Newspaper commentators make a good job of explaining the current economic crisis, but they fail, naturally enough, to connect their explanations into a class analysis.
Even a reduction of ten percent of UK output would not of itself cause very much hardship in Britain if income and wealth were not so unequally distributed. Only by understanding working class debt can the dimensions of socio-economic crisis can be grasped.
New Labour presided over a regime in which capital flowed into Britain, bolstering the value of sterling, to fund working class spending. The houses, cars, etc. were paid for only in part through wages, but, thanks to credit, the disposable income was much higher. One effect of this high expenditure was to drive up house prices leading many to re-mortgage in order to fund further expenditure, which in turn drove up house prices further.
The boom ended when finance capital saw the value of its security (the house, earning potential of the worker) could not guarantee the credit advanced. By the autumn of 2008 the withdrawal of credit (its sterling value secured by the tax payer through bank bailouts) led to a Britain characterised by recession, growing unemployment and falling house prices. Workers face mortgages and other credit bills they can’t pay as their income and assets decline. The end of the road is re-possession and destitution.
Let us be clear: today and in the coming years many working people have, and will continue to have, absolutely nothing, or less than nothing. How is any of this the outcome of Blair’s stakeholder society?
Credit for consumption makes little sense unless you believe that your income will keep on rising. The myth of eternal economic growth was peddled by New Labour in the 90s and early 2000s who argued that a flexible workforce and low wages were boosting the economy. What in fact was boosting Britain just as much was the inflow of capital to finance consumer credit. Two illusions of wealth were rising house prices and cheap holidays; Mediterranean holidays paid for by an overvalued pound caused by the purchase of sterling to lend to consumers. (Buying property at home and abroad along with foreign holiday were the topics of endless TV programmes ‘Brits abroad’ and the like)
Blair pulled it off for a while. Profits rose and capital had the additional ability to secure interest from workers as they bought their houses and partied on credit. For all but the poorest in Britain it seemed as if the country were booming. Everything could be had on the ‘never-never’ housing, education, holidays and through PFI even hospitals and the London Underground.