Chinese whispers - of a future collapse

The decline of the Chinese stock exchange by 20% over the last weeks, and its general convulsive behaviour since early April this year, has many echoes of the Great Depression (1929 - 39.) Although the apocryphal story of that time was the account of stock brokers jumping out of Wall Street windows when the final crash occurred, inevitably it was the workers and small farmers who suffered the most. This was obvious later in the 1930s but one less known aspect of the time was the fact that in 1929 millions of US workers and their families, sold, borrowed and pawned to raise the cash to 'get into the market.' By the first half of 1929, as the market started playing 'loop de loop', small investors had been loaned over $8.5 billion by stock sellers. This was more than the total value of all the currency then circulating in the US. The final and definitive crash of 1929 destroyed any future financial stability for millions of ordinary people in the US - at a stroke. Since then, and despite the wave of Thatcherite selling of utilities etc, picked up across the western hemisphere through the 1980s, the overwhelming majority of shares sold on the stock exchanges of the west were, and are, held by big corporations and financial institutions. Conversely, for two years the leadership of the Chinese Communist Party has been encouraging ordinary Chinese people to 'invest' as much of their savings as they can in the market.

Naturally the leadership of the CCP understands it is in a pickle via a vis its relations with the generally politically cautious Chinese population. In April this year alone, the Peoples Bank of China bought $256 billion in stocks to prop up the market. It has become difficult to accurately report further spending in the market by the PBC since then. But the current overall debts of China, combining personal, corporation, local and national government debts, are $28 trillion. This debt amounts to 282% of China's Gross Domestic Product. In fact current estimates show the total value of China's economy as $10.4 billion. Looked at objectively there is the real prospect of an irrecoverable market collapse in China.

There has been considerable speculation in the western media about the impact of a serious economic collapse in China on the rest of the world. As China's voracious appetite for both commodities, and for luxury western goods diminishes, there are already serious problems emerging in the BRIC countries and the the EU. But a debt laden crash in the world's second largest economy is something else. Its fundamental character is of a classic crisis of overproduction - as with 1929 / 31. And this at least requires a root and branch reorganisation of global capitalism - with all its attendant political and social crises. When the preemptive, sui-generis  Keynesianism that has already been used by Western governments and by Japan, to 'ease' the banking crisis of 2008 is added to the picture, the potential global prospects of a Chinese collapse are nothing less than calamitous.

In the US in the 1930s the Roosevelt administration used government spending to build infrastructure, advance new technology and to increase the wealth of subordinate classes, in effect the overwhelming majority of the US population, in order to promote spending. These are the classic Keynesian solutions to capitalist crises of over-production and debt. In a perverse, not to say lick spittle version of the same project, the US, UK, Japanese and now the EU have introduced 'quantatative easing' as a rich person's version of Keynesian model, to stem the effects of the 2008 financial crisis. This has meant the UK 'Bank of England' has spent $577 billion via banks on stocks and shares in the last 5 years. The US 'Fed' spent $3.8 trillion up to October 2014 in the same way. In Japan the national bank has already spent $923 billion; Japan originated QA as a result of its decade of stagnation. It is now spending $447 billion on QA every year, an open decision taken in October 2014.  The European Central Bank's first serious act since its hurried, crisis ridden birth, has been to announce a $1.23 trillion QA programme. (January 22, 2015.)  Amounting to a current global total of $4.51 trillion QA 's main impact has been to massively increase wealth (and the wealth of the wealthy) through the creation of a constantly inflating stock exchange. Leaving the busted finance industry, the global market became the next golden goose, the next security, indeed the next golden egg, for the world's rich.

This $4.51 trillion was not used to develop infrastructure and investment, not used to conquer disease, ease homelessness, was unavailable as a source of spending for the majority whose living standards lurched downwards. It secured and then increased the wealth of the rich. Accordingly, the national debt mountains and the personal debt mountains have increased in the west since 2008 as debt is the only means to secure peoples' spending - in reality, partly as a result of the remedy of QA. (For instance by June 2015 in the UK, people owed £1.441 trillion in personal debt - including their mortgages. The average debt per adult was £28 532 - 111% of average earnings. And UK people paid £53.497 billion in interest. This is all miles higher than it was in 2007/8. The national debt has also increased to over a £1 trillion.) And it is precisely this still expanding debt bubble, masking the chaos of capitalist overproduction, that renders western economies and ultimately their societies so vulnerable to the current Chinese disequilibrium.

Note: The data for this piece was drawn from many sources but three are worth particular mention.
Guardian 'QE Around the World' Katie Allen, 22 January 2015; Bloomburg April 2015 report on the Chinese market and indebtedness; The Money Charity, June 2015.

Political regroupment in Greece

There has been a bitter battle in Europe since January 25 this year between, on the one side, the second most powerful political and financial elite in the world and, on the other, the Greek people and their allies and leaders. It was nothing less than the choice of the direction of the future economic policy of Europe. This battle, which continues, has already produced several convulsions, including the U turn on the need for Greek debt relief by the Washington based International Monetary Fund, the opening of wide divisions between the French and German political class and the current necessity for the German political establishment to take up the cause of the current wave of refugees as a result of the negative international impact of the tarnished and authoritarian reputation that the German leaders have attracted as a result of their treatment of the Greeks.

On the other side, the battle has confronted and shaken Europe's anti-austerity movements. This is most obvious in Greece itself with the split in Syriza after Tsipras's agreement to a new Troika package of deeper austerity and deflation, tied to a permanent debt economy. On August 21, 23 Syriza MPs voted against the new proposals and Tsipras resigned as Prime Minister provoking a September General Election. On August 27, 53 members of Syriza's Central Committee announced their support for a new Popular Unity Party (Laiki Enotita), based on opposition to the new EU agreement and exit from the Euro, if that is required to sustain Greek opposition to the EU's previous and to their current austerity and debt repayment programmes.

But there are further shifts. Pablo Iglesias, leader of Spanish Podemos, may be giving his support to Jeremy Corbyn,
'In Podemos we share Jeremy Corbyn’s view that another Europe is not just possible but necessary. Against the irresponsibility of the troika and the Eurogroup, against the Europe of financial lobbies and puppet representatives, a new democratic and social Europe is emerging, and Jeremy Corbyn’s victory would be great step in that direction.'
But his reaction to Tsipras and the Greek crisis was more worrying; calling Tsipras a 'lion', Iglesias said he was confident Greek citizens would again show their support for him.
'He (Tsipras) recognised that he wouldn’t be able to complete some of the elements of his program, so Tsipras did what any democrat would do – he asked the citizens of his country if they want him to remain prime minister, if they want him to continue negotiating, if they in some way support the manner in which he is negotiating,' Iglasias has not yet seen fit to mention 'what any democrat would do' about the July Greek referendum, which gave the Greek citizen's emphatic negative opinion on the Troika's proposals - now adopted by Tsipras.

And now the new context in Europe will create a new and more deadly battlefield for its contending forces. The largest wave of refugees since WW2 is gathering its personal, social and collective calamities in a movement away from western originated poverty and wars towards life, for safety and for humanity, all of which it demands from the west, from Europe. The social and political institutions of Europe and its major countries were not built to favour such a gigantic and insistent cause. They are built to preserve and increase the wealth and power of Europes' corporations, banks and rulers. This utter failure of Europe's institutions and its current political classes will magnify despair and fear among its populations. Golden Dawn will reemerge with new force in Greece's next election. And the economic and its associated social crisis are equally unrestrained indeed fomented by those same European institutions - as the thunder and dust of debt collapse begins to shake the planet from the East.

A renovation of Europe's current direction in its politics and economics is certainly needed. How absurd it would be not to include a thorough going inspection of the movements, policies and proposals presented by the 'alternative' Europe? Surely, as the evolution of the Greek battle against austerity demonstrates, the counter to Europe's current direction requires the utmost critical examination and debate. Such argument and discussion is best achieved in the actual struggle for humanity, another lesson for those who stood aside from Syriza's contest with the Troika between January and July this year. As the various crises of Europe come to their peak, so will the ferocity of the contest between the future and the past and so must the intensity of the debate and discussion. It is one of our movement's greatest strengths.

It's my party - and I'll cry if I want to.

Caroline Lucas, Britain's single Green MP, has written an open letter to Jeremy Corbyn (see The Independent, 25 August.) She calls for a
'Progressive alliance', for the next election. This alliance is to be based on Corbyn's programme, then what she describes as the unique Green contribution and, most importantly for the future, the fact that,
'The beauty of this moment, and what scares the political establishment most, is that the power of your campaign (Corbyn's campaign) is coming from thousands of grassroot voices - not a diktat from above'.

Lucas argues that
'The old politics is crumbling, not just in Britain but across our continent.' But she expresses her disappointment that Corbyn's campaign has
'Not focused more on reforming our ailing democracy. A truly progressive politics fit for the 21st century requires a voting system which trusts people to cast a ballot for the party they believe in.' And Lucas goes on to suggest that if Corbyn were to win his Labour Party leadership bid, the momentum would open the opportunity for him to spearhead the call for a Constitutional Convention
'To allow people across the country to have a say in remodelling Britain for the future.'

Exciting stuff.

The gathering of popular support for Corbyn is certainly a remarkable political fact - first brought into life by the mass demonstration called after the General Election in June - by the Peoples' Assembly. Hundreds of thousands marched in London (with a large Green contingent) showing the awakening of a new, youthful based political current, that regarded the election result, and the traditional parties and choices that it expressed, as not representing them or their hopes. Corbyn's candidacy, and Labour's new internal election rules (that Miliband thought he was borrowing from the US Democratic party) have provided another focus for this new political trend. So much is obvious, and while the concrete details of history are always unique, the new potential radicalisation was generally predicted, well before the election, by the leadership of the Peoples' Assembly - among others.

So far the new British radical movement has not been disrupted by events in Greece. But in its most political centres there is increasing interest in the progress of the left organisations across Europe that challenge austerity and a growing recognition that the great questions of the future are inextricably linked to European, not to say global solutions. But although this active layer constitutes hundreds of thousands, if not a million or two, it has yet to 'win' a leadership role in the wider British society. This fact may yet be reflected in a much closer call in Labour leadership elections than expected, if not the defeat of Jeremy Corbyn's candidacy. Should Corbyn win then the Britain's radical left has created a much greater platform to address the whole of society and to begin the task of winning the leadership of Britain's nations to a new direction.

Corbyn's 'grass roots' campaign is the opposite to Foot's campaign and his victory as Labour leader in the 1980s, where the left trade union ranks and the mass Campaign for Nuclear Disarmament were used solely as adjuncts to the decision making power of the immensely powerful trade union bureaucracy of the day. But while the political space for a new version of the Social Democrat party, presumably under the Blairites, does not exist (witness what happened to Clegg et al) a Corbyn victory would certainly herald a further disintegration of the parliamentary Labour Party. Already the negative impact of the Scottish National Party's victory in Scotland for the future governmental prospects in Westminster of the traditional Labour Party is causing serious self-searching among Labour's right wing. A Corbyn leadership would bring Labour's crisis to the fore. Quite soon new quasi-party formations would emerge inside Labour and rightist coalitions sought, to prepare against future electoral 'ruination'

The weakness of British mainstream political thought (as reflected in the media debate about Corbyn's campaign) is that it does not understand that Labour's crisis is also a feature of the crisis of the British capitalist political system as a whole. The Empire and the City of London no longer buttress Britain's political stability; they no longer allow the wholesale export of its domestic social violence and economic misery to other, poorer parts of the world. As we approach 2016 a new global economic collapse looms and the EU is in its greatest turmoil since its inception. Mass movements by the near-world's poor and war-torn are on the march towards Europe while the EU itself is in a battle royal over austerity. All of which underlines the global and European dimension of everyday political lives in the UK. And, against that background, the Tories are about to start a excoriating 'debate' in society about EU membership. It is this combination that will frame the next stage of political radicalisation, both to the left and to the right, inside British politics. It will not be a discussion about whether or not to accept Cameron's treaty compromises. It will be a social, political, economic and moral battle about what sort of society is acceptable in an advanced country, what is feasible, what would be based on human need as opposed to the defence of the wealthy; how far is this a European, even a global cause? This debate has the potential to crack wide open all three of the main traditional parties of Britain, as well as challenging the basis of our current, decrepit political system itself.

And the key for the British left in this tussle? Whether or not to join the Labour Party? Whether to set up a left inside the SNP? Build new left parties? Perhaps to federate with the Greens? All, no doubt, important tactical questions to be determined in the concrete conditions of the new reality. What is strategic here (and across Europe) is something that Britain's new left might well learn from Greece as its European interest grows; it is that the various political developments now in creation, including the possibility of a Corbyn victory, will undoubtedly require the utmost political intelligence and imagination to succeed, but most of all, the priority of continuing to build up a fighting mass movement, against austerity, for human dignity and welfare, will, in the end, be the critical precondition for any secure progress.

The EU destroys Syriza. Will austerity win?

The drastic terms of the EU/Syriza deal (July 13) have destroyed any remains of the Syriza leadership's project; to overturn the 'neo-con' austerity policy in Europe and the Eurozone, currently led by Germany, in favour of a policy for growth and for the protection of the living standards of the working and middle classes. 

The deal has all the hallmarks of a deliberate and pitiless revenge on the Greek nation. Greece is to have no authority over its fiscal policy, an indefinite status, which is to be swallowed by the Greek parliament and then conducted day by day, by the Troika, in Athens. The Greek government is to sell off all of the nation's assets but keep the proceeds in a separate account - to pay debts. And although every economist in the world knows it will have to happen eventually, Greece is to remain encumbered by all of its debts - apparently a specific requirement of Mrs Merkel -  with no guarantee of their reduction. 

Syriza is breaking up under the weight of this defeat. Those, like the Syriza Minister for Administration, who honestly admits that Syriza was not able to overturn the 'balance of forces' in the EU and that the Greek 'deal' is a defeat and a blackmail of Greece, also claim that the war is not over. They point to coming elections in Spain, in Ireland and in Portugal. They believe that accepting the EU's demands is not the end for Greece and that Syriza's leadership at least has survived and will carry on fighting in the right direction. 

But this estimate is false. The 'deal' will crack Syrtiza wide open, produce a new defacto National Government and drive the Greek population lower and lower. The 'deal' carries with it its own story; that the election of Syriza was obviously foolish; that supporting Syriza has just made things even worse than they were; that there was no alternative but to accept Satrap status under German capital. And the effect of the Greek 'deal' on Spain and Ireland and Portugal will be to strengthen the idea that there is no alternative and to weaken consistently anti-austerity forces both within their own movements and parties and in their larger societies. 

However Greek's new 'deal' is so shaming; so burdensome, so endless that it reveals a serious error in the thinking and in the demands on Greece made by the now re-empowered princelings of the EU. The mistake thay have made is to conflate Syriza with the Greek mass movement against austerity. Syriza did emerge as a product of the Greek anti-austerity movement but not out of it. In the movement of the squares in 2010-2012, a broad leadership emerged that certainly encouraged the then nascent leaders of Syriza to take a role, but there was no sense that Syriza blossomed out of, still less directed, the mass movement itself. On the contrary, there was more than a little resistence from some parts of Syriza in the face of the occupations and demonstrations. Today, the Solidarity (not charity) organisations across Greece that run the voluntary markets and clinics and schools and pharmacies, and which are used by 3 million Greeks, are not initiated or run by Syriza. They were and are led by the vast layer of people that arose from Greece's protest movement. Syriza was never the parliamentary wing of the Greek peoples' anti-austerity movement. 

But the EU leaders do not know that. They would not understand it anyway, given their own entitlement based notions of leadership and the lack of connection with the ordinary people who pass by in the bus. They have struck at Syriza to warn the rest of Europe of the folly of electing anti-austerity representatives. And they will likely break Syriza, whose main leaders will now need to rely on the votes of the old memorandum parties to carry the new austerity laws in the Greek parliament. Thus a new National Coalition will be born - in defence of the Euro. The mass movement however is unlikely to face the same fate. So long as there is some, credible representation at the level of the national political institutions in general and in the Greek parliament in particular, the anti austerity movement of the Greek people, the sea in which the old Syriza could swim, will move again in defence of the whole nation. 

Syriza has, up to the referendum, led the fight against austerity in Europe and against the EU leadership, since its election on January 25 this year. It would have been absurd and sectarian to stand outside or on the margins of that fight. A subordinate argument inside Syriza's leadership (and outside) meanwhile strongly argued that Greece should be prepared to repudiate all debt and to leave the eurozone. Those who argued the case for this plan B denied that the fight within the eurozone was likely to remain the main, indeed only theatre of struggle for the continuing battle with austerity, and that preparations should be made for the shift in the location of the struggle. They have lost their argument in the leadership of Syriza at the moment where the battleground has definitively shifted. It is vital that they are now a leading part in the new formation and campaign - as a leading part of the Greek mass movement against its new austerity government. 

Greece; losing a battle

As this is written the EUs finance ministers are preparing a second bout of talks before the EU heads meet this afternoon. The British Telegraph (12 July) reports that Germany will not accede to the Greek proposals - even should they be 'strengthened' by more austerity measures - as demanded by other countries. The Germans have apparently prepared a five year Greek exit plan from the Euro.

This blog has long argued the Syriza's original anti-austerity stand would never be agreed within the framework of the Euro. This, for example, is from February 22;

If the saga of Greece's negotiations with the EU resolve anything, it is the mastery that Germany have over the common currency. The defence of the Euro has ceased to be (if it ever was) a vaguely internationalist token of progressive, modern brotherhood across nations, it is the core of Germany's immense economic and political power. This concrete reality is an unreformable obstacle to any individual national political leadership in Europe striking an independent economic and therefore political course away from the status quo. Sooner or later, if the Greek people want to create a new sort of society, they will have to break with the Euro and its current institutions. (Reforming the EU as a whole would have to start with a revolution in Germany.) And such a realisation played no part in Syriza's struggle and therefore weakened it.

Syriza gained a big majority in Greek parliament on July 10 for its leaders' new proposals to cut 13bn Euros from government spending. But not an overall majority of Syriza MPs. The vote was not 'whipped' by the party leadership. It was a conscience vote. And a handful of Syriza MPs abstained or voted 'no' to Syriza's austerity plans. They included two ministers. Syriza - as a party - is no longer the government. If Syriza's plans (or a sterner version of them) are accepted by the EU then Syriza will not rule in Greece. Some of Syriza, in a coalition with parties that accepted the last austerity package from the troika, will govern. The next trench of laws will be dictated by the troika and will need to be passed in the coming weeks by the Greek parliament's new majority as a token of Greece's commitment to the latest austerity.

What do Syriza's main leaders think they will get from their concessions (if accepted.)? They believe that all necessary measures have to be taken to stop the collapse of the Greek banks and the loss of capital for state wages, pensions, welfare, health, investment and trade. Despite the demonstrations, the patience of the people with the euro-ration and the resounding 'no', Syriza leaders do not believe that they have any other choice when it comes to defending the Greek people from immediate financial collapse. In their book the 'no' vote failed to do what it was supposed to do. It failed to impress the leaders of Europe. The fight against austerity has its limits. The limits are that it has to win, if it is to win at all - from inside the Eurozone.

Various commentators that want to hang on to Syriza's coat tails claim that in return for these essential concessions Syriza will 'win' the argument on long term debt relief. That is just artful. The debt question was blown open by the 'no' vote (and the US State Department influence on the IMF to publish its pre-vote report which defined the Greek debt as 'unsustainable.') In other words Greece had already won the debt argument before presenting the new austerity programme. How will the people of Greece, who have fought so long and hard, who have sacrificed so much to stay with the Syriza government think? We shall see; but whatever else they think Syriza's actions must seem like snatching defeat from the jaws of victory.

What is (was and remains) the alternative? Greece should repudiate all debts and print its own currency. To prevent hyper inflation the government needs to appropriate major assets, companies and personal wealth above certain limits, and base the new currency on these assets. (As Germany did successfully in the late 1920s.) Major loans should be launched from Russia and China. They will be high interest because of the repudiation, but again can be offset against possible interests in portage and transport held by both countries. This will produce convulsions in Greece and across Europe and the Eurozone in particular. Fear and greed by the world's rulers will create a major drive to stabilise the system which Greece might also exploit. In Greece itself the mass movement of the people will need to act to organise and defend and stabilise daily life and security. The Greek people, when in action, are the most politically and economically and socially conscious people in Europe and possibly in the world. They can point the way to a different future. In the course of such endeavour they would win the support of the ordinary people everywhere.

If the Syriza leaders make their austerity deal with the EU, what should the international solidarity movement do? That movement is based in supporting all those who fight for all the people against austerity, not any particular governments. The Solidarity (not charity) movement in Greece and the battle with austerity continues and must be supported more than ever, including against the new austerity measures if agreed by the EU.

The political regroupment in the Greek parliament, if the austerity deal is accepted by the EU, will, in due course, also pull together those that would combat the new austerity laws in the European and the Greek parliament. Their future, and the future of Greece, would now depend on the movement of the Greek people and their allies across the world.

A moment to savour and to learn

The Greek Solidarity Committee and the British Trades Union Congress held a victory meeting in London on Monday July 6. It was a moment to savour! There were fine speeches and contributions from many. There were also, inevitably, some passages of rhetoric that did not rise to the quality of the occasion (Dianne Abbot used the opportunity to insist on her credentials to be Labour's London Mayoral candidate for example.) In spectacular contrast, two cracking speeches from Syriza representative Marina brought the many hundreds present to their feet -  twice.

Greetings and support were sent from Caroline Lucas, the sole MP for the Greens despite their 1.2 million votes, from Sinn Fein and from Cristina Fernández de Kirchner, the President of Argentina! £900 was raised in a collection for the Solidarity (not charity!) Movement in Greece. People cried with joy and then they laughed with the great feeling that for once, hopefully a 'once' that will be followed by a 'twice' and more, much more as Spain and then Ireland and then Portugal move to change their government, a great feeling that the people, the ordinary working class people of Greece had roared 'NO' to the 13 European billionaires, defended by their EU institutions, who between them could, if they wanted, pay off Greece's entire 340 billion euro debt from their collective personal wealth - as John Reece from the Peoples Assembly told the meeting.

Some of the speeches will be put up on the GSC website. They are all worth a read. But there was one speech in particular that offered a novel perspective on British politics in the light of the Greek experience. Mark Serwotka outlined his view, that the British working class now needed their own Syriza. Those in the audience who might have experienced a warm glow at the final recognition of their efforts to create their own little Syrizas were to be disappointed. Serwotka made it clear that he was not proposing that combining all the little British left political sects would produce a spectacularly greater sum of their parts. Serwotka had a different perspective entirely. His point was that Britain now had the political makings of its own anti-austerity party.

Serwotka named the left in the Labour Party - identified as those supporting the only Labour leadership candidate who opposes austerity - Jeremy Corbyn (Jeremy happily did not talk about his leadership campaign in his own speech.) Serwotka then allied this group with the SNP, the Greens and Plaid Cymry in a proposed alliance which both inside and then helping to develop the movement outside Parliament, might spearhead the battle against austerity in Britain. At once British politics would begin to solve the problem of the lack of political representation of the whole working class and, at the same time, massively increase Britain's contribution to the anti-austerity wave now rolling across Southern and Western Europe.

Major movements in the history of class struggles always have the effect of breaking up apparent barriers and logjams in the thinking and the action of those in crisis. The British labour and trade union movement is in such a crisis, faced with new and potentially deadly assaults by the Tory government and by the hollowing out of traditional social democracy. Mark Serwotka has put his finger on one key political lesson from Greece. In politics, those who politically oppose austerity should fight together.

British people are also learning another lesson - in practise - from Greece. The politics of opposition to austerity needs a base among the people. The Peoples' Assembly marches against austerity, involving hundreds of thousands, a few weeks after the apparent Tory victory in the UK General Election, are an astonishing recognition of the fact that the engine room of a political change and the possibility of a mainstream political regroupment in favour of a fightback has to be predicated on a mass movement of millions, who turn out in the public squares, who grow in strength from each other and who call those who would lead to account.