Britain has a Debt Problem, All the More Reason to fight Austerity

The British state has a debt problem and this makes rejecting austerity all the more important. The conjunction between the two statements here is by no means contradictory. It is customary on the left to deny the fiscal crisis of the state, but there are real limitations to its capacity to sustain social expenditure given the pronounced power of capital. The march against austerity in London today might be the first step to concretising the belief that much more needs to be done than establishing popular support for the state in its current form.

This paints a very bleak picture for the Keynesian prescriptions that are the common alternative to fiscal contraction – in other words, austerity – and labour market liberalisation. Keynes’s argument was one based on psychological assumptions very different to those of classical and neoclassical economists. He described how the proportion of income not given over to consumption would become savings and was in aggregate identical to investment. This was the key to continuing growth in employment, the conclusion being that a shortfall in demand – in the form of goods for consumption and new investment – could prevent growth in employment. Economies could stagnate – and unemployment remain above its potentially lowest point – because of an absence of demand.³ By stimulating demand – primarily in the form of deficit spending, but also tax cuts and lowering interest rates – the government could create new employment, growing income/output, and therefore economic growth. In theory it remains possible for the state to do this (after all, there are no absolute limits to capitalism only relative ones). The argument against a purely Keynesian policy program is the institutional, social and political context. Even if the institutional capacity for a Keynesian revival led by the state exists (as perhaps it may in the United States), the kind of technological take-up characteristic of the ensuing boom would not necessarily drive job creation. Service economies, no matter how high-tech, do not produce the same kind of mass employment as heavy industrial economies. Moreover, with ongoing financialisation of capital and the internationalisation of regulatory structures (including the US state and its many free trade agreements, the EU and its many treaties, the IMF and so on), it is not at all clear that the reduced power of national governments could sustain a reverse course for very long. This argument applies especially to the UK with its heavy reliance on financial services, its low productivity growth, its high degree of de-industrialisation, and the pronounced weaknesses of the tax system.

What, if not growth alone, would amount to an adequate challenge to austerity? Only a concerted effort of the social will can begin – slowly – to reverse the decades-long evolution of advanced capitalism. Because these secular tendencies are multi-layered, only a multi-faceted effort – working at every institutional level of the state and civil society – can begin this work. Society does not have infinite resources for this task, and defeat is a possibility if not quite a likelihood. However, it is vital that we use our efforts to build concrete institutional powers. Protest is a high-visibility response, but it can sometimes leave no lasting trace. Our presence needs to be felt in institutions – primarily the staid “core” union structure, as well as in the new “peripheral” unions that seek to protect the more precarious sectors of the economy. Struggles need to be built around housing and immigration; urban destruction and resource exploitation; feminism and minority rights. It is a tall order, but happily this multi-faceted opposition – stretching well beyond the state – reflects already the political logic of austerity capital, which outsources “creative destruction” onto the different levels of the social fabric.