John McDonnell – April 2011

The demonstration on 26th March will not be enough if we are to prevent this Government destroying the lives of millions of our people. We need to understand what we are facing and what alternative there is.

We have 2.5 million unemployed already, and it is completely possible there will be 3 million jobless by the end of the year. One million of the workless are young people under the age of 24. Over one and a half million people are in enforced part-time work with significant cuts in their wages as a result.

In its detailed briefings for the budget, the Institute of Fiscal Studies drew attention to the fact that we are only at the start of the job losses – in both the public and private sectors – which will result from the Con-Dem Coalition’s cuts policies. The Institute’s charts of job cuts paint the picture of an economy on the precipice of a massive drop in employment. The message is that we just haven’t seen anything yet.

In simple economics, this level of increase in the number of unemployed people takes an enormous slice of demand out of the economy. If you then combine the job losses with pay freezes and pension and benefit cuts and add to that the increases in the costs of basic goods such as food, heating and fuel, you are presented with all the ingredients for a spiral of deflation.

The danger of a deflation spiral is obvious. Faced with rising prices of essential goods, people with less to spend have little to spend on anything else. The demand for consumer goods and services falls, with the result that more people get laid off, causing a further fall in demand and we go round in another vicious spiral of deflation.

All this is so familiar and so understandable, and yet the Con-Dem Coalition, partially and feebly shadowed by its Labour opposition, continues to succeed in persuading large sections of our society that cutting public spending and sacking people is the only answer to tackling the economic crisis.

The deficit has taken on almost mystical character as it is used to justify any measure the Tories and the Orange Book Liberals want to introduce, ranging from privatising the NHS, through closing our coastguard stations, to humiliating and impoverishing people with disabilities. Like some bogeyman behind the curtain in a cheap horror film, the international credit rating agencies lurk ready to cut the country’s credit rating if we do not accede to the cuts the Tories bring forward every week.

As Jeremy Corbyn MP has suggested on many occasions, this is the most blatant example of the use of Naomi Klein’s “Shock Doctrine” to manipulate people’s fears. In fact it has gone beyond that. Many people have become almost entranced in the worst of economic fairy tales, willing to accept cutting their own livelihoods and any sacrifice of their public services to enable the bankers (whose banks they now own) to enjoy their billion pound bonuses once again.

In all fairy tales, someone wakes up to discover the reality. That is what is happening now. People are beginning to wake up to what is happening in their communities and to their families as a result of what this Con-Dem Coalition is implementing. Our job is to help them wake up faster, to bring them back to reality. The demonstration on 26th March is about that process: waking people up to the reality of the scale of the cuts and their impact. It is also about waking them up to the alternative.

We have a systemic crisis. It can be solved in the short term by closing the deficit relatively easily by taxing those who are profiteering in this economic crisis – the bankers and speculators, the energy companies and the supermarkets. In the medium term, it involves tackling tax evasion and avoidance, increasing corporation tax, bringing in a Robin Hood transaction tax and implementing a land value tax.

As the taxes come in, we not only solve the deficit but we also use the funds to put people back to work on greening and rebalancing our economy. Demand is increased, and by increasing demand we get onto a virtuous economic cycle.

The alternative is straightforward enough. We now need to bring this Con-Dem Coalition down so that we can implement it. While we demonstrate on 26th March, let’s talk about how we do this. Marching will help. Direct action will contribute. Industrial action makes our efforts serious. All of them put together might just work. Solidarity!

John McDonnell is MP for Hayes & Harlington and Chair of the Socialist Campaign Group of Labour MPs and the Labour Representation Committee.

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