The true nature of the socilaism espoused by Jeremy Corbyn and his Shadow Chancellor John McDonnell, were revealed at the Labour Party conference today.
Despite all the left rhetoric, McDonnell made a speech on economic policy which made it clear they plan to run capitalism for the capitalist class. In his own words, McDonnell wants to be an “interventionist” government. That is to say he thinks the role of a Labour government is to intervene in the so-called free market in order to make it run more smoothly. His vision of the future is based on the rosy prospect of an ever-improving world capitalist system. He hopes he can protect and improve the lives of ordinary working people by running that economy more efficiently than the neo-liberals who have been at the helm recently.
Unfortunately for McDonnell, the prospects for “happy capitalism” are dire. On the same day the capitalist press were reporting on his speech and the less-than-hostile response of the CBI and other business and finance representatives, two other majior stories were appearing in the financial pages.
First, there has been a substantial decline in the share value of Deutsche Bank. Share values are less than 50% of their market price a year ago, and have not been this low for over twenty years. They were not even this low following the financial crisis of 2008. And the reason for the decline is that the bank is seen as at risk of failure, as it has recently failed banking ‘stress tests’ in Europe and the USA. This position was exacerbated by a recent record fine imposed by US regulators. But at the heart of the crisis is a belief that this bank might fail, and that the German government will not come to its rescue.
Deutsche Bank is far from the only bank at risk, it is just the one that the financial press focus on this week. Many others are in a similar position. For all the talk of banking reform, the financial sector is balanced precariously on a knife edge.
The second big financial story hints at what might tip the tottering banks over the edge.
Ken Rogoff used to be the chief economist at the IMF. Now at Harvard, he warns that the Chinese economy could be headed for a ‘hard landing’. It is estimated that the Chinese economy may have up to $25 trillion in debt. This has in part been due to huge borrowing to fund construction projects intended to boost growth in the economy. But the Bank of International Setlements (BIS) estimates that China now has 30 times as much debt as its total annual GDP. The BIS considers a government with a ratio of debt to GDP which is greater than 10:1 to be in trouble.
To quote the editorial in today’s City AM newspaper:
“So the spectre of a Great Chinese Crash hovers over the global economy. If the debt bubble bursts the UK will not be immune. British banks have $530 billion worth of lending and business in China, including Hong Kong.”
So, Mr McDonnell, what steps are you taking to prepare for the looming crisis? Taking over infrastructure such as railways and other de-nationalised industries will not be enough. When Capital has got itself into this intractable crisis, the role of socialists is not to try and fix it for their capitalist masters. The role of socialists must be to help the working class take control of the essential industries that the capitalist financial crisis threatens, and to put the production of essential goods and services under workers’ control.
Too radical for you, John? Of course it is. The time for left talking is over. We need to prepare to take real power. That will require a genuine workers’ party, committed 100% to the end of capitalism and the establishment of a socialist economy.