There is a feasible and popular alternative to austerity
The text below is the opening keynote speech given by CWU General Secretary, Billy Hayes, at Class's first national conference on 2 November, 2013 at Congress House. Please check against delivery - video to follow shortly.
The CWU strongly supports CLASS. We believe that it is vital to have a think tank that is entirely sympathetic to the trade unions and labour movement.
By the late seventies, it was clear that the long post-war boom was over. In both liberal and conservative circles there was a turn towards those academics who promoted the writings of Hayek, Friedman and other reactionaries.
Implementing such policies did not create a new period of expansion comparable to the post 1945 long expansion.
But in the Chicago school writings, politicians were able to find a justification for the assault upon the trade unions and the welfare state.
There wasn’t a new long expansion in the economy. But there was compensation for the ruling establishment in reducing the share of the national economy going to wages.
For our part, we have no such easy answers. We need to establish both how we can create the conditions for a sustained economic recovery, – and how we can raise living standards amongst the working class and poor.
This is the type of work CLASS needs to be concentrating on – if it is to become as influential as the Neo-liberal think tanks.
In our view, the government has to become the force promoting increased investment in the infrastructure, productive industries and the workforce.
The failure of 2008 was a failure of the private markets – not state spending.
There was an over-production of credit in both the financial markets and the housing market. The economy collapsed when investment fell.
When the crisis broke it was obvious who was to blame – the bailout of the banks and financial institutions made that clear.
But the re-groupment of neo-liberalism was swift. They insisted that the underlying source of the problem was excessive state spending.
Strangely, they did not regard as excessive the money spent of recapitalising the banks and financial institutions – £1.2 trillion in the UK alone.
No, the problem was excessive spending on the unemployed, the disabled, public sector pensions and wages, and so on.
Let us register that there was no suggestion of excessive military spending.
After all, a range of nuclear missiles, and various weapons of mass destruction, was essential. How else can you implement an aggressive foreign policy to guarantee access to other countries’ energy supplies and productive resources?
So since 2008 we have witnessed coordinated austerity in the developed countries. This has not created new growth. It has reinforced economic stagnation.
It is only when governments stimulate the economy through investment that we see any serious growth, as shown by the spending packages used by Gordon Brown and President Obama.
Today, we need to be discussing what an incoming Labour government must do to expand the economy and raise living standards.
Where is the capital to come from?
In 1970, UK firms were investing two thirds of their gross profits. In 2012, the same firms were investing just 43 percent.
If the investment ratio were to return now to 1970 rate it would increase by £122 billion. That’s nearly 9% of GDP.
Private companies have been increasing their cash hoard by £75 billion a year since 2008.
They are on an investment strike.
Instead, shareholder dividends have been growing – anticipated payments in 2013 are £80 billion.
An incoming Labour government has to mobilise these resources to create a sustained economic recovery.
That means an incoming Labour government must tax companies effectively.
In 1970, corporation tax was 40 percent – today is heading towards 20 percent. Instead of that allowance being used productively it has gone to shareholders.
The next Labour government should use the cash hoards in publicly owned banks for productive investment.
This could be used to rebuild public services. It can also be used to address the stagnation in the housing market.
It is good that Ed Miliband wants to double house-building to 200,000 a year. But he hasn’t said how he intends to do this. The private market won’t deliver such growth -so local and national government will have to build those homes.
A Labour government needs to create a jobs and wages led recovery. That means, as Frances O’Grady puts it “Britain needs a pay rise”.
The freeze on wages in the public service sector has to be lifted. Benefit cuts must end – we have to provide civilised living standards for those unable to work, and for those who care for the sick, disabled and elderly.
The next Labour government should end the disproportion in military spending. It is ridiculous that as the seventh largest economy in the world, we still have the fourth highest military spend.
Cameron’s Syria debacle shows that the public has lost its appetite for military adventures against developing countries.
Huge savings can be made simply by reducing our military spending to the level of Germany. We can also save £100 billion by scrapping the Trident programme. We can show that Labour can become a force for peace.
Such policies need to be sustained by in-depth research and further analysis.
This is, I believe, the promise of the Centre for Labour and Social Studies. It can prove that there is an alternative to austerity which is both feasible and popular.
All that will then be needed is the political will to carry it through.
Thanks for listening.