THE DAY after official figures were released showing that the UK economy was crashing into the deepest depression for 300 years, the governor of the Bank of England Andrew Bailey rushed to reassure the country that the Bank would throw a lifeline to the sinking ship and that austerity could be avoided.
Bailey was responding to the news that the Johnson government is preparing to unleash an unprecedented austerity war against the working class in order to pay off the massive government debts it has incurred as British capitalism plunges into its deepest recession.
What is scaring the ruling class is that this austerity will inevitably lead to an all-out clash of class forces.
Having suffered over ten years of Tory austerity under Cameron to bail out the banks from the crash of 2008 – austerity that smashed wages, cut the NHS and left the country completely unprepared to deal with the pandemic – the working class will not tolerate yet more austerity to keep the profits for the bosses and bankers rolling in and will turn to revolution.
To counter this threat, Bailey said that austerity could be avoided by the Bank taking on the government debt and financing it forever by simply printing money and directly buying government bonds.
The Bank has already bought £200 billion of government debt and Bailey said it was prepared to buy up even more in an attempt ‘to spread the cost of the virus across society’. The government typically borrows money direct from the international money markets through issuing bonds.
Last April the Bank agreed temporarily to finance government borrowing if funds couldn’t immediately be raised from debt markets, a measure last used during the 2008 financial crisis.
At the time Bailey insisted it was a very temporary measure because: ‘Using monetary financing would damage credibility on controlling inflation by eroding operational independence. It would also ultimately result in an unsustainable central bank balance sheet and is incompatible with the pursuit of an inflation target by an independent central bank.’
In less than a month this temporary emergency measure, necessary because the money markets were not prepared to fund the UK debt when the economy was crashing, has become a permanent feature now that the true extent of the crash has become so clear.
Back in April Bailey insisted that the Bank would not engage in ‘monetary financing’ – the permanent funding of government spending – because it inevitably leads to hyperinflation just as it did in Weimar Germany after World War One and more recently in Zimbabwe.
Yet today, Bailey ignores his previous fears that just printing worthless paper money to pay for government spending only deepens the debt and offers it up as an alternative to austerity.
Bailey knows full well that what he is proposing is the road to hyperinflation (after all he warned against it in April) and offers no solution to the capitalist crisis.
Instead, his proposal is aimed at the leadership of the Labour Party and trade unions, who are desperate to clutch at any straw that holds the promise of a way out of the crisis that avoids revolution and justifies their collaboration with the Tories in pushing workers back to work.
These reformists will grasp the vain hope of a peaceful return to ‘normal’ capitalism that Bailey holds out when he talks of a revival in the economy following the lockdown.
The inescapable fact is that every day brings more closures and losses across industry and services with thousands of jobs lost forever and the only future capitalism has for workers is mass unemployment, austerity and hyperinflation.
This historic crisis means that a clash between the two classes is unavoidable and every ‘solution’ put forward by the bourgeois bankers and politicians must inevitably lead to revolution.
The working class must prepare for this decisive class struggle by purging the leadership of the unions, removing the treacherous reformists who have refused to fight the Tories and build a new revolutionary leadership of the WRP prepared to mobilise the strength of the working class to bring down the Tories and go forward to a workers’ government.
Only socialist revolution can resolve the crisis of capitalism.