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Putting the Cat Back in the Bag

Austerity is back on the political agenda for one reason – the establishment is terrified that recent state interventions will raise the demand to solve other social problems the same way, argues Grace Blakeley.

In the midst of a crisis as significant as this one, it is often said that everyone is a socialist. There are few politicians and economists calling for the state to step back, let businesses fail, banks go bust and homeowners default on their mortgages. If socialism meant corporate welfare, then it is true that we would be entering a massive socialist revival. 

But socialism is not, of course, corporate welfare. No matter how much a capitalist state spends on healthcare and education – or, in this context, furlough schemes and business loans – it will never become a socialist state. The fundamental character of political power in any country is always determined by the balance of power between labour and capital, and the way in which this balance is institutionalised. The British state is spending more because British capitalists – and indeed capitalists around the world – need it to spend more. 

The object of socialist policy development has always been to use democratic measures to shift the balance of power between labour and capital. In the context of growing support for public ownership, a revival of the trade union movement and a drastic expansion in political education, policies like a Universal Basic Income or a Green New Deal could shift the balance of class power that underpins modern capitalism. But without these ‘non-reformist reforms,’ more state spending – even state spending that supports working people – simply serves to support the interests of the ruling classes. 

It is important for socialists to understand the Conservative Party’s apparent move towards greater state intervention under Boris Johnson in these terms. Johnson has not constituted a ‘worker-friendly’ government in response to the shifting nature of his electoral coalition, he has simply recognised that the needs of capital – and the middle class homeowners upon whom capital depends for popular support – have shifted. Without extensive state support, businesses, banks and investors would all find themselves substantially in the red.

Even support for workers must be understood in these terms. Consumer spending makes up around 70 per cent of UK GDP, measured according to expenditure. Without workers to buy cars, houses, clothes, TVs, meals out and the plethora of other consumer goods now available to nearly everyone thanks to the dramatic expansion in debt-fuelled spending that has taken place since the 1980s, the British economy would collapse. Businesses would fail to realise the profits generated in production, default on their loans and bring the banks down with them. As Gary Stevenson recently argued, “the government has created new money to replace the lost spending of the rich, so that working people can continue to pay their bills to the rich.”

This spending will continue for as long as it benefits the wealthy – and not for a minute longer. That’s why yesterday’s leaked Treasury document should come as no surprise. It proposed increases in income tax, a two-year public sector pay freeze and pension cuts to pay for the measures introduced during the crisis. It’s clear that the chorus of calls for fiscal retrenchment has already returned. George Osborne, the architect of the last round of austerity, has already begun to argue that similar measures will be needed in the wake of this crisis.

I, and many others on the Left, have written extensively about the weaknesses of the arguments for austerity. Cutting state spending when demand is weak, businesses and consumers are indebted, and uncertainty about the future is high only serves to constrain business investment and consumer spending, reducing GDP – and therefore tax revenues – over the long term. But this isn’t the point.

Austerity was never really about reducing the country’s debt; it was a class political project intended to curb the power of working people at a time of fragility for the ideological and material foundations of global capitalism. 

A state that provides a strong social safety net threatens to erode the desperate reserve army of labour that capital relies upon to generate profits and discipline workers. Perhaps even more importantly, high levels of state spending of the kind seen during moments of crisis threaten to politicise management of the economy. If the state could afford to spend billions of pounds during the crisis, then why shouldn’t it provide higher education, housing and healthcare when the crisis ends? 

Defeating this kind of thinking requires a powerful countervailing ideology. The ideology of austerity is meant to convince us that periods of largesse must be balanced by periods of retrenchment. The power of this narrative lies in the fact that it parallels the lived experience of most workers under capitalism – if you go on a debt-fuelled spending spree, eventually you’ll have to pay the money back, or else. 

As we are already beginning to see with this latest leak, the same arguments used in the wake of the financial crisis will be trotted out in response to this pandemic. Just as we must understand the state’s current generosity in class terms, we must understand the austerity ideology in class terms too. We cannot respond with the same technocratic arguments that have been made by liberals non-stop for the past twelve years. 

Instead, we must ask why working people are always the ones forced to pay for bailouts that ultimately benefit the interests of big business. If, as a society, we really must pay the piper, then why should it be the people whose labour has kept society running during this crisis who bear the brunt? Why not introduce higher taxes on corporate profits and wealth, or demand public ownership of corporations that have received state support?

Thankfully, the public is onside with such policies. Unfortunately, the Labour Party is not. Socialists must be ready for a long fight in the wake of this crisis to ensure that real, systemic alternatives remain on the political agenda – and that another wave of austerity is not forthcoming. If the Left doesn’t capture the radical energy generated by this crisis, then the far-right will.