The response to austerity can't be on the terms which led us into it

The only effective response must be to repudiate the debt, writes Molly Scott Cato

It is disappointing that the response from the Left in Britain to the politics of austerity has been so limp. The brilliant coup from the interests of capital to paint the economic crisis as a crisis of government debt and public spending—and therefore the basis for an attack on the ideology of the left—has seen little in the way of aggressive intellectual response.

The simple explanation for this is that the left is divided. The line taken by the socialist and labour left has largely been one of denial. This is not a high level of debt, they argue. By historical standards, we have survived much higher levels of debt. Why, after the last war we faced debts on a far greater scale and yet that is when we established the health service.

I think this is a mistaken approach to the politics of austerity. For one thing, it will not wash. Citizens have a sense of there having been a vast amount of cash floating around during the Labour years. They also know that consumption, individual and national, was based on untrammelled credit. This is their sense of how life was, and they are not wrong.

Secondly, the parallel between our economy now and in the 1950s does not hold up to scrutiny. At that time we were an imperial nation and the workshop of the world, if a somewhat scruffy one making rather unfashionable products. We could use our empire as a vast ‘internal’ market, sucking in resources and finding compliant customers for our products. We could repay our debts through hard, productive labour—and we did. Now what do we have to offer the world as justification for the debts we have incurred? Our favourite offering of financial services is finding considerably less favour than five years ago.

But most importantly we should reject this line of argument because it is morally wrong. We should not have to live through the 1950s again, working hard to return interest to those who loaned us money. Back then it was US and Canadian capitalists who, through lend-lease, had ensured that the value created by British workers would flow back to them. We would not have won the war without US productive capacity, but we would not have lost the peace as spectacularly as we did had they not insisted that we continue to pay for it right up to 2006, just two years before the credit crisis.

Rather than arguing about how we should pay it back we should be repudiating the debt.

This is what has been happening in other European countries, where Citizens’ Audit have been established, inspired by the examples of the Latin American countries who refused to pay their debts during the last decade. Why should we pay back money loaned to us by financial institutions who have the power to create money by electronic fiat, they asked. And we should be asking the same question. By the time we had paid our wartime debts—the debts we incurred for defeating Hitler and protecting European democracy—we had paid our ‘allies’ the US and Canada, or rather US and Canadian capitalists and financiers, twice what we had borrowed. This iniquitous use of the power of money to extract value should be the real target of the left.

Earlier this week Portugal’s citizens’ audit campaign published a preliminary technical report: ‘Understand the debt to get out of the trap’; the Spanish campaign is called ‘Who owes whom?’ and is part of the work of the indignados. The Irish citizens audit, supported by UNITE as well as debt campaign groups, challenged circular nature of Irish debt-holding, with the government guaranteeing banks which, in turn, hold its debt. It found that Irish debt had been transformed from a safe and boring investment to a vehicle of speculative interest. Its authors used Kissinger’s term of “constructive ambiguity” to describe the deliberate use of recondite language to undermine the citizen’s power to understand the actions of their politicians.

The real purpose of a citizens’ audit is precisely to challenge this “constructive ambiguity”. Most people never question whether it is right that they should pay interest to a bank for the privilege of buying their home, although they will pay around twice the cost of the house by the term of the mortgage. Whether this is just depends on how the bank acquired the money and in these days when the corrupt dealings of banks are becoming revealed in more egregious detail every day, an audit into how our debt was acquired, who owns it, and who will receive the money that we are paying in return for our borrowings is urgently overdue.

Photograph: Getty Images

Molly Scott Cato is Green MEP for the southwest of England, elected in May 2014. She has published widely, particularly on issues related to green economics. Molly was formerly Professor of Strategy and Sustainability at the University of Roehampton.

Photo: Getty
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Who will win in Manchester Gorton?

Will Labour lose in Manchester Gorton?

The death of Gerald Kaufman will trigger a by-election in his Manchester Gorton seat, which has been Labour-held since 1935.

Coming so soon after the disappointing results in Copeland – where the seat was lost to the Tories – and Stoke – where the party lost vote share – some overly excitable commentators are talking up the possibility of an upset in the Manchester seat.

But Gorton is very different to Stoke-on-Trent and to Copeland. The Labour lead is 56 points, compared to 16.5 points in Stoke-on-Trent and 6.5 points in Copeland. (As I’ve written before and will doubtless write again, it’s much more instructive to talk about vote share rather than vote numbers in British elections. Most of the country tends to vote in the same way even if they vote at different volumes.)

That 47 per cent of the seat's residents come from a non-white background and that the Labour party holds every council seat in the constituency only adds to the party's strong position here. 

But that doesn’t mean that there is no interest to be had in the contest at all. That the seat voted heavily to remain in the European Union – around 65 per cent according to Chris Hanretty’s estimates – will provide a glimmer of hope to the Liberal Democrats that they can finish a strong second, as they did consistently from 1992 to 2010, before slumping to fifth in 2015.

How they do in second place will inform how jittery Labour MPs with smaller majorities and a history of Liberal Democrat activity are about Labour’s embrace of Brexit.

They also have a narrow chance of becoming competitive should Labour’s selection turn acrimonious. The seat has been in special measures since 2004, which means the selection will be run by the party’s national executive committee, though several local candidates are tipped to run, with Afzal Khan,  a local MEP, and Julie Reid, a local councillor, both expected to run for the vacant seats.

It’s highly unlikely but if the selection occurs in a way that irritates the local party or provokes serious local in-fighting, you can just about see how the Liberal Democrats give everyone a surprise. But it’s about as likely as the United States men landing on Mars any time soon – plausible, but far-fetched. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.