Thursday, 27 November 2008
The car industry has been one of the worst hit by the financial crisis as consumers low on confidence and credit buying of any new cars, almost comes to a full stop. In the US automakers Ford, GM, and Chrysler have been going to Washington to declare that if they are not given a bailout (or a subsidy) of $25 billion they won’t survive beyond 2009.The automakers have until Tuesday to submit a plan on how they intend to use the money and get out of the mess that they, the capitalist economy and Wall Street have created.
They might have a difficult time, though, convincing an already skeptical Congress that they can survive, even with a huge cash infusion. General Motors Corp. and Ford Motor Co. have lost a combined $30 billion in the first nine months of this year and are rapidly using up cash reserves. GM faces its worst financial crisis in nearly 80 years. So the big three in Automakers in the US have gone to seek help from the government, for what would in capitalist’s terms been referred to normally as otherwise, failing companies. The US auto industry, characterized by GM has long been regarded as the pillar and icon of US manufacturing. The question is whether Washington under an outgoing Bush administration would turn a blind eye and let the three automakers go into bankruptcy. Those in favour of a bailout plan maintain action should be taken immediately. They insist that the breakdown of auto industry could affect other trades through the supply chain, finally leading to millions of workers losing their jobs and possibly bringing the unemployment rate up by ten percent.
US recession deepens
New economic data released in recent days indicate that in the US the unfolding recession is developing at a pace and scale unmatched since the 1930s. No one can preach or prophesies that which is likely to come, as often as some do. Capitalism is by its very nature ruthless in its pursuit of profit; after all, profit is another word for capitalism. The present Bush administration has some very influential capitalist captains, particularly people like Richard Bruce Cheney, the current Vice President of the United States. As Vice President, Cheney is also the President of the United States Senate. He is also still very well connected to capitalism, particularly the oil industry, he served as Chairman of the Board and Chief Executive Officer of Halliburton.
Halliburton Energy Services is a US-based multinational corporation with operations in more than 70 countries. It has been at the forefront of several media and political controversies in relation to its previous work for the U.S. Government, its political ties, and its corporate ethics. Halliburton's major business segment is the Energy Services Group (ESG). ESG provides technical products and services for oil and gas exploration and production. Cheney is but one representative member of an administration that has looked out for the interests of US oil, particularly well. It came with an agenda that led to war over oil. Thousands have been consistently lied too, thousands have been needlessly killed. The world is notably by far, a much worse place to live in, in the opening decades of the twenty-first century. And as this worldwide despised and most detested gaggle of geese prepare to leave the world stage to everyone’s relief, as if something burdensome has been reduced or removed from our shoulders – or has it? Will they bankroll the auto industry, or will they allow it to go to the wall, if so what will be its consequences?
The news that a British shopping institution and high street icon, has been placed into administration – which is a technical measure that potentially allows a company to trade its way out of a crisis, but the administrators are legally bound to put the interests of creditors first, which has befallen upon Woolworths and MFI the furniture retailer may be the start of a steep dive in the capitalist economic crisis, a taster of what’s to come.
Woolworths owes £385 million. They have been squeezed by a downturn in consumer spending, and the concern by the banks that they were a poor risk, which meant that their suppliers have recently insisted on pre-payment of invoices, which is the immediate cause of their crisis. This represents a significant development with the storm centre of the recession moving from the banking sector to the real economy. There are several dangers, every high street has a Woolworths, and they employ a lot of staff. If they actually shut then this will be a visible manifestation of economic crisis destabilising confidence even further, as would a big increase in unemployment – in addition to the obvious problems for the workers concerned and their families. There is also a danger that Woolworths’s administrators may seek to improve the cash flow with a pre-Xmas fire sale, which would start a deflationary price war and push other weak retail firms out of business.
Monday, 24 November 2008
I recently came across this very interesting story of a First World War solder in the East London Advertiser and following a recent debate hosted by the Socialist Party, between Bill Martin and Dr Terence Kealey the Vice-Chancellor of Buckingham University. I thought it captured and condensed in some way the idea and proposition advanced by Dr Kealey that workers willingly participated in the First World War. Although the debate in question was on the subject ‘Have We Evolved To Make Money, working peoples involvement in the First World War was touched upon extensively by Dr Kealey in his contribution and his belief that workers soldiered that war somehow with eagerness’ indeed this very point needed and needs to be disputed as I felt no evidence can qualify the argument, if anything the evidence faces the opposite direction. Not wishing to make too much or even attempt to make a complete analyse of the war and it’s impact on British society, it remains the case, that the shortage of manpower in the trenches led to the Derby Scheme, that then, provided some groundwork that led to full conscription, at first no compulsion. Instead, by a mixture of suasion and blandishment, men where pressured into ‘attesting’ that is to say undertaking to serve if and when called upon to do so. As it affected society the Derby Scheme was a gigantic engine of fraud and moral blackmail and even after a fortnight the then Prime Minister Asquith put his finger up to the wind.
“If (he said) there should still be found a substantial number of men of military age not required for other purposes, and who, without excuse hold back from service of their country, I believe that the very same conditions which make compulsion impossible now – namely the absence of general consent – would force the country to view that they must consent to supplement, by some form of legal obligation, the failure of the voluntary system.”
And if that statement by Liberal Asquith was not enough then consider the view of Lord Derby, and his report on recruiting, and his view to take single men first,
“it will not be possible to hold married men to their attestation unless and until the services of single men have been obtained by other means, the present system having failed to bring them to the colours.”
Opposition to this war was widespread amongst workers, what I mean by emphasizing workers, is that most are in manual occupations, but by no means all. It can hardly be any clearer; amongst a large part of the population people had reservations about war, some against it in its entirety, 16,000 became registered conscientious objectors, whilst 3,300 accepted service in Non-combatant tasks. This opposition, challenging the authority of the state, was of a magnitude that can only be considered as significant.
There are many reports of large demonstrations, of demonstrations for peace being broken up, of Quaker meetings being disturbed men imprisoned, released, arrested, court marshalled, and so on, not forgetting that 70 conscientious objectors who actually died from their prison treatment. The organized resistance to the military conscription of the First World War is without doubt important because it provides evident proof of widespread unwillingness on the part of the working class. The war was executed by a ruthless ruling class on both sides of argument, who thought nothing of man’s most precious of possessions, his right of individual judgement!
Arthur Lovell’s story is not only a fascinating and moving real life story of one man’s life, it’s a demonstration of mans capabilities, physically and intellectually able to believe in each other, shearing whatever we have in the world, which is each other. I’ve posted this story because it really contributes to that which is against the divine madness of war.
By Gary Haines
TODAY marks the 90th anniversary of the Armistice which ended the First World War.
It is also the 80th anniversary of a hero from the trenches, a costermonger from London’s East End who joined up at the outbreak of war in August, 1914, and survived four years on the Western Front—only to die in a road accident on the 10th annual two minute silence to commemorate the Armistice and his fallen comrades.
The guns had fallen silent in 1918 on the 11th hour of the 11th day of the 11th month.
Tragically, the last day of the Great War saw 242 British personnel die, including three women. The total loss of life on this final day was 863.
The last British fatality recorded was a Private Ellison of the Fifth Royal Irish Lancers who was killed at 9.30am—just 90 minutes before peace.
The last Allied soldier believed to have fallen was a Canadian, Private George Lawrence Price of the 28th North West Battalion, Second Canadian Division, killed by a German sniper at 10.58am—two minutes before 11am.
Arthur Lovell had survived four years in the trenches, but would die exactly 10 years later on Armistice Day in 1928.
The war veteran—a costermonger market trader in peacetime—was observing the ‘Great Silence’ at his barrow at Burgess-street in Limehouse.
As the silence came to an end and the traffic resumed, the horrified veteran saw a four-year-old girl, little Rosie Wales, run into the road into the path of a steam lorry.
Arthur ran after her, without a thought for his own safety, pushing the child out of harm’s way.
But the brave veteran, who had cheated bombs and snipers’ bullets for more than four years, slipped and was hit by the truck.
He would die of his injuries in St Andrew’s Hospital in Bromley-by-Bow later that day.
It was an act of heroism which caught the imagination of the nation.
A week later, Arthur was given a full military funeral. The crowds which jammed the streets of the East End were even bigger than those that had turned out for Armistice Day seven days before.
Lovell’s son, also called Arthur, witnessed his father’s accident, which would leave a widow, Eliza, and seven children. His three eldest, all girls, were working in factories. The others, all boys, were aged 10 years to three months.
Arthur Lovell was one of the ‘Old Contemptibles’ who served in the 17th London Regiment, part of the Middlesex Battalion, who marched off to war at the very beginning in 1914.
He was wounded twice, but survived to finish the war at Mons on November 11, 1918.
His funeral 10 years later would see a great outpouring of grief with thousands lining the route through the East End.
The East London Advertiser reported on November 24, 1928: “Vast, silent and bareheaded crowds thronged every yard of the route which the funeral procession took from Halgood-street, Bow, to All Hallows Church, Bromley, and to Burgess-street, Limehouse.
“The coffin was carried on a gun carriage which was draped with a Union Jack. Many wreaths lay upon it including some composed entirely of Flanders poppies.
“The funeral procession was led by mounted police and the Band of the K Division Metropolitan Police. Following the gun carriage were costermongers with their barrows and carts, the hearse covered with wreathes, police marching four deep, men of the East London British Legion, buglers and men from the 17th London Territorials, a group of Girl Guides, Brownies and lastly a contingent of nurses.
“The procession stopped in Burgess-street where the mother of Rosie Wales (the little girl he saved from the lorry) placed a harp-shaped wreath on the coffin, bearing the words ‘From Little Rosie’.”
Crowds waited at Mile End outside the gates of Tower Hamlets Cemetery for hours for the burial. Mounted Police had to preserve public order when the crowd tried to rush the gates as the hearse left.
The service ended with the sounding of the Last Post and Reville. Crowds surged forward to get nearer to the grave and it was reported that many women fainted.
The story doesn’t end there. The Bishop of Stepney recalled at the funeral a strange tale from the day before.
“Last night there came to Arthur Lovell’s house a man who had been attracted by the name and asked if he could see the body,” the bishop recounted.
“He said quietly, ‘I thought so—this man saved my life in France during the war and I haven’t seen him since then until tonight’.”
Arthur had saved the man’s life during a German gas attack by lending him his gas mask, risking his own life for a comrade.
A memorial to Arthur Lovell was unveiled by Countess Haig at Bromley Public Hall in May, 1929, six months after his death. Costermongers joined the countess to honour their hero and the service ended as Rosie Wales presenting a bouquet to her.
The ceremony was broadcast through loud-speakers to the crowds gathered in the street.
An anonymous donation covered the expense of the portrait which was the centrepiece of the memorial and the costs of administering the Lovell Fund set up to look after Lovell’s family. The fund raised £2,190 from a-thousand contributors.
The memorial was inscribed “Arthur Lovell. Love is indestructible. Its holy flame for ever burneth; From Heaven it came, to Heaven returneth.”
Among those at the packed service were Arthur’s widow and seven children. Their dad had been a hero in peace as well as war.
Wednesday, 19 November 2008
THE postal region with Britain’s biggest financial debts is East London, a survey has found.
The E1 to E17 postcodes have been identified collectively as the most debt-heavy in the country, according to a report by Callcredit reference agency.
The agency assessed debt ‘status’ across the country, evaluating census data, age, property class and income as well as debt data.
Those with ‘East London’ postcodes were most heavily in the red, contrasting with the neighbouring EC1 to EC4 City financial district topping the poll as the country’s least-indebted area.
The East London region stretches from deprived districts like E1 Whitechapel to affluent leafy suburbs such as E4 Chingford.
Tuesday, 18 November 2008
With only two days left before people vote in a Tower Hamlets local by-election which could be a crucial indicator in the way London’s East End votes in any forthcoming General Election.
A four-cornered battle for Mile End East ward will take place on November 20.
Candidates represent all four parties at the Town Hall—the controlling Labour group is up against Conservative, Liberal Democrat and Respect opposition parties.
But all eyes are on the two current MPs whose present constituency boundary slices through Mile End.
Respect MP George Galloway in Bethnal Green & Bow to the west of the line is switching to neighbouring Poplar & Limehouse constituency to the east, to take on Labour’s Jim Fitzpatrick at the next General Election.
Mile End East sits on the current boundary between the two rival MPs’ constituencies and the November 20 poll could show which way voters are likely to go at the General Election in this deprived inner city borough. This will be an interesting contest because its outcome will give an indication as to the future fate for Galloway’s half of Respect following the split last year with the SWP. My own feeling is that it can go any way depending on who is able to influence best the leaders in the mosques. I will have more to say about this by-election later on.
Saturday, 8 November 2008
The above portrait is the image of my grandfather, from my mother’s side of the family. I first saw his likeness hang on the wall of my grandmothers flat in the early 1970s on a family Christmas visit to Germany.
Thousands of war veterans will March past the Cenotaph memorial in London to mark Remembrance Sunday. The Queen will lay the first wreath of poppies.
Senior Royals will follow suit,then the PM and leading politicians and other dignitary’s. Remembrance events will take place around the country and in the theatres of modern wars in both Afghanistan and Iraq.
This years Remembrance Sunday falls exactly 90 years after the ending of World War I, Armistice Day.
World War II was humanity's deadliest war, causing tens of millions of deaths. The total estimated human loss of life caused by World War II was roughly 72 million people, making it the deadliest and most destructive war in human history. The civilian toll was around 47 million, including 20 million deaths due to war-related famine and disease. The military toll was about 25 million, including the deaths of about 4 million prisoners of war in captivity. The Allies lost approximately 61 million people, and the Axis powers lost 11 million.
My grandfather Wilhelm Kahler was killed just weeks before the wars end, away from home in Russia at the ridiculously young age of less than forty years; he was one of 5.2 million German servicemen – that’s three in every ten mobilized, whose lives were prematurely taken along with 2.4 million innocent German civilians. More German soldiers lost their lives in the last twelve months of fighting than in the whole of the war. The crucial point is that to Hitler this monstrous toll meant nothing whatever, he once said; “life is horrible, coming into being, existing, and passing away, there’s always a killing. Everything that is born must later die. Humanity is a ridiculous cosmic bacterium.”
His statement only proving that war is evil, the dark side of humanity, it is the true tragedy, the triumph of disaster.
How can anyone praise war without stopping to reflect on the many horrors of pain and needless loss of life?
Capitalism in crisis by Adam Buik (Part 3)
Finally there’s the stock exchange though this is not part of the banking system
even if it too is a means of raising capital for trade and industry. It’s where shares, which are property titles giving their owners the right to a share in the profits of capitalist companies, are traded. What happens there tends to reflect the collective opinion of shareholders as to the profit prospects of individual companies and in the economy generally. But it isn’t always a true reflection as there can be irrational bubbles and as it can be manipulated by those with big money, engaging in such practices as “short-selling”, insider trading, spreading false rumours and other forms of skulduggery that the authorities are always trying to stamp out.
The real world
But to return to the real economy.
Marx realised that production under capitalism was cyclical. For short, we speak of boom/slump cycles. Actually, Marx went into more detail, describing the following cycle:
"feverish production, a consequent glut on the market, then a contraction of the market, which causes production to be crippled. The life of industry becomes a series of periods of moderate activity, prosperity, overproduction, crisis and stagnation".
We are now in the crisis stage, with a period of stagnation to follow.
What happens in a boom is that capitalist enterprises assume that it will continue and so they all plan to expand their production, investing in new machinery, building new factories, taking on more workers. But when this all comes on stream, it is found that productive capacity exceeds market demand. There is overproduction (in relation to paying demand, not real needs of course). This has both financial and economic consequences. Workers are laid off, orders with sub-contractors are not renewed, which in turn have a knock-on effect, leading to further lay-offs and factory closures.
The same has happened this time: the market that has overexpanded being that for housing in America. Beginning in 2000 there was an expansion in the construction of new houses for sale. There was also widespread renovation for resale of existing housing. The purchase of these houses was financed by loans from specialist mortgage lenders, which were supplied with money “wholesale” by investment banks. A boom in house-building and house-buying developed. House prices rose but workers’ incomes didn’t, so, to keep up demand, mortgage lenders lowered their standards. They began to grant more and more "sub-prime" loans, so-called because they were given to people whose income was below the normally accepted level and so had a higher chance of defaulting.
Eventually the inevitable happened. sub-prime borrowers did default, which represented a fall in paying demand for houses. By early 2006 house-building peaked. The boom came to an end and house prices began to fall. But far from stimulating the market this left millions with negative equity, which meant not only that they had to cut their consumption but also that the banks wouldn’t get all their money back even if they repossessed the houses. The housing boom could in theory have continued if people’s incomes had gone up and at the same rate. But it didn’t and it couldn’t have. Once borrowers began defaulting, the mortgage lenders suffered losses and so had less to lend. Credit tightened, which provoked yet more defaults.
What had happened was that more houses had come to be built than people could afford to pay for or, from another angle, than could be sold profitably. In other words, overproduction (in relation to what people could afford, not in relation to housing needs). A recent study by the Bank for International Settlements in Basle, entitled “The Housing Meltdown: Why did it happen in the United States?”, uses such terms as “an overhang of excess supply”, “overbuilding of new housing” and “a substantial oversupply of housing”, producing figures to show
“that between 2001 and 2006, the United States built more new homes than would have seem to been required by the growth of its population”
“The US housing construction sector seems to have managed to build up a substantial oversupply of housing. The United States was therefore more likely to experience a sharp fall in prices than some other countries, even before credit supply tightened.” (www.bis.org/publ/work259.htm)
This last point is important: the housing boom burst and house prices began to fall “even before credit supply tightened”. In other words, it couldn’t have been the credit crunch that contributed to the end of the housing boom. Rather it was the other way round, at least in America (even if the credit squeeze resulting from what happened there may well have burst the housing bubble in other countries). In other words, it was overproduction that triggered the “credit crunch”.
This then made things worse, both in America and in other countries. As more and more of the sub-prime borrowers began to default, i.e. did not have the money to carry on buying their house, the banks and other institutions that had invested money to buy houses suffered losses; which forced them to cut back on their lending as they still had obligations to their depositors and creditors.
This had a knock-on effect worldwide. Some of the investment banks (and the famous Fannie Mae and Freddie Mac) which had lent money to mortgage lenders to finance the sub-prime loans, had pooled these loans and sold them on as an interest-bearing bond (had “securitised” them). Other banks took these bonds and pooled them again with other loans. These bonds were taken up by banks, commercial as well as investment and by investment funds, in Europe as well as America, to a quite surprising extent in fact.
When these bonds became worthless or drastically depreciated as the sub-prime borrowers defaulted, the banks throughout the world that held them suffered losses, some huge losses, requiring them to cut back on their lending. Hence the world “credit crunch” that started in August last year.
But another whammy was coming. When it was realised that some of the bonds they held were "toxic", banks became reluctant to acquire any bonds which might contain a “toxic” element. The problem was that it was not easy to identify which and to what extent some of the bonds on the market were toxic. Confidence in trading in them fell and short-term interest rates went up.
It was this that represented a second whammy for some banks, who had borrowed on the money market to re-lend to buy housing. When they came to renew these loans they found that the rate of interest on the short-term bonds they borrowed on the money market had risen above that they were getting on their mortgages. They were making a loss, some to such an extent that they were technically insolvent. They were only saved from bankruptcy by being taken over by other banks or by the government, at a great loss to their shareholders. In Britain this happened to Northern Rock, Alliance & Leicester and Bradford & Bingley. In fact, none of the building societies which in the 1990s converted themselves into banks have survived as independent enterprises. All have been taken over by bigger, older established banks. So, incidentally, confirming that in a crisis the centralization of capital is speeded up. The Continent too has been affected, with two Belgian banks and one German, specialising in lending money to buy houses, having to be rescued. Even Switzerland. And of course Iceland.
But worse was to come. A third whammy. The collapse of the US housing market resulted in a change in the status and credit-rating of the bonds containing sub-prime loans. This reduced the capital-to-asset ratio of the banks holding them. Most banks were able to accommodate this to some extent out of the profits they were making on their other, more solid loans. But not all banks. Some were in danger of becoming technically insolvent. Thus, earlier this year, the Royal Bank of Scotland tried to raise a record amount of new capital. Now it’s 60 percent government owned.
But nobody knew to what extent individual banks had been affected by this. So all came under suspicion. As a result banks were reluctant to lend to each other. The London money market is international and, as British banks came under suspicion of possible technical insolvency, more cautious overseas banks (from, for instance, Japan, the Middle East and Scandinavia) became reluctant to lend on the money market. Transactions on the money market ground to a virtual halt and the interbank rate (LIBOR) - which is more important than the bank rate in influencing short-term interests rates - rose well above the bank rate.
There has been some argument amongst the experts as to whether there is a "liquidity crisis" (i.e. a reluctance to accept usual paper IOUs) or an "insolvency crisis" (banks capital-to-assets ratio falling too low). The British government's decision to provide money in the form of shares to banks who want it to increase their capital suggests that it has been decided that, in Britain at least, there is an insolvency element. The hope is that allowing banks to increase their capital-to-assets ratio by an injection of government money will restore the confidence of overseas banks in British banks and start them lending again. That other governments have followed suit suggests that possible bank insolvencies was a problem there too.
At the same time there is evidently also a liquidity crisis in that fear of acquiring "toxic" bonds and of lending to a bank that might be insolvent have also contributed to the blockage of money markets in America as well as Britain. In America, under the Paulson plan, the government is to buy up these toxic bonds so as to take them out of the market. In Britain the Bank of England has been giving Treasury Bills in place of other paper IOUs which are not circulating for the time being. In America the Federal Reserve has even decided to take commercial IOUs issued by non-banking enterprises, so becoming their "lender of last resort" to them as well as to the banks.
The banking system seizing up is a serious problem as it can no longer properly carry out its original, basic function of chanelling funds to productive industry. If this goes on for too long, it will have a serious effect on production. Governments have to intervene to unblock the situation. What they have to do is to restore confidence. They have no idea if their proposals will work but they have to give the impression that they think they will.
One annoying feature of the media reporting of the various government bail-outs of banks has been the description of them as “taxpayer” bail-outs. In other words, that it’s suggested that it is somehow “our” money that is spent or lent whereas it’s not; it’s the government’s money, which is not the same thing.. Of course if you accept the Marxian view that taxation is not a burden on the wage and salary working class but on the propertied class, then it is the “taxpayers” who are paying (but this is not quite what the media had in mind). The money to bail out banks has been put up by the rest of the capitalist class. These bail-outs are a case of the capitalist class paying to try to get the functionning and viable banking system that they must have. No doubt they will extract a price from the finance capitalists, but this is a conflict that doesn’t concern us as workers and as socialists.
The measures taken may well eventually end the banking crisis but they won't stop the economic crisis from continuing to develop. The lay-offs and cutbacks in industrial production and in services have already begun and the knock-on effects are spreading. This is generally accepted, and is reflected in the fall in share prices and also in the Baltic Exchange Dry Index which Dave Perrin drew our attention to in the September Socialist Standard. This is an index of something happening in the real economy - the shipping of raw materials. An article in the Guardian (14 October) was headed “Baltic Dry warns of tough times on the horizon” and subtitled “The index, a proxy for world trade flows, has fallen more than 80% since July and is now at a three-year low”, explaining:
“The index has long been seen as a good leading indicator of future economic production levels because it charts the cost of freight movements in 26 of the world’s biggest lanes of ‘dry’ materials, such as coal, iron ore and grain which feed into the production of finished goods some weeks or months ahead.” (http://www.guardian.co.uk/business/2008/oct/14/creditcrunch-marketturmoil)
So, there’s most probably going to be slump. The only question is how deep and how long is it going to be. Will it be a short, sharp shock as it was following the collapse of the secondary banks in 1973? Will it be a prolonged period of stagnation as over the last ten or so years in Japan? Will be a big depression like in the 1930s?
They say that money makes the world go round. Actually its labour that does this. But, far from money making the world go round, it gets in the way and sometimes, as now, money actually stops the world going round. Crises such as the present one show the ultimate irrationality of capitalism since, although the resources and the skills are there to produce enough to satisfy people’s needs, the system does not allow this to happen. But what is the aim of production if not to satisfy people’s needs? That’s not going to happen as long as capitalism exists. It can only happen when once the resources of the world have become the common heritage of the people of the world. In other words, socialism in its original sense.
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