The global economic crisis and the challenges for trade unions in the UK!

The financial market crisis has led to global economic recession. While many banks were bailed out by governments at high costs, it is now working people and society more generally, who are made to pay for the crisis. In this post, I will assess the challenges for British trade unions in their attempts to resist welfare state cuts and austerity.

The global economic crisis and its implications for labour

The problem started when US lenders gave mortgages to people, who were highly unlikely to be able to repay their mortgages, the so-called subprime mortgages. These mortgages were ‘re-packaged’ into derivatives and further traded on financial markets to ‘spread the risk’ of these loans. Ultimately, this procedure only spread the problem with more and more financial institutions being drawn into this large amount of ‘bad debt’. When home owners defaulted on their mortgages and the US house market plummeted as a result of many trying to sell their houses, financial institutions connected to these subprime mortgages went into difficulties. The crisis spread quickly beyond the USA. The UK, due to the close integration of the City of London into the global financial markets, was one of the first countries to be affected, before the crisis spread to the rest of Europe. Some financial institutions went bankrupt such as Lehman Brothers in 2008, others were bailed out at high costs, leading to a significant increase in national debt around the world.

While it was initially banks, which suffered most, the general instability in the financial markets soon brought several members of the Eurozone to the brink of collapse. Greece, Portugal, Ireland and Spanish banks most recently had to be bailed out with large financial rescue packages. Italy too is in severe difficulties. Nevertheless, who is actually bailed out in these situations? It is not the Greek health system or education, which are supported. On the contrary, drastic cuts in public spending are made a precondition for any bailout package. Rather, by ensuring that countries continue to service their debts, it is yet again banks, which are bailed out. Many banks have extensively invested in property markets such as in Ireland or state bonds of countries such as Greece and are, therefore, vulnerable to the potential bankruptcy of these countries. 

Workers are now forced to pay for these bailouts be it through unemployment, wage and pension cuts or the cut-back of welfare services more generally. Countries, heavily indebted as a result of bank bailouts and the general financial insecurity, need to secure their credit ratings on international financial markets by reducing their debts through spending cuts, it is argued. Austerity policies have been implemented across Europe. The UK is no exception here, even though it is not a Eurozone member. The interests of finance capital have clearly become internalised within the European national and EU forms of state. In the UK, austerity is expressed in a drastic increase in Higher Education tuition fees of up to £9000 per year, the attack on public sector pensions, the partial privatisation of the National Health Service, and a whole range of cuts to welfare provisions across the board.

Of course, to some extent austerity policies are about addressing national debt levels. Nevertheless, current UK debt levels are not dramatic in historical comparison. They were higher directly after the war, when the welfare state was actually established in the first place (PCS, no date). Hence, there is clearly also an ideological agenda behind these cuts. The current crisis is abused to push through restructuring, which would not have been possible otherwise. The goal is ultimately to open up the public sector as a new growth point for private profit making.

What are the challenges for the mobilisation against these cuts?

Trade unions in the UK have not given up and continue the struggle against austerity. Numerous conflicts over the attack on pensions are on-going. Yet, it has been difficult to develop a unified strategy for a sustained campaign beyond the large public sector strike of 30 November 2011 (see November 30 – what next?). What could be some of the essential elements for a more comprehensive strategy?

First, there is the powerful discourse that we would be all in the same boat. We should all do our bit to bring down national debt levels. Nothing could be further from the truth. The rich are not affected, when there are cuts to the National Health Service. They have always had their private health plans and hospitals. Capital is not concerned about an increase in tuition fees. Their children have always gone to private, fee paying schools. It is really working people, who rely on public services, which suffer from these cuts. Any strategy of resistance needs to contest vigorously this ‘we are all in the same boat’ discourse.

Another challenge is the discourse that the problem is really the fault of Greek, Irish and Portuguese people, who had lived beyond their means and drawn on credit in an irresponsible way. Again, this is not correct. High debt levels in peripheral European countries are linked to a fundamental unevenness, underlying the European political economy. Countries in the core such as Germany have made super-profits with an export-led growth strategy, while countries in the periphery had absorbed these exports. These super-profits in the core, in the search for profitable investment opportunities, were then channelled into state bonds of peripheral countries such as Greece. In turn, these new loans were then again used to buy products from the core (see The imposition of austerity). Any resistance to austerity in the UK needs to highlight this unevenness and must link resistance at home to solidarity with the struggles of Greek, Irish and Portuguese workers abroad.  

The discourse that foreign workers would take British jobs is a further tactic employed by capital in times of crisis. This is reflected in tougher immigration laws and a general national discourse against foreigners with racist undertones. Any resistance to austerity in the UK must not let itself be divided by pitting British and foreign workers against each other. The opponents are not immigrants, but capital and its push to open up the public sector for private investment. Hence, any resistance to austerity must also link up with struggles against racism.

Different conditions across the economy are another problem. When the University and College Union (UCU) goes out on strike to defend the pension entitlements of its members, it is often criticised for apparently overlooking that the Higher Education pension scheme is much better than pension schemes elsewhere in the economy. Public sector pensions in general are often described as gold-plated, which would be no longer affordable and especially not fair in view of those people, who are on much less good pension schemes. It is important here that public sector workers are not divided from private sector workers over these issues. Every successful defence of a pension scheme makes it easier to defend other schemes. Ultimately the demand has to be that everybody should have the right to a decent pension. Hence, the defence of pensions in the public sector must be linked to demands for a better pension scheme for all.

Anti-trade union legislation, brought in by Thatcher in the 1980s, makes it very difficult for trade unions to call for action on a broad basis. Strikes can only be held in relation to specific disputes with employers. Hence, the focus of UCU, for example, on the defence of Higher Education sector pensions. Nevertheless, while this is legally the only possibility, in the discourse around industrial action, the defence of pensions must be linked to a wider struggle against cuts more generally, be they in the health sector, be they in the area of social benefits for people with a disability, or be they in education. Struggles against pension cuts must be linked to demands for retaining education as a public good, available to all, as well as maintaining the universal access to health care, for example. Only if specific struggles against cuts are based on broader discourses, will it be possible to reach out to other trade unions and social movements in order to enlarge the social basis of resistance.

The TUC has announced another big, national demonstration for 20 October 2012 (TUC, no date). This will be an excellent opportunity to develop broader discourses of resistance and construct larger alliances.

Prof. Andreas Bieler

Professor of Political Economy

University of Nottingham/UK

Andreas.Bieler@nottingham.ac.uk

Personal website: http://www.andreasbieler.net
@Andreas_Bieler

3 August 2012