no longer can have fiscal or monetary policy, but you don’t have it now anyways — so no loss, right? Every dime of deficit spending you have is already probably denominated in some reserve currency you do not control. Since this cannot be sustained in the long run, we are going to do is substitute reduced hours of work policies for the loss of fiscal and monetary policies. The aim is to transfer as much of state spending to the private economy as possible, ensuring there is no loss of income for working folks. Gone are the defense budget, foreign interventions, and the bloated civil service sector.
Which is to say, our aim is to squeeze the fuck out of domestic capital and force it to be more productive.
Reducing the unproductive state sector has the added benefit of reducing the domestic trade deficit as well, since state deficit spending is basically responsible for trade deficits. This will, of course, leave the state unable to service its debt — pushing it into bankruptcy – which is perfectly fine. The only people profiting from state sector debt is Wall Street. Let the state sector go bankrupt, since you have now insulated the population from the effects of such bankruptcy by drastically reducing hours of labor.
What we have done now is imposed a reverse-austerity — one that hits capital and the state instead of labor. We have done this by getting rid of the trade deficit and forcing Wall Street to accept the losses on the public debt. We have also removed the currency risk of such a move by adopting a reserve currency. And, finally, we have removed the risk to the working class, by eliminating unemployment from the equation completely.
Without currency risk, capital flight is no longer an option — there is no currency arbitrage. With a severely reduced state sector, the cost of unnecessary labor is squeezed out of the economy and it becomes “more competitive”. Since the state has defaulted on its debt and is under severe spending constraint, no one in their right mind will lend to it.
Moreover, every time there is a state or trade deficit or unemployment, we will just cut hours of labor still further to address these deficits.
There is no better way to kill the accumulation of debts and trade deficits or unemployment — which are all just forms of fictitious capital — than reducing hours of labor. Moreover, by doing this we are only doing proactively what the world market is doing naturally with unemployment: reducing unnecessary labor costs. The world market is already stripping nation states of their capacity to run fiscal and trade deficits through monetary and fiscal policies. However, it is doing this by forcing these nations into austerity regimes that place costs of this labor rationalization on the working population
All we are doing is displacing this impact with one that hits fictitious capital instead. Essentially, instead of rationalizing on the basis of money wages, we are rationalizing on the basis of labor time.
Marx’s theory suggests this works, because the value paid in wages must equal socially necessary labor time in both its simple commodity and its capitalistic forms. It should, therefore, be more effective than trying to subsidize profits as the fascist state does through economic policy.
Whereas capitalist austerity is inherently depressionary, reverse-austerity, as I outlined it, has no depressionary effect at all.
This is an interesting suggestion – but it begs many questions. For starters, if the government goes bankrupt ( I assume you mean defaults on its debts) how will the currency be worth anything? And without a functioning government how would we implement a policy of drastically reducing the hours of labor for the pay of full time work? It seems to me that you would need the government to mandate this reduction in “socially necessary” labor hours – and that without such a mandate the population wouldn’t be insulated from the effects of bankruptcy.
Having said that your analysis seems to make sense from a macro-economic point of view – Working less for the same pay would keep everyone employed.
Thanks for your comments, Al. A few answers to you questions:
“…if the government goes bankrupt ( I assume you mean defaults on its debts) how will the currency be worth anything?
This is why the country in question must move to adopt the dollar, which is immune to default risk — or at least low enough on the scale of risk as to be immune.
“And without a functioning government how would we implement a policy of drastically reducing the hours of labor for the pay of full time work.”
Surprising as it may seem, you do not need a budget to enforce laws reducing hours of work. People will not work one minute longer than they have to.
” Working less for the same pay would keep everyone employed.”
This has nothing to do with working less for the same pay. Remember, the currency is just a worthless piece of paper. Prices can adjust to any level of real economic activity. If hours are reduced, prices will have to fall because there will be less wasted labor overhead. So, even with less wages, the actual income of the working class will increase, because prices will have to fall faster. The scam used against us all of these years is the common misconception that the amount of currency we are paid has some definite relationship to our material standard of living. This is not true.
Thank you for the response. If I follow your argument, you are suggesting as more and more people end up in part time and/or seasonal employment, they will make less. Thus prices for goods and services will have to fall given that there is less demand for them. If this is the case, mass deflation will eventually cause the system to mutate into something like communism? It’s a nifty description of the road we seem to be on but it still begs all sorts of questions – and this is where I think political considerations are still relavant to the discussion. I can certainly see the logic but it suggests decades of suffering at levels of deprivation not seen in the united States since the great depression. And given the standard of living most Americans have come to expect, the trajectory your describing will lead to massive unrest and will likely provoke massive resistance from both the left and the right. In my experience it is the right the tend to have the guns and far more innovative at mobilizing people. Thus larger regional or even a world conflict would seem just as likely as progress toward communism. In fact, we don’t have to imagine it – we just have to look at what happened in the 1930′s.
I think there are two things to separate: the scenario you outline is going to happen in any event. My argument is designed to avoid that by immunizing the working population from its effect. Simply stated, the scenario you outline is nothing more than a futile attempt made by capital to shift the burden of the inevitable collapse of capitalism onto workers. We can prevent precisely what you expect by reducing hours of work.