Whither Britain?

The longest depression ever

The UK’s economic woes.

“The current UK depression will be the longest since at least the first world war. Without a dramatic surge in growth, it is also quite likely to generate a bigger cumulative loss of output than the ‘great depression’. All this is disturbing enough. What is even more disturbing is the near universal view that almost nothing can be done to change the prognosis.” (‘Britain must escape its longest depression’) So said Martin Wolf in the Financial Times of 2 September 2011. Although he apparently does not subscribe himself to the “near universal view that nothing can be done to change the prognosis”, he does not commit himself as to what he thinks the solution might be. He went on to give a brief history of the depressions of the 20th century, showing how, by comparison, the present one is the most severe as far as the UK is concerned: “Hitherto, the longest depressions of the past century were those from June 1979 to June 1983 (under Margaret Thatcher) and from January 1930 to December 1933 (the great depression). For the present depression to be shorter than its longest predecessor, it must end not later than April 2012. But output is close to 4 percent below its starting point, with eight months to go. Even if growth now jumped to a 4 percent annual rate, it would take another year for it to end. If growth were to be 1.5 percent a year, the depression would last 72 months, making it some 50 percent longer than its longest predecessor in a century. “One can assess the depth of a depression by the steepness of the decline or by the cumulative losses, relative to the starting point. The depression of 1920-24 was the steepest, followed by the great depression, whose largest reduction in GDP was 7.1 percent. But the present depression is only a little behind, with a fall of 6.5 percent. The cumulative loss of GDP is likely to be worse this time even than in the 1930s. It was 17.7 percent of GDP back then, against 14.5 percent, this time, so far. But this depression is not over. If growth were to be 2 percent a year, the cumulative loss would be over 18 percent of GDP.” He believes that the “cushion of the modern welfare state has made this a much less traumatic shock than the depression of the interwar years” (though of course this ‘cushion’ is being relentlessly eroded even as we speak), but he is forced to conclude that “the scale and duration of this depression has been shocking”. Were he fortunate to have even a passing acquaintance with Marxist economics, Martin Wolf would not be shocked or surprised at what is happening, since Marxism predicted long ago not only that crises were unavoidable under the conditions of capitalism, but also that they would become more profound and prolonged under the conditions of imperialism. The fundamental flaw in the capitalist system is that to maximise profit, workers are paid as little as possible, while production of commodities increases exponentially with the development of new and expensive technologies. Periodically, there reaches a point where, precisely because of the relative impoverishment of the vast masses of the workers and peasants of the world, they are unable to purchase sufficient of the commodities produced by capitalist enterprises to enable the latter to turn an acceptable level of profit, or even recoup their costs in some cases. Here and there can be found even bourgeois commentators who can recognise that the problem is an inherent problem of the capitalist system: “It is a crisis of capitalism because our economic model and policy settings cannot produce sustainable growth, adequate income formation or employment creation. We have lost the housing, financial services and credit creation growth drivers and been left with excessive levels of personal and government debt to unwind, a dysfunctional financial system, and weak labour markets. “The capacity to produce and sell goods and services has outstripped that of consumers to borrow and spend. Without credit and jobs, other fault lines have been exposed, including the long stagnation of real wages and extremes of inequality. It is truly a crisis of aggregate demand [or what Marxists call a crisis of overproduction],” says George Magnus, a senior economics adviser at UBS, quoted with remarkable candour in the Financial Times. (‘Financial bust bequeaths a crisis of capitalism’, 13 September 2011) Naturally, though, Mr Magnus does not arrive at the logical conclusion that capitalism has passed its sell-by date and needs to be dismantled lock, stock and barrel. Austerity no solution Those capitalists who have become unprofitable are retrenching, or even closing down their enterprises, giving rise to redundancies on a mass scale, which is further impoverishing the mass of potential consumers, thereby exacerbating the crisis. In a frantic endeavour to avert the looming crisis, the capitalists had been resorting to lending money to impoverished consumers to enable them to continue buying. This usury initially brought in such a good rate of return that capitalists were happy to rush in to lend more money both to individuals and to governments so that the spending could continue. Unfortunately for them, as the inexorable process of impoverishment of the broad masses of the people continued, their indebtedness – the requirement to pay back the principals borrowed as well as to pay interest – ended by reducing their purchasing power still further. Government spending, too, began to be cut back as capitalists demanded the lowering of taxes in order to try to maintain their profit levels. Demand vanished from the economy like molten snow. And yet in their frenzy for profits the capitalists are demanding still lower taxes, still more wage cuts and austerity for the working masses, the downsizing of the public-sector workforce, the cutting of pension entitlements to the bone, etc, etc – all of which measures are duly being taken on behalf of capitalism by their various governments, and all of which are exacerbating the crisis still further. Many bourgeois commentators, and, it must be said, investors too, have realised that austerity only makes matters worse. Nobel laureate Paul Krugman considers in this context that obscurantists have run amok. “What we’re witnessing here is a catastrophe on multiple levels. We are doing a terrible thing. We are repeating all the mistakes of the 1930s, doing our best shot at recreating the Great Depression,” he said. (Quoted in ‘The West’s horrible fiscal choice’ by Ambrose Evans-Pritchard, Daily Telegraph, 4 August 2011) The bourgeois media hacks resolutely close their eyes to these rather too obvious truths, and like to cite occasions when, as a result of drastic austerity, various countries ‘recovered’ from crisis. However, these ‘recoveries’, to the extent they existed at all, involved lowering costs of production to a bare minimum in order to be able to undercut competitors, primarily when selling abroad to countries that had not yet succumbed to crisis. The present crisis, however, is so deep and embraces so many countries, that demand in the few countries that are not in desperate straits could never be sufficient to rescue all those who are facing shipwreck. “A study by Goran Hjelm from Sweden’s Institute of Economic Research said the formula [for austerity measures to improve a country’s economic position] only really works when countries can let their currencies slide and export their way out of trouble. This is not possible for Spain and Italy within EMU, nor for the combined West at the same time. ‘We can’t all devalue together and export to Mars,’ said Jamie Dannhauser from Lombard Street Research.” (Daily Telegraph, ibid ) Curiously enough, the government’s strategy of seeking to lower costs of production to the maximum by the imposition of mass austerity in the hope and expectation that this will make British exports more competitive in the world market and enable British capitalists to make vast profits abroad has actually had some success in boosting exports. It is nevertheless a strategy which is doomed to failure. Hard as UK-based companies strive to boost exports, the leaden home market, wracked, or wrecked, by austerity, is acting like a deadweight pulling them down. This is explained by Philip Aldrick, Economics Editor of the Daily Telegraph, discussing the falls in manufacturing activity that marked the six months from February to July this year. He noted that “The manufacturing figures are particularly worrying because the weakness came despite continued support from exports, with the index for new export orders increasing from 51 in June to 53.7 in July with companies reporting improved sales to Australia, China, East Asia, New Zealand and the USA.” Mr Aldrick went on to cite Mark Lee, head of manufacturing at Barclays Corporate, saying: “Very weak domestic demand has effectively stalled any momentum that had built in the UK manufacturing sector over the past two years, with these new figures highlighting a worrying trend of destocking amongst manufacturers, as they seemingly prepare for further declines in orders.” And of course, the preparations for “further declines in orders” necessarily involve redundancies, short-time working, pressure to accept lower wages etc, adding a further twist to the downward spiral of the crisis. Of course, not only is manufacturing cutting jobs, but so is the banking sector. HSBC plans to cut at least 10,000 jobs and Lloyds 15,000. The Royal Bank of Scotland has already shed 28,000 staff since the start of the crisis, and Barclays too has been cutting staff for months. Foreign banks are doing the same. When all this is added to the mass of redundancies that have been announced in the public services, it is self-evident that the purchasing power of the masses is being inexorably reduced. Impact of the crisis on the working masses For the poor, the situation is dire. Wages have risen on average by only 2 percent, while hundreds of thousands have lost their jobs and, as a result, most of their income. Meanwhile, consumer price inflation is running at 4 percent and is expected to reach 5 percent by the end of the year because of increases in energy bills, while the retail prices index has risen by 5.3 percent. The cost of food is also escalating: “According to the ONS, prices for bread and cereals have risen 8.5 percent in the past year, 7.2 percent for meat and 12.2 percent for fish. Vegetables are 5.4 percent more expensive, while sugar and confectionery cost 8.2 percent more. Coffee and tea prices have risen 9.3 percent, and soft drinks and juices 10.6 percent. “Overall, the inflation rate for food and non-alcoholic beverages was 6.9 percent.” And they are set to rise further still. (‘Food prices soar despite surprise drop in inflation’ by Philip Aldrick, Daily Telegraph, 13 July 2011) Meanwhile, according to James Hurley, “Almost 40 percent of households saw their finances deteriorate between July and August, compared to just under 6 percent that reported an improvement as Britons were hit by rising prices and a squeeze on take-home pay.” (‘UK household finances are “worse than during height of recession”’ (Daily Telegraph, 22 August 2011) Harry Wallop claims that the effect of inflation (which is currently running at 5 percent, as measured by the Retail Price Index), is that “the average worker, paid £23,971 a year, has seen £647 knocked off the purchasing power of their salary”. He adds: “The dent to people’s real wages come as high petrol prices, food costs and utility bills show no sign of calming down. Two of the big six energy companies have already announced bill increases of more than 15 percent, with the remaining suppliers expected to follow suit.” (Daily Telegraph, 14 July 2011) One effect of all this is that, by the end of 2009, 20 percent of households were estimated by the Department of Energy and Climate Change to be in ‘fuel poverty’ (ie, unable to afford to keep their homes reasonably warm). By the end of the current year, it his thought that the number of households in fuel poverty will have leapt from 5.5 million to 6.3 million – a quarter of all households in Britain. (See ‘Households in fuel poverty jump’ by Harry Wallop, Daily Telegraph, 15 July 2011) This is against a background where “Income from employment fell for the eleventh month running – August saw the steepest decline in take-home pay for nine months – while spending power continued to be squeezed by rising prices.” (James Hurley, op cit ) While income is declining, the prices being charged by the various monopolies for the necessities of life continue to rise. For instance, the ludicrously high cost of travelling on London Transport is now to be increased by a further 8 percent to raise the cash needed to complete the renovation of London’s creaking commuter services. Meanwhile, the same government that seeks to extract more and more from the poor is seriously considering dropping the new 50 percent tax rate for those who earn over £150,000 a year. Apparently, the rich are deterred from the virtues of entrepreneurship if they are asked to pay higher taxes, even though they can well afford them – which the poor cannot. The rich are, after all, doing their bit for the economy, since they are “still splashing out on Bentleys and Ferraris despite the struggling British economy, according to the luxury car dealer HR Owen”, whose profits have doubled in the last year! (See Daily Telegraph, 23 August 2011) UK plc in decline It is no surprise, then, that the IMF has expressed doubts on the viability of the government’s deficit reduction plan, the mainstay of which is £80bn-worth of cuts in public spending over the next four years. The basis of the IMF’s doubts is that “structural unemployment is significantly higher than the OBR [Office of Budget Responsibility – ie, the government] believes. Drawing on evidence from the past economic cycle, it estimated a long-term unemployment rate of 6.8 percent or 2.2 million people, nearly 300,000 more than the official estimate of 1.9 million or 5.25 percent of the labour force.” (See ‘IMF casts doubt on UK deficit plan’ by Chris Giles, Financial Times, 2 August 2011) On 14 September, the Evening Standard announced that the number of unemployed in the UK had passed 2.5 million – 7.9 percent of the workforce. (See ‘Unions blame “austerity cuts” as jobless total tops 2.5 million’ by Jonathan Prynn and Craig Woodhouse) In fact, in the UK, as in other countries that have been implementing austerity as a ‘cure’ for crisis, matters have become worse and not better. Data on Britain’s GDP indicate total stagnation – ie, decline. For all the harsh austerity forced on the working-class masses and on the petty-bourgeoisie, “The OECD predicted in its ‘interim assessment report’ that the UK economy would come to a virtual halt in the second half of 2011, with growth of just 0.1 percent in the third and fourth quarters. That was a significant downgrade from the 0.4 percent quarter-on-quarter growth it was forecasting in May.” (‘OECD warns of double-dip threat in UK and cuts forecasts’ by Angela Monaghan, Daily Telegraph, 9 September 2011) Moreover, these austerity measures have done absolutely nothing to bring down the government’s need to borrow. On the contrary, this has actually increased because of the slump in tax revenues: “Public borrowing excluding the bank bail-outs – the key measure of the budget deficit – widened to £9.95bn in April from £7.25bn for the same month last year. The sharp rise was down to a fall in tax receipts and a rise in expenditure despite the spending cuts.” Mind you, £300m of this fall was down to the fact that last year the government imposed a one-off bonus tax, which has not been renewed. Why was it not renewed, when massive bonuses are still being dished out to the darlings of the City? Once again, the rich are let off the hook to the tune of £3.5bn a year despite the fact that “Net debt, excluding interventions, was £910bn, compared with £765.5bn last year. Government spending was also up [in April as compared to March] from £51.5bn to £54.1bn, as the welfare bill rose by £718m on the year and the interest bill on the national debt jumped by £964m.” (‘UK public finances suffer worse April on record’ by Philip Aldrick, Daily Telegraph, 25 May 2011) Not for the rich to be discouraged when “Britain’s cumulative national debt … rose by almost 20 percent year-on-year to more than €1.2tr – and now accounts for 82.5 percent of GDP, ” and is “the third-highest [percentage of public borrowing to national output] in the European Union after that of Ireland and Greece – higher than either Spain or Portugal, next in line at just above 9 percent each”. (‘Chinese rating agency downgrades UK debt’, Daily Telegraph, 25 May 2011) Stock market in poor shape Another, related, blow to the economy is the falling stock market. Because British companies are finding it hard to make profits, the value of their shares is falling. On 19 August, London’s index of leading shares, the FTSE 100, fell below the psychological 5,000 mark as investors dumped stocks, especially in banks, in a panic over the spread of the European debt crisis and the fragile US economy. The FTSE All-World equity index, too, has fallen almost 20 percent since May. Barclays lost about a fifth of its value over five days in August, RBS shares have fallen 22 percent and Lloyds shares have almost halved since the start of the year. (See ‘US and Europe dangerously close to recession’ by Louise Armistead and Harry Wilson, Financial Times, 20 August 2011) While one is not inclined to shed any tears over falling stock markets, those who lose most money when this happens are often the small savers, while the declining values of pension pots leave millions of people worse off, and less able to buy. Quantitative easing no solution The only bourgeois alternative to austerity is quantitative easing (ie, the printing of money) of the kind indulged in by Britain under Gordon Brown. As a good social democrat, Brown was convinced that so long as more and more money was released into the economy, demand would be boosted and economic crisis could be averted. As is well known, however, this ‘remedy’, by lowering the value of the pound, effectively gave a pay cut to every single British worker. Furthermore, in order to stop inflation going through the roof, much of the money that was printed had to be borrowed from elsewhere, thus further escalating sovereign debt to such proportions that the UK’s AAA status (as a super-safe country to lend money to, which is therefore able to attract investment at the lowest possible rates of interest) is now under threat. Indeed, back at the end of May the Chinese Dagong Global Credit Rating Company did indeed downgrade British sovereign debt to A+ from AA- with a ‘negative’ outlook for its solvency. Once sovereign debt is downgraded, the country in question has to pay higher and higher rates of interest on its borrowings until the point comes when the interest payments are unaffordable, which is what has happened already to Greece, Ireland and Portugal. In other words “The indebted West is in a frightening bind: damned if it does, and equally damned if it doesn’t,” to quote Ambrose Evans-Pritchard – a summation worthy of a Marxist. Sadly, there is no question of bourgeois media hacks, however great their financial expertise, going on to reach the obvious conclusion that capitalism is unworkable, causes endless misery and needs to be disposed of with all speed. Even less are they about to point out that the only possible alternative is a centrally-planned socialist economy in which all means of production belong to the proletarian state and are managed for the exclusive benefit of the mass of the working people. Crisis is bringing Britain to its knees as an imperial power It’s an ill wind ... When the world has been in the deadly grip of western imperialism for well over 100 years, and the tentacles of the system have spread into every corner of the globe, one can see how correct Lenin was when, in his 1916 pamphlet Imperialism, the Highest Stage of Capitalism, he described imperialism as parasitic, decadent, and moribund. It is a power rotting from the inside and bound to collapse. Although, like the Phantom of the Opera, imperialism has been keeping itself alive by sucking the blood of the countries of Africa, Asia and Latin America, exacting heavy tribute in the form of interest on debt, dividends on investment and unequal exchange, still the inexorable process of decay from within has been silently progressing throughout all these decades. One hundred years ago, writers on economics, were already noting that Britain was on its way to becoming a rentier state, ie, a parasitic state living off income derived from investments and lending, rather than on production. At a time when Britain could still lay claim to being the ‘workshop of the world’, Schulze Gaevernitz noted that: “Great Britain is gradually becoming transformed from an industrial into a creditor state. Notwithstanding the absolute increase in industrial output and the export of manufactured goods, there is an increase in the relative importance of income from interest and dividends, issues of securities, commissions and speculation in the whole of the national economy. ”[1] Even he would have been astonished to see what has happened to British manufacturing since those days. By 1960, manufacturing had fallen to a paltry 35 percent of GDP. By 1999, it had reached 19 percent. And today, it stands at ... 13 percent. What is the fate of the working class in this parasitic economy? Lenin wrote: “Hobson gives the following economic appraisal of the prospect of the partitioning of China: ‘The greater part of western Europe might then assume the appearance and character already exhibited by tracts of country in the South of England, in the Riviera and in the tourist-ridden or residential parts of Italy and Switzerland, little clusters of wealthy aristocrats drawing dividends and pensions from the Far East, with a somewhat larger group of professional retainers and tradesmen and a larger body of personal servants and workers in the transport trade and in the final stages of production of the more perishable goods; all the main arterial industries would have disappeared, the staple foods and manufactures flowing in as tribute from Asia and Africa ...’ ” [2] In other words, the working class becomes parasitic to a certain extent, albeit the pickings it receives are a great deal smaller than what goes to the masters and are unevenly distributed, so that large numbers can barely subsist on what is provided to them. Since the UK is a rentier state par excellence, and to an incomparably greater extent even than was the case 100 years ago, its survival as such depends on its ability to be able to collect its dues. “The world has become divided into a handful of usurer states and a vast majority of debtor states. ‘At the top of the list of foreign investments,’ says Schulze-Gaevernitz, ‘are those placed in politically dependent or allied countries: Great Britain grants loans to Egypt, Japan, China and South America. Her navy plays here the part of bailiff in case of necessity. Great Britain’s political power protects her from the indignation of her debtors.’ ” (Op cit) The world economic crisis, however, has dealt a severe blow to the very basis of the UK’s parasitic existence. What the crisis did, first and foremost, was reduce the capital of the rentiers, insofar as millions of debtors proved to be uncreditworthy and, one way or another, defaulted on their debts. This happens periodically, as capitalism inexorably makes the poor too poor to buy everything that the capitalists need to sell them, even on credit. To make good the losses, at least in part, billions of pounds were transferred from the public purse into the banks, the investment vehicles of the imperialist financial oligarchy, while the squeeze is being put on the working class masses to make good the shortfall from their meagre resources. But precisely because their resources are meagre, however hard they are squeezed, they can yield very little, except over time. As a result, everything that is paid for from the public purse, including even services that mainly benefit the bourgeoisie, has ceased to be affordable. Cutting welfare, as well as education and health services, to the bone is not enough – cuts also have to be made to the state apparatus: the armed services, the propaganda services, the police, the Inland Revenue, etc. But how can British investments be safeguarded if the armed services are cut back? This is a question that is causing considerable consternation in ruling circles; a consternation that is reflected in the bourgeois press. Military spending cuts In October, the government published its Strategic Defence and Security Review, in which it announced it was to cut military personnel by 10 percent, reducing army numbers from 96,000 to 89,000; the navy from 35,000 to 30,000 and the RAF from 44,000 to 39,000 – an overall reduction of 17,000 service personnel. In addition, it will scrap 40 percent of artillery and tanks and cut 25,000 civilian jobs in the defence ministry. This includes the immediate scrapping of the UK’s only aircraft carrier, the Ark Royal, along with the entire fleet of Harrier jump jets. It will be 10 years before the UK has another aircraft carrier back in service, and even those ordered might have been cancelled but for the fact that it would cost more to cancel the contracts than to go ahead with them at this stage. Due to be completed in 2020, at least one of the two carriers now being built will be sold off after just three years in service. In addition, the government has put off the decision regarding replacing its Trident submarines until 2016. It is quite likely that the whole idea will be abandoned as unaffordable. In all, the cuts to the military that were announced in October amounted to some £3.2bn, ie, 8 percent of the UK’s current £40bn annual military budget – although it will be noted that this is a great deal less than the 10-20 percent that the government originally planned to cut. For all the innocents currently being bamboozled into thinking that getting a Labour government back in at the next election would improve matters, let them take note that the oh-so-left-wing Ed Miliband is also wringing his hands at the size of the military cutbacks, saying that Cameron’s revised defence policy is “simply not credible as a blueprint for our future defence needs” (of course, he means ‘offence’ needs). In other words, Miliband would devote more public expenditure to the military and therefore less to providing essential services to working people. Please take note! As it happens, the military cutbacks announced in October are but the tip of the iceberg, and it is now becoming apparent that, under what is called Planning Round 2011 (PR11), there are further cuts in the pipeline, to be effected as soon as Britain withdraws from Afghanistan. According to the Daily Telegraph, “the financial crisis engulfing the Ministry of Defence (MoD) is now regarded as so severe that, following Britain’s withdrawal from Afghanistan in 2015, the size of the Army will be reduced to ‘circa 80,000’, according to one senior defence source. “This would make the Army the smallest since the reign of George IV, when troop numbers were drawn down after the end of the Napoleonic wars. ” (‘Army facing huge cuts after withdrawal from Afghanistan’ by Sean Rayment, 20 February 2011) The same newspaper detailed some of the hardware that will quite probably be scrapped: “While the Navy suffered the worst cuts out of all three services in SDSR it could face losing another Type 23 frigate, a Royal Fleet Auxiliary tanker or supply ship. “Operations in Afghanistan could come under threat if the fleet of Reaper and Predator unmanned drones that spy and attack insurgents are chopped. The move would save an estimated £100m. “Another candidate for cuts is the new armoured reconnaissance vehicle to replace the ageing Scimitar light tanks. An estimated £100m this year and £500m in four years would be saved if the MoD cancelled the Future Rapid Effects System Scout project. ” (‘Armed forces face further cuts’ by James Kirkup, 6 March 2011) The net effect of all this is that the UK will no longer be in a position to mount any independent campaign like the Falklands war, but will be reduced to no more than a sidekick of other imperialist military powers. In fact, so bad are the equipment losses that Britain would, according to certain military bigwigs, be disadvantaged in war against Libya for the very good reason that, over the past few years, Britain has supplied Libya with sophisticated military equipment that Britain itself can no longer counter, especially since the recent scrapping of the £4bn fleet of Nimrod MRA4 reconnaissance aircraft (spy planes), which had never flown. The Daily Telegraph reported that “A former Nimrod pilot, still serving in the RAF, said the aircraft would have been ‘perfect’ for monitoring the situation [in Libya] from a safe distance using its electro-optical sensor. Its electronic intelligence and secure radio systems would have been ‘invaluable in minimising risk’ ... ” But it was not to be! (‘British forces would struggle to mount even a small scale military intervention as the cupboard for resources was “threadbare”, senior officers have said’ by Thomas Harding, 26 February 2011) There is apparently an ‘unfunded black hole’ of orders for military equipment due to be paid for in the next few years that have not been budgeted for. The amount involved is said to be in the region of £38bn (almost equal to the whole of a single year’s ‘defence’ budget). Much of the deficit is no doubt owed to the US armaments industry, which is unlikely to prove in the slightest bit understanding about cancelled orders or late payment! At least one order is with Lockheed for three new F35B jump jet fighter aircraft, which will be useless until Britain’s new aircraft carriers are ready, and even then will be poor value, as the new carriers work with conventional aircraft that are both cheaper and more militarily effective. The cost that has to be paid for these white elephants is £389m – it remains to be seen if our US allies will be amenable to modifying the order. So desperate is the government to effect cuts that there is a major element of disorder in its military retreat. For instance, among the military personnel fingered for redundancy are some 100 student pilots in the RAF, some of them only a few hours away from becoming fully qualified, and whose training up to the present is said to have cost an estimated £300m. A problem is likely to arise because there will be nobody available to replace pilots killed by the Afghan resistance. As the Daily Telegraph put it: “There are fears that the sackings will lead to a shortage of helicopter and transport pilots on the front line in Afghanistan”. (‘Quarter of RAF trainee pilots to be sacked in defence spending cuts’ by Thomas Harding, 14 February 2011) And, despite Cameron’s attempts to allay the fears of his US ally (and British troops on the ground) that the cuts won’t affect operations in Afghanistan, the loss of the Harrier jump jet will deprive British operations of air cover and is bound to make the occupation troops more vulnerable. In spite of all the cuts, Britain will still be the country with the fourth highest military expenditure in the world (after the US, Russia and China). It would seem, however, that in the modern world, fourth place gets you nowhere. Reduced tax revenue The British government’s struggles to hang on in the premier league are not helped by the fact that tax revenues, despite tax increases, are on the decline. The main reason for this is the impoverishment of the working-class masses, who are suffering mounting unemployment and lowering wages, all of which, incidentally, adds to the cost of welfare, even though welfare is being savagely cut! Meanwhile, the bourgeoisie is, as ever, doing everything it can to dodge its share of the tax bill, with several British ‘household names’ removing their official residences abroad and setting up schemes which make it appear that profits made on sales of goods manufactured or sold in the UK have in fact been ‘earned’ abroad, in countries like Switzerland, where very low rates of corporation tax prevail. An organisation called UK Uncut, formed to protest against the government’s public-sector cuts, says that widespread tax avoidance schemes by corporations and the wealthy cost the exchequer up to £25bn per year. Household names they have exposed as multi-million-pound tax dodgers include Vodafone, British Home Stores, Boots, Cadbury, Arcadia, Walkers Snacks and Johnny Walker. Vodafone, for instance, failed to pay £7bn it owed to the Inland Revenue. After long-drawn out negotiations, the Revenue agreed to accept £1bn in settlement (although only after Mr Dave Hartnett, the HMRC chief, put his foot down with his underlings)! On learning of this little concession to a rich company, Nick Cohen of The Observer wrote: “Once, ‘only the little people pay taxes’ was the slogan of convicted fraudsters. Now, it sounds uncomfortably close to becoming the mission statement of Her Majesty’s Revenue & Customs. ” (‘How Vodafone made tax dodging respectable’, 14 November 2010) Why are we not surprised to learn from Daniel Martin of thismoney.co.uk that “The agreement between HMRC and Vodafone came after negotiations – between revenue officers and John Connors, Vodafone’s head of tax. Until 2007, Mr Connors was a senior official at HMRC, where he worked closely with Mr Hartnett. ” So degenerate have the British imperialists become that they are no longer even willing to pay the forces on which they rely to collect their debts, much less to fork out for the services the working masses need in order to survive to serve another day. All of which is proving the truth of Mao Zedong’s well-known aphorism that imperialism is a paper tiger. He was specifically talking about US imperialism, but his remarks ring just as true for British imperialism: “Now US imperialism is quite powerful, but in reality it isn’t. It is very weak politically because it is divorced from the masses of the people and is disliked by everybody and by the American people too. In appearance it is very powerful but in reality it is nothing to be afraid of, it is a paper tiger. Outwardly a tiger, it is made of paper, unable to withstand the wind and the rain. I believe the United States is nothing but a paper tiger ... “When we say US imperialism is a paper tiger, we are speaking in terms of strategy. Regarding it as a whole, we must despise it. But regarding each part, we must take it seriously. It has claws and fangs. We have to destroy it piecemeal ... If we deal with it step by step and in earnest, we will certainly succeed in the end. “Strategically, we must utterly despise US imperialism. Tactically, we must take it seriously. In struggling against it, we must take each battle, each encounter, seriously. At present, the United States is powerful, but when looked at in a broader perspective, as a whole and from a long-term viewpoint, it has no popular support, its policies are disliked by the people, because it oppresses and exploits them. For this reason, the tiger is doomed. ” (‘US imperialism is a paper tiger’ by Mao Zedong, 14 July 1956, Selected Works, Vol 5) Endnotes: [1] Gerhardt Schulze Gaevernitz, Britischer imperialismus und Freihandel zu Beginn des zwanzigsten Jahrhunderts, Leipzig: Duncker, 1906, quoted approvingly in V I Lenin, Imperialism the Highest Stage of Capitalism, 1917 [2] John A Hobson, Imperialism, a Study, London: Cosimo, 1902, quoted in V I Lenin, ibid