We asked a number of writers what they would do to make sure that things are better rather than worse by this time next year.

(David Purdy, Cameron Brown, Maggie Chapman, Carlo Morelli, Robin McAlpine, Gregor Gall and Stephen Boyd)

Stabilise and stimulate  - David Purdy

When the US government allowed the investment bank Lehman Brothers to go bust, the credit crunch finally went nuclear, precipitating a spectacular global banking crisis and sending stock markets around the world into a tailspin. At the time of writing in mid-October, fear of widespread bank failures has abated thanks to the emergency government rescue packages improvised over the past two weeks. However, as the danger of financial collapse recedes, the prospect of economic recession looms. In the coming months, the priority must be to prevent an ordinary recession from turning into a full-scale depression.

If no action is taken to limit the depth and duration of a sharp economic downturn such as we are now experiencing, or if governments do things that make the situation worse, the fall in spending – by households on consumer goods and by firms on means of production – will not only drive down sales, output, employment and incomes: it may also do lasting damage to business confidence. Eventually, every downturn bottoms out. But what goes down does not necessarily come straight back up. If confidence has been shattered and firms are pessimistic about future profits prospects, they will be reluctant to risk spending money on new investment projects, whether to enlarge production capacity, launch new products or install new equipment. If anything, they will seek to reduce capacity by closing plant and scrapping equipment. In these circumstances, economic activity may stagnate for years on end, as happened throughout the capitalist world in the 1930s. And once depression sets in, it is very difficult to engineer a recovery. In the 1930s, only two governments presided over successful recovery programmes: the social democrats and their allies in Sweden and the Nazis in Germany. In Britain and the US, the scourge of mass unemployment was only brought to an end by the great mobilisation of the Second World War.

So just as governments have intervened to save the banking system, they need to act promptly to shore up total spending. In principle, this can be done either by cutting taxes or increasing public spending. Tax cuts can be implemented quickly, but in a climate of fear and uncertainty, when many households and businesses are struggling to pay off debts, an increase in disposable income brought about by lowering taxes is more likely to be saved than spent. In the long run, if we are to rely less on credit, we need to revive the habit of saving. But here and now the problem is to combat recession. The government should, therefore, increase public spending, allow the budget deficit to widen and finance it by issuing new bonds. At a time when gilt-edged securities provide a safe haven from plunging equities, there is no need to fear that higher public borrowing will drive up interest rates. But just to make sure, the government should reinforce its fiscal stimulus by abandoning the inflation-targeting regime that was introduced in 1997, so as to make way for early and deep cuts in the Bank of England’s base rate. This regime was designed to cope with home-grown inflation, not imported inflation. In any case, the upsurge in global food and fuel prices is subsiding. The danger we face today is deflation: falling prices. This must be avoided at all costs. If people expect tomorrow’s prices to be lower than today’s, they have an incentive to postpone spending if they can, thereby accelerating the slide into depression. This is what happened to Japan in the 1990s.

It will not be easy to rewrite the rules of fiscal and monetary policy in a hurry. Two obstacles in particular must be overcome. One is the widespread belief, assiduously propagated by the media and the Conservative Party, that the sharp rise in public debt arising from recent state acquisitions in the banking system, obliges the government to cut public spending and raise taxes. This is dangerous nonsense. Borrowing funds to acquire banks or shares in banks is a financial investment. This is quite different from borrowing to maintain demand for currently produced goods and services. Buying bank shares at depressed market prices should be a good deal for taxpayers in the long run, provided the government pursues appropriately expansionary fiscal and monetary policies today. But if it follows the example of its 1930s predecessors and vainly tries to balance the budget at a time of recession, it will make a bad situation worse, depressing asset prices still further and setting off a vicious spiral in which the value of private asset-holdings and the volume of private spending chase each other downward. To counter unfounded fears that deficit-finance will impose a burden on future generations of taxpayers, the government should prioritise projects that bestow lasting benefits on society as a whole, would not otherwise be undertaken and can easily be stepped up or eased off according to the needs of the moment. Given the urgent problem of climate change, the need for drastic cuts in carbon emissions and the signs that the era of cheap energy is over, the obvious candidate is a government-sponsored programme of home insulation. This would have the additional advantages of reducing household fuel bills and giving a boost to the building industry.

The second obstacle to a new macroeconomic policy concerns wages and prices. The aim of the inflation-targeting regime presided over by the Bank of England’s Monetary Policy Committee is to contain the growth of money wages across the economy as a whole. If, for example, the growth of money wages threatens to exceed the growth of output per worker by a margin greater than the central inflation target – currently two per cent per annum as measured by the EU-standardised Consumer Price Index – the Committee raises the base rate of interest so as to curb spending, restrain economic activity and subdue the growth of earnings. Indeed, given the general weakness of organised labour, the mere threat of higher unemployment may suffice to keep wages in check. In effect, inflation-targeting is a system of wage restraint by remote control.

It would be neither responsible nor credible to ditch this system without providing a functional substitute. If money wages are not contained by rising unemployment or the threat of it, there has to be some other way of countering inflation. The democratic alternative is a negotiated incomes policy designed to protect the real incomes of the poorest groups in society and load the burden of restraint on to those with the broadest shoulders. The government could, for example, announce its intention to introduce measures safeguarding households at the bottom end of the income distribution and increasing taxes on those at the top end. On this basis, it would have the moral authority to seek a general, voluntary agreement on pay restraint. Social security scales are already uprated annually in line with the Retail Price Index. It would be a relatively simple matter to extend this arrangement to the National Minimum Wage. At the opposite end of the income scale, the government could raise the higher rate of personal income tax from 40 to 50 per cent and increase capital gains and inheritance tax.

The next step would be to convene a national economic forum, comprising representatives of all the relevant stakeholders – from the government, Bank of England, employers’ organisations and trade unions to sole traders, unpaid carers and students – to discuss how to promote economic recovery and reduce income inequality without stoking up inflation. And if this exercise in social partnership succeeded, multilateral policy negotiation could become a permanent part of the machinery of national economic management, a ‘Green New Deal’ creating the conditions for extending social ownership and democratic control over the economy, so that it contributes to human well-being and ecological sustainability, rather than personal insecurity, social decay and environmental degradation.

 David Purdy is an economist and member of Democratic Left  

Contain and reclaim  - Cameron Brown

At time of writing the financial crisis is just that – with minimal impact on the wider population. Albeit unemployment is edging up, the reality is that the numbers of the employed has never been higher. Scotland has a higher proportion of public sector employees who are relatively immune to financial crises. Governments are showing a readiness to maintain effective demand through the crisis and there is no need for panic. But there will be a few people who will be more uncomfortable this Christmas.

The losers are:

In the bloated financial services sector. But I argue that for too long the Financial services industry has acted as a parasitic layer on the rest of the economy and has grown fat at the expense of the rest of us. It was they that needed high interest rates to attract hot money, it was they that encouraged high levels of personal debt and it was they that fed the rise in house prices. Now the ambition of the UK to become the financial centre of the world looks like hubris. And look at it from a personal point of view: if you have real skills then there may be opportunities in Dubai and Mumbai where the weather is better. Ones left behind can look for more fulfilling work in the real economy. They can’t complain as they have been trained to know that markets can go down as well as up.

Those with private pensions invested in equities looking to retire immediately. The answer is that individuals should maintain their funds in their pensions until indices rise again – don’t forget the money hasn’t gone away but is waiting to re-enter after the bottom has been reached. They should ask to work on … It is better for people and economically positive for people to work if they can anyway. If they are in poor health they should negotiate with their pension funds to get more rapid draw-down of their pensions. One of the Scottish scandals is that not only do the Scots die sooner but they lose out more from their pensions. Perhaps the government in Scotland could negotiate to help individuals in this situation by buying up annuities.

Those businesses that need short term capital to survive. This is where we should be most worried and insist that banks do provide liquidity. If necessary the Government should provide earmarked funds for this purpose.

Those in personal debt who may find their houses repossessed and declared bankrupt. Without wanting to trivialise the pain I would argue that in a world of declining asset values (at least in the short- to medium-term) it may be best for individuals and businesses for this to happen. They have been induced to take risks they cannot afford. Better to admit it sooner rather than extend the pain. Houses can be taken into public ownership and rented at market values (i.e. lower values) and offered back to those who would be homeless otherwise. Companies can be put into receivership and put on their feet as going concerns.

So if the financial crisis can be contained not too many people will be directly affected. There is a general effect that will be registered from a write-down in equity values but there is still time for these asset values to climb off the floor.

The other side of the coin though, and what I pointed to earlier, is that there can be positive returns from a shift in strategic direction. Where does the future of Scotland lie? Is it in developing a financial services industry to compete with the world? Or in other directions? I have argued that there is an opportunity to diverge from a high interest rate, high exchange rate economy structured to support financial services at the expense of high levels of debt , risk and inflated asset values. Scotland should be advocating membership of the Eurozone and the policies of the European social model. The Anglo–Saxon model has been thoroughly discredited and we should stick the boot in.

In return Scotland needs to manage its own assets much more carefully. It owns oil, gas, wind, and tidal energy resources. Its seas should be reclaimed and managed for long term sustainability. Argiculture should be refocused on high added-value production rather than animal feed. Scottish universities should be encouraged to expand and attract English and foreign students. Tourism can be encouraged by first a more competitive exchange rate and then higher standards in cultural and hotel and food services. Industry can be encouraged by lower interest rates and exchange rates. Credit can be channelled into industry rather than personal consumption. The quality of people’s lives can be promoted by transforming the national diet by mandatory high quality school meals and breakfast clubs. Building standards can be improved with subsidies for insulation, efficient central heating, CHP schemes, etc.

In effect there is an opportunity to make Scotland more like Europe than England over the last twenty years. An economy focused on industry and high quality public services. Lower levels of personal consumption and debt. Lower property prices and a regulated financial services industry. So what would I offer to stop people suffering next Christmas?

Faith. We have to give them confidence that there is a better way. We need to substitute blind faith in the market with a government and national culture confident in being able to live in a trading world to provide both high quality social and economic welfare in close cooperation with other nations in Europe.

Understanding. Rather than being blindly herded into a high consumption, high debt lifestyle people can come to understand that a less risky, more predictable life can be satisfying and positive.

A Strategic shift. To pursue a national strategy better able to deliver sustainable results. Repudiate a country run by financial services for financial services.

Simple, effective reforms. Pension reform, ensuring that good businesses receive liquidity, bringing houses repossessed into public ownership using accumulated housing funds.

 Cameron Brown is an ex NHS Trust Director and Management Consultant specialising in Healthcare issues   

A Green New Deal  - Maggie Chapman

In recent weeks, the modern globalised capitalism has gone out of its way to demonstrate that it can’t look after itself. If the current crisis is the film Home Alone then international finance has attempted to protect the Christmas presents from burglars not with ingenious traps, but by burning the house down. As a result, even the most avowedly laissez-faire of governments, that of George Bush (remember him?), has been forced to nationalise the bulk of the US mortgage lending sector. On this side of the water, the government resisted briefly but was forced to take ownership of Northern Rock. A friend recently accused me of having successfully predicted 10 out of the past two recessions. It may be my naturally sanguine personality, or it may be that each time those recessions were averted, the creation of more debt and the move further towards a service based economy made the inevitable recession much, much worse. More borrowing fuelled more economic growth, but we all know what happens when the cure for a hangover is more drinking. What we are seeing now is effectively the product of a 10-year drinking binge. While there were brief periods of sobriety after the dot com bubble burst, and after the World Trade Center attacks, we have experienced collective economic drunkenness for most of the past decade.

Greens have never supported the neo-liberal consensus. Never have we bowed down to those who hubristically dubbed themselves ‘Masters of the Universe’. While many of the commentariat are already proclaiming the death of green politics, such predictions are based on a profound misunderstanding of Green politics. No longer are people attracted to Greens just by an interest in the environment. People are attracted to Greens because they understand that only Greens have a political analysis that accounts for what has happened over the past year. In 1929, when buccaneer capitalism last crashed onto the rocks of a depression, it was Roosevelt and the New Deal that answered the new economic questions that were posed by the collapse of post-First World War capitalism. If anyone has the answer to this crisis, it’s likely to be the Greens.

The Green New Deal lists a number of ways in which the twin challenges of climate crisis and the economic crisis can be addressed. The document was produced by a group including new Green Party of England and Wales leader Caroline Lucas, Larry Elliott of the Guardian, Coin Hines of Finance for the Future, post-colonial debt expert Ann Pettifor and former Friends of the Earth Director, Charles Secrett. Among the key asks is a massive economic transformation towards a low carbon economy. This can provide a massive expansion in skills and jobs. It will make every building to some extent self-powering, decentralising demand for energy and giving power, quite literally, back to people. By pushing for a windfall tax on the massive profits of energy companies, a Green New Deal would invest in insulating every house from both the cold and rises in energy prices. The transition to a low carbon economy will take time as well as money, and the planning must start now. It is tragic that the Scottish Government is desperately trying to raise the £4 billion for an unnecessary second Forth Road Bridge when that money would ease the transition to a low carbon economy for the whole nation. The serious business of raising finance to invest in creating a socially just and sustainable future requires a range of solutions. These should include ways for individuals and organisations to invest savings and reserves in mitigating the effects of climate change and dynamically redirecting the economy.

The clear indication from international development organisations and domestic poverty activists is that climate change is going to hit the poorest hardest. This means that the efforts to price carbon must take account of poverty levels. The Scottish Greens are in favour of domestic tradable quotas. The quota would be determined by dividing the national emissions to create individual allowances – the national allowance would reduce every year to tackle climate change. Individuals that use less than their allowance could sell any surplus, while those consuming more would have to buy more allowance. The net effect would likely be that those on lowest incomes would be able to trade their allowance and gain income. This would act to redistribute wealth while also helping to stop climate change.

The Green New Deal contains a number of macroeconomic plans that aim to deal with the excesses of global capitalism. As we are all now aware global capitalism has overtaken us in this plan and has curbed its own excesses by threatening to collapse. It is, however, important that the response to this near-collapse is to address the underlying problems. Recently I saw a piece of graffiti on a doorstep telling the inhabitants of the block of flats that the government was tracking down benefits cheats. For too long the state has persecuted the very poorest while allowing corporate raiders to pay no tax at all on their plunder. At a time when the economy is contracting, it is all the more important that those who benefit from our society pay their share. The deduction at source of tax on all income paid to financial institutions in tax havens could effectively reduce the level of corporate tax evasion. The Green New Deal draws on the response of government to the economic downturn of the 1930s. Given the severity of the current downturn it is appropriate to respond with similar measures. Few doubt that the current economic crisis is the worst since the 1930s. The re-regulation of domestic financial bodies should form a priority. This should involve a reduction of the interest payable on government bonds – encouraging investment in new energy and transport infrastructure. Inflation should be controlled through effective regulation of the broader economy.

The current financial crisis is characterised by the collapse of financial institutions that, over the past decade, showed a profound inability to understand why the same company should not operate across several areas of activity. The same institutions were insulated by the hubristic notion that they were ‘too big to fail’. Lehman Brothers proved this hubris to be fatal. The recovery from this collapse must not involve the creation and promotion of more mega-banks. For this reason the merger of Lloyds TSB and Halifax Bank of Scotland is deeply foolish.

The same bank must not be allowed to operate in any retail banking, corporate finance or securities. By ensuring that all financial operators are small enough that their failure does not threaten the future of the domestic economy, we can avoid any future sequence of insolvency.

The Green New Deal represents the most comprehensive explanation to date of what a Green economy would look like. It would create an economy based on low carbon energy, efficiency and equity. It promotes quality of life over the pursuit of a quick buck, and in doing so gives the stability that allows people to live healthy, fulfilling and happy lives. I hope that’s what people want the economy to deliver, and it’s an economy I would love to help deliver in Edinburgh, Scotland and globally.

 Maggie Chapman is the Green Councillor for Leith Walk Ward in Edinburgh and is the Green Finance and Economic Development spokesperson in the City of Edinburgh Council. She is a lecturer at Napier University.  

Convert a crisis into a revolution  - Carlo Morelli

The recession sparked by the credit crunch of 2008 is having such a profound effect that prominent writings from the past are being taken from the bookshelf and dusted down on a daily basis. Not only is Marx’s writing again seeing a revival amongst the general public but Keynes has been rediscovered by policymakers with counter-cyclical government expenditure now the flavour of the month across the globe. The significance of these upheavals should not be underestimated. Marx’s philosophy that quantitative change gives rise to qualitative change resulting in the recognition that ‘all that is solid melts into air’ can be aptly applied to the present crisis. Nothing is now impossible in order to rescue capitalism.

Financial commentators’ optimism in the past period of growth is now only surpassed by their pessimism in the future. Only this time no one can be sure if they are exaggerating. Just one example of the extent of this pessimism can be gauged from the investment discussions currently under-way in the financial press. Buried in the Financial Times finance section in late October 2008 (Financial Times, 25th October 2008, Money section, p.7) was a series of articles on the limitations of with-profits policies for investors. While this arcane discussion, of the losses derived from stock-market investment and the suggestion that investors should incur the Market Value Reductions in order to remove their funds from investment companies, seems irrelevant to all but a tiny minority. However, consider the following; every single individual in the UK who has either a pension based upon stocks and shares, a life insurance policy or an endowment-based mortgage is the group at the focus of this discussion. Norwich Union alone, for example, has over 1.3 million policy-holders of this type of policy. If these policies turn out to be worthless, as the discussion implies, we are seeing the wholesale impoverishment of the better-off working class and the middle classes. Only those at the bottom or very top of the wealth distribution are likely to escape this latest debacle of the financial sector. All those who have attempted to save to improve their position are going to be robbed by the crisis. The polarisation taking place within society as a result of this crisis is going to be drawn very far up the income distribution.

Intellectually too we are seeing a redrawing of the political debate. The Financial Times is probably the most amusing example of this intellectual revolution. The paper has become the leading organ calling for state intervention in the market with Martin Wolf boldly stating “It is time for comprehensive rescues of financial systems” at the beginning of October only being surpassed by the middle of October with its editorial entitled “Nationalise to save the free market”. This revolutionary thinking at the heart of the capitalist establishment is not unchallenged. Readers’ shock and horror is exhibited in its letters such that by the end of October they were stating that the ‘FT’s swing to the left goes too far with Keynes’. (See M. Wolf, ‘It is time for comprehensive rescues of the financial systems’, 8th October 2008, p.17, 14th October 2008, p.16 and J.D. Reitz, ‘FT’s swing to the left goes too far with Keynes’, 25th October 2008, p.10.)

While such twists and turns of the ruling pro-market ideology are hugely amusing they underlie a much more significant development in the divisions over how to deal with capitalism’s crisis. Lenin’s first condition for a revolution, a ruling class unable to rule in the existing way, seems to be rapidly emerging. The current crisis of capitalism is without doubt one in which the old order of neo-liberalism and globalisation is being buried under Keynesianism for Capital. Governments around the globe have focused upon a Keynesianism for Capital but have steadfastly refused to develop a Keynesianism for Labour. So unemployment, repossession and impoverishment will characterise the current recession, while profitability for bankers, hedge-funds and speculators will be underpinned by government guarantee and expenditure.

Lenin argued that revolutions also require a working class that is no longer prepared to be ruled in the same way and a revolutionary organisation capable at channelling revolutionary movements to overthrow capitalism. This leaves those on the left with a challenge; how can they ensure the second and third of Lenin’s three elements can be developed? Fortunately perhaps, resistance to neo-liberalism around the globe has been a recurrent theme of social conflict throughout the past twenty years as globalisation deepened. Whether in Latin American social movements, food protests on a global scale, trade union struggles in European economies or the resistance to US and British led imperialist war in Iraq and Afghanistan working classes globally do not seem readily prepared to be ruled in the same way. The current failure of governments to provide Keynesianism for Labour will undoubtedly intensify these struggles for equality, justice and peace.

The extent to which Labour’s impact is felt on the ruling classes and challenges the agenda of the new-Keynesian governments will be of upmost importance in 2009 as recession emerges. Simultaneously, the challenge for the left is in creating a political representation for the working class which provides an economic alternative to capitalism. The capitalist crisis does in fact resolve two key debates for the Marxist and non-Marxist left during the past twenty years; that of the degree to which globalisation permits a transcending of traditional constraints on economic growth and the extent to which globalisation undermines the role of the state. That globalisation has been predicated upon the growth of speculative investment, investment which would have in other periods led to increases in fixed-capital formation has now become apparent. Financial investments, securitisation and the wider growth of financial markets provided returns to holders of capital while speculative growth continued. Growth could only continue as long as the assets underpinning financial markets were deemed to be rising in value. However, once a halt to rising asset-based financial investments prices occurred the financial sector, and the derivatives market which emerged from it, ensured the financial crisis spread to all sectors of the financial markets. In a globalised financial world financial de-leveraging becomes a transmission belt for the financial crisis moving into the productive economy. The 2008 credit squeeze ensured that previously profitable productive capital now becomes unprofitable. This is what we are now witnessing.

Thus for the left the creation of a politics which places people before profit and planning before the market is of rising importance.

 Carlo Morelli is a Lecturer in Economics at Dundee University  

Dismantle neo-liberal ideology  - Robin McAlpine

Hell, you’d think it was an economic crisis. The airwaves and the news pages are filled with people who think we can escape our current crisis through the short-term application of economic policies. Then again, an awful lot of them don’t want to escape the crisis at all; they just want to avoid a part of it. Because the crisis isn’t economic – that is a symptom. It is epistemological.

The crisis is the result of the Masters of the Universe seizing almost complete control of the means of political influence. Mussolini described fascism as “a merger of state and corporate power”. We were more or less there. I have described elsewhere (No Idea, SLR Press) a 35-year project to persuade the public that politics can’t really change anything so they might as well shop. It hasn’t been about defeating the labour movement to the benefit of capital but rather it has been about defeating the belief that a labour movement is possible to place capital in complete, untrammelled control. The crisis is really about the conquest of fundamentalism, the defeat of hope and belief, the crushing of dissent and the imposition of one, national ideology. Collapsing banks are simply one expression of the problem. There are lots of people who don’t want the problem solved. Make no mistake; no-one is chastened. No-one is really admitting they are wrong. No-one involved is articulating a case for anything different. Rather we are listening to strategies designed to get us back to where we were. This is not a revolution; so far it is more like the Spanish Inquisition – a desperate, slightly surreal attempt to make something ‘true again’ through means which must be forgotten about if they work because they contradict their ends.

So let us think about this problem from two directions. Looking from where we are, the problem is that the blatantly obvious (that the untrammelled, under-regulated greed of a tiny minority is not an effective way to run any kind of show) was hidden and disguised through the ideological double-think of neo-liberal capital. Other writers in this issue will almost certainly cover this ground – massive debt ratios, inflated house prices, financial products no-one understood, non-existent accountability. To believe that this was anything other than dangerously dysfunctional and destined for collapse you had to believe the proposition that ‘reality-based’ measures did not apply to the Magical Market. We created a world in which numerals could function without any relationship to the real-world things they were supposed to be counting. The belief that politics could only undermine this economic order was one of the few things the neo-liberals got right. Unfortunately, that was exactly the only thing that could have saved us.

But anyone who thinks that this is the first expression of the problem has been asleep. As this article is supposed to focus on solutions there isn’t much space to look backwards, so we shall select on simple illustration. The cause of the collapse of Lehman Brothers is more-or-less exactly the same as the cause of the Iraq War. In both cases belief in an Absolute Truth triumphed over reality, evidence, actual truth – call it whatever you like. Weapons of Mass Destruction pointed at our heads and ready to launch in minutes is qualitatively much the same as a Collateralised Debt Obligation – a fairly tale necessary to the functioning of an operation which is Above Accountability. Third Word debt, the collapses in countries like Argentina, growing inequality, frozen social mobility, even the re-sexualisation of women are all part of this crisis. It’s just that these frogs were boiled gradually.

So what do we do? Firstly, nothing here is meant to be an alternative to the types of progressive economic measure which we need to take to ride out this downturn. Yes we need a Green New Deal. In Scotland we should also rediscover the other interesting parts of the FDR New Deal such as the support for artists, writers and other creatives and the pumping of money into academia. A Green New Deal is a starting point, but if by the end of this all we have transformed is our lofts we will have missed the point (and make no mistake, that’s what lots of commentators actually mean – short-term jobs for undesirables filling roofs with insulation, keeping them ready to step back into what ever form of wage slavery the ‘free market’ demands when the time is right). We need to match a Green New Deal with a Creative New Deal and an Intellectual New Deal. We must stimulate the economy, but we need to stimulate our minds and our souls because these are just as much victims of the crisis. We should expand university participation, partly for economic reasons but partly to signal a change in direction from the ‘quick buck’ strategies of recent years. And we should plough money into the arts in Scotland. There are so many reasons for this it is hard to list them – the fact that people turn to culture in hard times is a key one and the fact that this is an industry in which Scotland will still be competitive once the crisis is over is another. Spending £100 million to build a road which will do no more than slow down the decline in the construction industry is short-termism. Spending the same money to establish a Scottish-run television channel would create probably as many jobs, but these jobs would have a chance of still being there in five years.

But this is How to Survive For Now. In the longer-term we need to do the things which will address the crisis which caused the crisis. For now, here are four areas of action where we must engage the enemy:

We must reform politics. Democracy is in a mess and it needs to be straightened out. Step one would be to introduce proportional representation at Westminster. First Past the Post is the political equivalent of a member’s club you have no chance of joining. All but a tiny handful of MPs are nothing more than window dressing. And that handful are all holidaying on the yachts of people who are virtually fictional characters – symbols more than people. We need to break up the big parties so there is balance and plurality. We need to rip up many of the institutions and start again, or at least drag them out of the shadows. Sure this means the World Bank and the IMF, but it also means the European Union which is now largely functions a counterweight to European plurality. We need all the powers we can get in Scotland and probably full independence (remember, the UK and the US are the womb of this crisis from whence all the disastrous progeny set forth). We also need to ratchet up freedom of information legislation substantially – there should be absolutely no such thing as ‘commercial confidentiality’ in the public domain. We need to dismantle much of the secret state. Intelligence services are not really about catching would-be terrorists but about ensuring hegemony. And globally we need some form of democratic accountability. Let’s make every decision of the United Nations a straight majority vote of the General Assembly for a start.
 
We must reinvent the means of knowing. This first and foremost means the media. Everything which is now happening could have been prevented by newspapers. A scary thought perhaps, but just a bit of dissent from somewhere might have made all the difference. Instead the print media basically split into two groups – one for the elite reassuring them that there was simply no way they could be wrong, the other for the drones to distract them with tits for the boys and shoes for the girls. Introduce a system of licensed franchises spread among a wide and representative group of non-profit trusts chosen to create balance and diversity of political view. Ban advertising in those papers to reduce further the influence of big business on what we know. Reforming television is becoming more difficult, but perhaps every broadcaster ought to have a public service role and ought to have to demonstrate it if the national resource of electromagnetic wave spectrum is to be theirs.
 
We must re-educate. Step one would be to turn the school curriculum upside down. The primary goals of instrumental skills and obedience with secondary goals of free thinking and wide knowledge base must be reversed. No-one ought to be able to leave school knowing how a Bunsen burner works but with no idea of how the world works. We also need to make education a core part of work with a statutory amount of paid time being dedicated to learning unrelated to core job roles. This should be a role the trades unions take on with zeal. Ignorance must be the victim of this crisis just as we are all now victims of ignorance.
 
We need to change the episteme. Defined as the ‘way we think’, we need some big changes. To be honest, it is probably too early to dive in with suggestion about how that should be done. So we should start a proper debate about what and how and we should start it now. To illustrate what we might be talking about, we need to rethink attitudes to consumption and waste, to mind and the intellect, to definitions of ‘truth’ and ‘evidence’, to notions of the social roles of people and to defining what is ‘productive’. And one last thought to get this started – if we need to think about what we do want from our values we could also consider what we don’t want. Let’s kick off with some trials at which whose unacceptable behaviour got us into this are held to account. Yes, these would be show trials in the sense that they are there to send a message, but this after all is the function of all trials. We wouldn’t have to lower the burden of proof to find guilt. That in itself would show us something.
 
Which would be a start.

 Robin McAlpine is Editor of the Scottish Left Review  

Find the leaders  - Gregor Gall

Who or where is the Oskar Lafontaine of British politics? This may sound a strange question to ask right now. According to some in the labour movement, Gordon Brown has renewed his left and leadership credentials by his response to the turmoil in the financial markets. His ‘stock’, if you will, with the public has seemingly risen somewhat as a consequence of this response. Some are now saying all is not lost for Labour in the forthcoming general election. According to this school of thought, he has acted decisively and robustly – so decisively and robustly that the soft left rebels in the Parliamentary Labour Party have declared a cessation of hostilities with Brown in this time of what they call national crisis. But this has been state intervention to support capitalism, not state intervention to secure social justice. To be blunt, if this is the conclusion from some in the labour movement, then they are asking the wrong questions about ‘what is to be done’ as capitalism heads towards a huge recession that the ruling class wants to make workers pay for.

So the Lafontaine question - as it shall become known – is still a very pressing one in Britain. Lafontaine was finance minister in the social democrat (SPD) Schroder government in Germany. As the SPD moved so far to the neo-liberal right, Lafontaine declared that ‘enough was enough’ and made the break in 2005 to form the precursor to the Left Party (Die Linke). The Left Party now has a significant presence not only amongst state and federal parliaments but also amongst workers and trade unionists (see SLR January-February 2008 issue for Victor Grossman’s article on Die Link). It is not an exaggeration to say that Lafontaine’s decision to leave the SPD transformed the political situation, making what would probably have been another ill-fated attempt to form a viable and substantial left party become exactly that - a viable and substantial left party. Of course, this could not have been down without grassroots activism on the part of many. They were the necessary forces but they alone were not sufficient to create the success that Die Linke has become. Lafontaine was what made the forces of Die Linke move from being not just necessary but also sufficient to become a viable and substantial left party. He is currently joint chair of the party.

Brown and new Labour’s response to the financial turmoil is such a momentous event that the left must sit up and take stock of it. It is a ‘Clause 4’ moment when ‘new’ Labour so starkly showed us its true colours. We should not be fooled by the cloaking of this action in the language of protecting hard working families or stabilising the economy. We need only look at the extremely lenient terms for the bailouts again to be hit by the lack of a quid pro quo from the banks. These are loans from cronies to friends. If the motivation was not to resuscitate capitalism and the capitalists but rather protect working people then we could have rightly expected to have seen the following: much stricter conditions for the bail outs, full control over executive remuneration, social inclusion in banking practices, a much more powerful and dirigiste Financial Services Authority imbued with social welfare morals, workers directors on the boards of the banks, no redundancy programmes and no house repossessions. And the slide of the economy into recession could have been prevented by reflating the economy through public sector expenditure not bank bailouts.

But, of course, we did not see any of this, which demonstrates two things. First, ideologically, the Labour Party is no longer a party of labour. Second, that the Labour left or affiliated unions do not have the sufficient strength to impose these kinds of conditions on the party leadership. Whether this writes off the Labour Party forever is a major and continuing debate. Certainly, in the short-term there is little to be gained from hoping or even praying Labour will change its errant ways (because they are not errant but pathological).

What should be of less debate and controversy is that if Britain had an Oskar Lafontaine (along with a Die Linke) then the left would have been able to successfully press for some of these conditions to the bailouts. Such a phenomenon in this country would have allowed Labour to be pushed to the left from within as well as from without. Arthur Scargill, Tommy Sheridan and George Galloway were Labour Party members but the left-of-Labour political projects that they led are now busted flushes compared to what they used to be. A Scottish Socialist Party (and/or Solidarity) and a Respect with an array of elected representatives at different levels would no doubt have been a boon for the left in these circumstances. But they would not have transformed the political situation sufficiently.

When we turn to look at the possible candidates inside Labour today, John Trickett and Jon Cruddas of the Compass group do not measure up. Their left credentials are not that left. Something similar could be said of Michael Meacher. But even if this was not the case, they are just not big enough hitters. So the likes of Tony Benn, John McDonnell, Alan Simpson and Jeremy Corbyn come into view. Bar Benn, all are still MPs and Benn is unlikely to move from his unshakeable belief in the cause of the Labour Party. John McDonnell has a much more sophisticated analysis which stresses that the issue of staying with and try to ‘reclaim’ Labour is an extremely contingent one and he has done more than any other Labour left MP to renew and expand the left through the Labour Representation Committee and his attempted leadership bid. But the fact that he could not get on to the ballot paper – indeed was not allowed to by Cruddas supporters and various union leaders – means that he did not achieve a lift-off into the public consciousness as a formidable socialist leader and tribune of the people that could have been otherwise gained by challenging Brown in a ballot.

So we are left in a continuing political paralysis for the left. We are reaping what we have collectively sowed. We cannot really turn events like the financial turmoil and economic crisis into opportunities because we lack the credibility and connection with a large mass of ordinary people. We cannot go from 0 to 60 mph as is necessary because we certainly lack the petrol to do so and maybe an engine and a few wheels as well. A Lafontaine would better allow us to make that necessary leap. But is that just a leap too far for the left in Britain? Certainly, there are aspects of the political set up here that militate against such an emergence compared to Germany – we do not have a system of PR for Westminster, no left party has become embedded to the extent of the PDS as a well-spring for a subsequent development and so on. Over and above that, many on the left would probably decry having such a popular – even celebrity – leader after its travails here in regard of both Tommy Sheridan and George Galloway. But right now, a radical leader that could be a genuine tribune of the people – eloquent, articulate, heartfelt and with a mainstream British-wide platform and substantial following – would be the biggest single boon to stimulating and engendering a fight back.

 Gregor Gall is Professor of Industrial Relations at the University of Hertfordshire and a regular contributor to the Morning Star and the Guardian’s CommentisFree.   

Regulate and rebalance  - Stephen Boyd

The US economist Thomas Palley describes the principal impacts of financialisation as (1) elevating the significance of the financial sector relative to the real sector; (2) transferring income from the real sector to the financial sector; and (3) contributing to income inequality and wage stagnation. It is a persuasive analysis. The ‘financialised’ economic model, pursued with particular vigour in the US and UK, didn’t lead to greater prosperity for all: it generated moderate GDP and productivity growth, an exponential rise in income and wealth inequality and a decline in social mobility.

Its unravelling over the past year was also utterly inevitable. The mantra of ‘no-one saw this coming’ was often repeated over late summer/autumn 2008 but the claim doesn’t stand up to the merest scrutiny: books were written explaining the consequences of burgeoning cheap credit. The failure of the financialised economy was just as inevitable as ordinary working people carrying the can for the recklessness of bankers.

While the events of autumn 2008 have laid bare the fragility of an economic model built on ever expanding household debt-income ratios and corporate debt-equity ratios, the crisis has also highlighted the paucity of economic thinking emanating from Scotland’s political parties. The First Minister blames ‘spivs and speculators’ for the collapse in HBOS’s share price and demands tougher regulation. Meanwhile his ministers continue to tour the country promoting laissez faire and his Government’s six point plan to beat recession hints at reducing regulatory ‘burdens’ on business. The Labour Government’s minor Keynesian revelation arrived appallingly late in the day. The PM’s complacent belief that financial services will forevermore drive growth has been blown apart and the recession is bound to be exacerbated by an independent Bank of England working to a tight inflation focused remit.

Perhaps the most revealing statement through the crisis was David Cameron’s assertion that ‘we must not let the left use this as an excuse to wreck an important part of the British and world economy’. Wreck what exactly David? Could ‘the left’ really outperform the master of the universe in this regard? Very few people will have any confidence whatsoever that the Tories will prioritise the interests of working people over those of their friends in the City. Perhaps Annabel Goldie should outline her detailed views on effective regulation of finance. The financialised economy didn’t therefore represent the failure of one political party – it represented a failure of politics. No coherent, persuasive alternatives were developed by other parties. Indeed, the Government was regularly attacked for an over-supply of regulation.

But with crisis comes opportunity. We are probably facing a once-in-a-generation opportunity to introduce real change to the economic model that has served us so poorly. The approach should be three-pronged: effective regulation of financial markets, rebalancing towards manufacturing and action to tackle economic inequality and insecurity. Events of this autumn have only served to highlight the vacuity of the anti-government crusaders on the fringes of Scottish politics and media. The free-market economy is a myth. Regulation is a public good. Successful economies require appropriate Government oversight and intervention.

Financial markets require more effective regulation as a matter of urgency and the priorities must be the bonus culture, capital reserves and the trading of derivatives and securities. It should be borne in mind that the current consensus in favour of more stringent regulation will soon evaporate. But more effective regulation is only part of the story. The economy must be rebalanced – policy should now emphasise stabilising and growing manufacturing investment and employment.

A priority for the Scottish Government should be to establish a Scottish Investment Bank to provide patient, committed long-term capital to growing Scottish companies. This should build on the success, and seek to extend the work, of the Co-Investment Fund. The failure of Scotland’s financial sector to support emerging Scottish industries constitutes a structural problem and should be addressed as such. Government, working with stakeholders and using all the levers available to it, must also design and implement a low carbon industrial strategy for Scotland. The failure to generate more jobs from our renewable energy endowment is a national disgrace. The market alone will not deliver. Government at all levels must act to ensure that Scotland achieves real job growth from development of environmental industries. Following the recent publication of the UK Government’s Manufacturing Strategy, there should also be a thorough consideration of whether Scotland requires a stand-alone manufacturing strategy or whether the Government’s Economic Strategy and priority industry sectoral plans are sufficient in this regard.

Other areas for action include should be sectoral public procurement strategies and investment in science, technology, engineering and maths (STEM) skills. This will also require a renewed focus on in-work training. The last area for action is addressing economic inequality and insecurity. With the end of the unsustainable ‘financialised’ economy, there now exists an opportunity to build a society where the fruits of sustainable economic growth are broadly shared with those who create that growth each day of their working lives. To do this it will be necessary to create an economic architecture that reconnects a strong, flexible economy to the living standards of all, not just to residents of the penthouse. A complete overhaul of the taxation framework is a good place to start. This should aim to produce a system which is truly progressive, ensuring that all income taxes have progressive rates and that indirect taxes operate with exemptions to assist the poor. It must also ensure that the capital gains tax regime does not offer significant tax incentives when compared to income taxes. Fair and proportionate inheritance taxes remain necessary and we must start to hear politicians outline why. The recommendations on corporate taxation included in this summer’s Green New Deal report should also be implemented.

Of course, there should be no greater force for economic equality than the trade union movement. Paul Krugman, recently awarded the Nobel Prize for economics, observed last year that, “International comparisons suggest that a newly empowered US union movement would make quite a lot of difference in reducing inequality. The sharpest increases in wage inequality have taken place in the United States and Britain, both of which experienced substantial falls in trade union membership”. It is now evident that the economic and social model pursued by successive governments over the past twenty years has failed. Contrary to popular perception structural changes have not readied Scotland (or indeed the UK) for the global downturn - rather, they have weakened our ability to cope. The period of broadly shared growth post-second world war was underpinned by strong trade unions, sharply progressive taxation and controls on the free movement of capital - there is no reason that similar policies cannot ensure that growth is once again more broadly shared.

 Stephen Boyd is Assistant Secretary at the STUC