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Austerity and its alternative

Michael Meacher explains the main elements of an alternative socialist strategy as detailed in his new book 'The State We Need'

Control of the money supply which was franchised out to the banks from the 1970s and led directly to the cataclysmic crash of 2008-9 should be brought back within public policy in order to ensure that industry, investment, jobs and exports are given primacy over consumption. At present only some 8% of total investment in Britain goes into productive activities.

Since the Big 5 banks which control 85% of the retail market overwhelmingly invest in tax avoidance, overseas speculation and exotic financial derivatives rather than lending to British industry, they should be broken up into smaller specialist banks focusing on Britain's real needs for regional development, science and innovation, low-carbon economy, and small businesses.

Britain is not paying its way in the world. Last year imports exceeded exports by more than £100bn, and any sustainable growth of living standards can only be built on a strong and resilient manufacturing base. Therefore rebuilding that badly weakened manufacturing capacity, halved in the last 30 neoliberal years, should be made an overriding aim for the next Labour government

Austerity is the wrong way to cut the budget deficit since cutting government expenditure deflates the economy and the consequent falling government tax receipts plus the length of the dole queues make it impossible to close the public expenditure gap. The right way to cut the deficit is by steady expansion of the economy through public investment in housing, energy and transport infrastructures and laying the foundations for a green economy.

That can all be done without any increase in public borrowing at all, either by instructing the public banks RBS and Lloyds to give priority to lending to industry, or by targeting another tranche of QE (quantitative easing) not on the banks but directly into industrial investment, or by taxing the ultra-rich.

The Sunday Times Rich List has recently announced that the 1,000 richest persons in Britain have increased their assets since the crash 5 years ago by a staggering £190bn, so at a time of economic crisis this should be charged to capital gains tax which would raise, technically £53bn, but realistically at least £30bn.

That would be more than enough to generate a million or more jobs within 2 years, and that would send out a critical signal that job creation and full employment had at long last been restored to their proper place as a fundamental goal of economic policy. It also makes financial common-sense when Osborne at present is spending £18bn a year keeping 2.5 million unemployed and when youth joblessness is now a shocking 21%.

A commitment to sustainable growth must re-establish a positive role for the State as the only way to reverse drastic market failures in housing, pensions, energy, transport (rail), utilities (water), access to justice (public legal rights), and the banking system. Inequality has reached obscene levels not seen since before the First World War, with CEOs of FTSE-100 companies now remunerated at more than 125 times median wages in their own organisations. The best way to counter this is by whole company pay bargaining whereby representatives of all the main grades within an organisation should meet at least once a year to review company performance, agree outline targets for the next year, and then seek to reach agreement on how available funds should be allotted for pay awards from the boardroom to the cleaners on the shop floor.

Since social mobility has collapsed from the late 1970s, the erection of class barriers needs to be countered from the earliest age, selectivity in State schools should be phased out, and the private schools steadily integrated into the state system.

A more balanced power structure is needed which requires partnership in the industrial workplace rather than untrammelled corporate power and requires better regulation of the media, police and political governance.

The only long-term sustainable answer to world energy supply is the rapid development of renewable sources of energy, plus much more vigorous promotion of energy conservation and efficiency. So ecological tax reform should shift the tax base from value added (labour and capital) and on to resources extracted from nature, put through the economy, and returned back to nature (pollution).