The purpose of this blog is to provide analytical commentary on formal and informal labour organisations and their attempts to resist ever more brutal forms of exploitation in today’s neo-liberal, global capitalism.

Tuesday, 26 October 2010

The Con-Dem Budget as a class project

What attitude should one take towards last week’s Comprehensive Spending Review by the UK government? That all depends on one’s point of view. Neo-liberals take a different view from that of Keynesian analysts. And it is a Marxist understanding, which uncovers the underlying class dynamics.

The Conservative-Liberal government justifies the drastic budget cuts as necessary in order to retain international confidence in Britain’s fiscal stability. Almost 500, 000 jobs may be lost in the public sector as a result, but the private market would be able to absorb these workers as long as the deficit is brought under control and the budget stabilised. From a neo-liberal economic perspective, this makes perfect sense. Low national debt levels and budget deficits would provide the best framework for an otherwise free market to function most efficiently and most profitably, ultimately also resulting in new jobs. This belief may appear as naïve, it probably is naïve, especially considering that it was the integrated global financial market, organised in the interests of transnational finance, which has been at the heart of the credit crunch crisis, but neo-liberal economics prescribes such a course of action.

From a neo-Keynesian perspective, put forward by some members of the Labour Party and a whole range of trade unions, this large-scale cut in jobs is disastrous. 500, 000 more unemployed people in addition to those who have already lost their job as a result of the crisis would imply lower tax income for the state – arguably, it is the collapse in tax revenues rather than increased government spending, which caused the deficit in the first place – higher unemployment benefit payments and generally less demand in the economy, thereby endangering the fragile recovery we are experiencing at the moment. And indeed, drastic public spending cut-backs are poisonous in the current climate. They not only lower effective demand, they also instil a sense of insecurity in people and companies alike, leading yet to a further reduction in demand levels.

Nevertheless, the implications of the budget cuts are even more dramatic, when they are understood as a class project. This not because they affect the poor more drastically than the rich. This is indeed the case, but not of major importance in itself. The real significance lies in the way the budget cuts affect the general power balance between capital and labour, between employers and workers. 500, 000 more unemployed people on the labour market will put immense downward pressure on wage levels. Individual workers in their desperate search for gainful employment will be ‘tempted’ to accept lower salaries. Trade unions, the main task of which is to monopolise labour in order to avoid workers underbidding each other by offering lower wage demands, will find it difficult to fulfil their function in this situation. As a result, they will appear less useful to workers leading to lower membership levels and a further marginalisation in society. In short, what looks at first sight as an attempt to bring under control the national budget, turns out to be a clear class project in the interest of employers and at the expense of workers and trade unions. The balance of power is shifted significantly in favour of capital. Employers will marvel at the opportunity of cutting back wage levels and work-related benefits. Discussions about reducing pension benefits in the public sector are just one aspect of this.

Importantly, however, workers are not without weapons to resist this imposition of new conditions. Trade unions are still in a position to organise collective action and resistance. The forthcoming months and the struggles against these budget cuts will be a crucial test of British trade unions and their ability to defend successfully workers against this outright class offensive. They cannot afford to lose this struggle.

Prof. Andreas Bieler
Professor of Political Economy
University of Nottingham/UK

Personal website:

26 October 2010