On 27 October Luton Trades Union Council sponsored a meeting, “No Pay Cuts For Down Days!”, in support of the 1200 workers at the General Motors van factory in Luton.
The way out, said the call for the meeting, was for workers “to join up with other unions to build a movement to fight redundancies, cuts in pay, house repossessions, and to start to build a world that does not rely on the waste and madness of capitalism to determine our future”.
GM is shutting down the factory for two weeks in the run-up to Christmas. For previous down days the workers had got only a statutory £20; for this downtime the union negotiated normal pay, but with the condition that workers will make it up by working overtime for free when demand revives.
Van and car production is slumping first in this crisis because new van or car purchases are cancelled quicker by credit-strapped firms or households than basic supplies or food. GM lost $19 billion in the first half of 2008; the “market value” of the corporation (total value of all the shares in it) is down to $3 billion (from $52 billion in 2000); the ratings agency Moody’s reckons that, even after a $25 billion loan to the US car industry from the US government, GM could run out of cash by the middle of 2009 and may sue for bankruptcy.
Other industries and services will follow as the downturn snowballs through the economy over the next year or more. One firm’s downtime or bankruptcy will become another’s loss of markets. In the past three months, unemployment has risen at the fastest rate for 17 years.
The labour movement should start campaigning now for generalised responses: demands for a shorter working week without loss of pay, and for expansion of public services.
The jobs challenge will overlap with the housing challenge. In the second quarter of 2008, housing repossessions were 71% up on a year earlier. As more people lose jobs or are forced to work short time, more will fall behind on mortgage payments.
We should demand that the government make it mandatory for banks and mortgage companies to offer rescheduling and reduced payments, and every household has the fallback option of having their house taken into public ownership and converted into a social rental.
On 21 October Mervyn King, governor of the Bank of England, outlined the Bank’s predictions. “Not since the beginning of the First World War”, he said, had “our banking system been so close to collapse”.
In the first period of the sub-prime mortgage crisis, bankers had expected the trouble to be “short-lived”, and limited to “a lack of liquidity” (ready cash) in some financial firms. “It became clear that the problem was deeper-seated, and concerned the solvency of the banking system” — i.e. whether banks had the resources to cover their debts in any form at all, ready cash or otherwise.
Not just the sub-prime bubble, but others, were imploding, because of “the very high levels of borrowing relative to capital (or leverage) with which many banks were operating, and the fact that banks had purchased significant quantities of... complex financial instruments from each other”.
In other words, banks and other financial firms had been piling borrowing upon borrowing, repackaging the debts in fancier and fancier ways, in the hope of gain from ever-rising markets. Then the music stopped.
“The supply of finance to the UK corporate sector has ground to a halt”, said King, so investment will plummet. House prices are already 13% lower than a year ago, and will continue to fall, so the element of consumer demand contributed by people remortgaging their houses to “cash out” increased value will disappear.
The National Institute of Economic and Social Research published its report on “The Great Crash of 2008” the day after King’s speech. It says that the UK went into recession in May 2008; now, it expects no more from government policymakers than “to get through this crisis without generating a depression of the scale of the 1930s”.
The UK, it says, will have “the worst setback among the G7 countries” because it has huge levels of household debt — “170% of income by the end of 2007” — which have to shrink.
Even if the financial turmoil subsides smoothly, and even if none of the possible dramatic further concatenations (governments defaulting, China going from slowdown to outright crisis) happens, the world faces a comprehensive downturn as credit shrinks across the globe.
Many sections of the working class may at first be stunned, and inclined to think that nothing can be done but keep our heads down. A lot depends on the ability of the activists and militants in the labour movement to start formulating and arguing for a workers’ plan for a fightback. Trades Councils in other areas should follow the example of Luton, rallying the local trade union activists to discuss the measures needed and to start a systematic campaign for them.