16 November 2012

By Enrico Tortolano

As millions take to the streets in Europe, could this could be a similar turning point to that seen in Latin America when the workers rose against neo-liberalist ideas? And will the momentum from the European strikes make its way over to the UK where austerity measures are fostering an unequal society?

Wednesday marked a historic day for the trade union movement as millions of people across 23 European countries took to the streets to protest against government cuts. They hope this could be the turning point that eventually sees Europe give credence to alternatives to neo-liberalism. While there is some reticence in the UK around the potential for a general strike, there is a clear mandate among trade union members to take action against the government's austerity measures, and the first pan-European general strike could provide the momentum for greater change in the UK.

The realignment of power and privilege at the summit of British politics may continue to delight and enrich City bankers and corporate financiers, but austerity - neo-liberalism’s economic arm - is simply not working. With soaring energy bills, increased travel costs, rising food prices, benefit and tax credit cuts, unemployment, VAT increases, falling wages and increased pension contributions, millions of families have been pushed into the debt trap.

Despite growing by 1 per cent in the third quarter of 2012, the fact remains that the UK economy has flat-lined since 2010, is 4 per cent smaller than it was in 2008 and is now 16 per cent smaller than it would have been if the modest rate of growth from 1980 until 2007 had been maintained. Undoubtedly, millions of families are heading for a long period of declining living standards unless we ensure that growth and wealth is more fairly redistributed over the next decade. Even with a return to growth it is now entirely possible living standards for low and middle households will be no higher by 2020 than they were in 2000. According to the Commission on Living Standards, household income in 2020 is set to be 15 per cent lower than in 2008 - a return to 1993 income levels.

Economists rarely agree, but there does seem to have been a break-out of consent: That the plan to tackle the fiscal deficit through deregulation, privatisation and massive public spending cuts has failed. After almost three years of low or no growth, the Government’s hostility to easing Britain’s austerity programme has led even the IMF to recognise the blindingly obvious – that we urgently need policies that will stimulate growth. In fact the IMF now acknowledge that every £1 in tax rises and spending cuts takes between 90p and £1.70 from GDP.

Moreover, growth and jobs need to be allied to a serious attempt to make the rich stump up their fair share of tax. The mass of wealth sitting out of reach of tax authorities is so great the true gap between rich and poor remains largely abditive. Recent calculations show that £6.3tn of assets is owned by only 92,000 people, or 0.001% of the world's population. Closing down tax loopholes exploited by multinationals and the rapacious rich is vital if we are to balance the economy.

The government needs to focus on stimulating the economy, rather than squeezing it to the point of suffocation with cuts, pay freezes and tax rises for the 99% of people who aren't rich enough to avoid paying their taxes. There needs to be proper investment in HMRC if we are to close the £120bn tax gap. A financial transactions tax would also raise revenues to pay back the debt and deter financiers from speculating on markets. We need to invest in infrastructure like new social housing for the two million families on council house waiting lists. It means investing to create new jobs in renewable energy rather than speculating on food prices to profit from starvation. And it means investing in new businesses and ideas, not getting windfall dividends and bonuses for mergers and laying-off staff.

Nevertheless, despite near universal approbation for the growth agenda the government remains resolutely against reason: They plan to make another £80 billion of spending cuts in the next three years. The elite have shown cunning and guile in manipulating the national deficit and public expenditure cuts into the defining political narrative. The ruling establishment has turned a global financial crisis caused by private sector greed and incompetence into a virulent attack on public services. Naomi Klein in her book The Shock Doctrine convincingly expatiates this strategy of turning ‘crises’, perceived or otherwise, into profit-making opportunities for the rich. What we are witnessing is the temporary triumph of corporate political action. The Public relations industry has become a powerful tool in the struggle to subordinate political decision-making and public policy to corporate rule. Government is simply seen as a mechanism for allocating resources to business: The government’s bailout of the banks was the supreme example.

The time for challenging this philosophy has never been more propitious. As unemployment soars and job insecurity increases, deficit reduction is not the priority its proponents claim. Austerity is not a matter of economic necessity but a political choice. There are alternatives. Twenty years ago, Latin America was a laboratory for neo-liberal austerity, but through popular struggle rapidly turned into the leading region for growth-based alternatives.

Events are moving fast. From a situation in which nothing seemed to be happening, suddenly anything is possible. It’s up to us now.

Enrico Tortolano is writing in a personal capacity in this article, which was originally published in the Morning Star. He expands on the ideas within this article in his essay No Way to Run an Economy in journal Federation Viewpoint. This journal includes nine experts' views on alternatives to austerity