Editorial: Voting Against Austerity (2012)

Editorial from the June 2012 issue of the Socialist Standard

The people of Iceland did it first. Twice. In two referendums they rejected a deal their government had negotiated with international creditors. They even put a former prime minister on trial. It didn’t make any difference. Now they have been followed by voters in France and, more dramatically, in Greece. It won’t make any difference there either. Because, in capitalism in a slump, there is no alternative to falling living standards for the majority.

Nobody wants their standard of living to be reduced, whether as cuts to their wages or their pensions or as the reduced income unemployment brings. But that’s what they get, even though they might vote against it. It’s understandable that, given the chance in an election, people should vote to reject austerity. At least it shows they are not prepared to accept things lying down. For the people of Greece to have voted back those promising yet more austerity would have been to brand themselves as gutless.

To imagine that electing another set of politicians is going to make any difference, though, is an illusion. It assumes that governments control the way the capitalist economy works whereas in fact they have to govern on its terms of ‘no profit, no production’. They have to give priority to profits and profit-making. In a slump that means imposing austerity.

Henry Ford is reputed to have said that you can have a car of any colour so long as it’s black. Capitalism in a crisis is like that. You can elect any government, but that government will impose austerity. Even if Greece defaults and withdraws from the euro, the cruel fact is that any government, even one elected on an anti-austerity basis, would have to do this.

The fuel that drives capitalism is profits. A slump means that capitalist businesses are investing less than before because it’s not so profitable. The only way capitalism can get out of this is if profitability revives. This happens spontaneously in a slump. The assets of failing and bankrupt firms pass cheaply to others, who can therefore use them more profitably. Interest rates fall, allowing firms that borrow money to invest to keep a larger proportion of their profits. Increased unemployment exerts a downward pressure on wages, increasing the share of profits in new production.

Left-wingers and trade union leaders think that the way out of a slump is to increase spending. Get the government to spend more, they say, and that will get production going again. But it won’t. For the simple reason that the increased wages or government spending would have to be at the expense of profits; which would make things worse. Some governments may start off trying to do this but they are very quickly obliged by the economic laws of capitalism to effect a U-turn and impose austerity.

That’s the way capitalism works, and it’s the only way it can work. Capitalism is a system that puts profits before people and cannot be reformed to do otherwise. The only way forward is not to vote for a change of government policy or to reform some aspect of capitalism, but to act to replace capitalism with socialism so that the Earth’s resources really can become the common heritage of all and used to serve human welfare.