Obviously, the New Scientist is disingenuous to pretend that no studies have hitherto confirmed global structures of ownership in this pattern, or that it has thus far been the preserve of - what else? - 'conspiracy theory'.  There has been tonnes of sociological work on the workings of capitalist class power, the role of corporations and finance, etc.  Nonetheless, this looks serious:

Obama has given in to the most reactionary elements in US politics.  He has opted for deep cuts in public spending which will certainly include reductions in Medicare and Social Security (thus bad for Obama's base), and are certainly dysfunctional for US capitalism.  There's no sense of a long-term strategy for reviving growth or sustainable profitability here.  It has delivered for narrow sectors of US capital, specifically finance capital, but seemingly no one else.  And yet, it's still not enough.  

Standard & Poor's, the credit rating agency, has downgraded the US, which means that the cost of government borrowing will go up, and the ability to repay any deficit will be reduced.  It will also hurt consumer spending, as every American will have to pay more to borrow.  And, as we've already seen in Ireland, Greece and Spain, the attempt to pay it off by cutting spending only further weakens economies that depend significantly on such investment, thus reducing the revenues needed to pay any deficit.  It can only contribute to pressures toward a 'double dip', as the Eurozone crisis brings us back to 2007/8.  Corporate investment is weak, job growth is terrible, wage growth ditto, and consumer spending is fragile because households are still up to their ears in debt.  It would take very little to tip the economy back into crisis.  What's more, Wall Street traders appear to be perfectly well aware of this weakness, as they have been panic selling stocks since the debt deal was reached.  S&P's rationale is as follows: 

This is a raw exertion of class power.  Making it more difficult to repay debts while demanding that the government repay its debts faster is only a reasonable step if you accept that finance capital can do whatever the bloody hell it likes.  During the New York City fiscal crisis in the 1970s, created because lenders refused to roll over debts, a director at thew NY State Emergency Financial Control Board pithily explained: "The demands of the lender become reasonable because the lender is the lender."  A poignant reminder that behind every rationality lies a sociology.  Of course the hedge funds, ratings agencies, banks etc are less than concerned about the effect of underfunded infrastructures such as health and higher education.  As far as they're concerned, spending is too high and they don't much care how it comes down.  Theirs is a very narrow perspective.  But why doesn't the Wall Street establishment seem overly concerned that 'fiscal consolidation' of this kind will compound the fragility of the US economy and possibly tip the world into a new recession-cum-depression?

The pathologies of the US economy are not exactly a secret.  Michael Perelman identifies the following as weaknesses of US capitalism in its neoliberal phase: long-term underinvestment in research and development, low productivity resulting from a shift toward low wage service jobs, more financial vs productive investment, underinvestment in infrastructure, and an irrational military Keynesianism that results in the best innovation and research being conducted in secrecy, hoarded by the Pentagon etc..  Obama has performed sterling work on behalf of the Wall Street establishment, throwing his immense clout behind the bail outs, screening them from criticism, allowing them to continue to act with relatively little serious oversight, bringing them into government decision-making, and basically devising most of his policies with an eye to pleasing investment banks, bond traders and, at the outside, hedge funds.  But what he doesn't done is re-orient US capitalism in a more rational direction.  What he doesn't done is anything that could conceivably rescue the system from its pathologies.  This raises the question of why the wider US ruling class isn't kicking up a stink about it?

David McNally has made a strong case for arguing that US capital, or at least dominant sectors of US capital, find more and more of their investments and sales overseas.  Sluggish growth and profitability within the core capitalist economies has thus been more than offset by dynamism in south-east Asia.  As a result of imperialism, then, much of American capital is at liberty to make significant returns without worrying too much about what happens to infrastructures, consumer power or labour productivity in the US.  And with financialization, much of the US services and manufacturing economy generates revenues from financial investments rather than productive investment.  The centrality of imperialism here may explain why reducing military spending to cover the deficit isn't on the agenda.  It would also explain why the mandarins of Pennsylvania Avenue have appeared to be desperate to placate the ire of Republican tubthumpers, blasting away with biblical fury about the dangers of out-of-control spending.

So, we have an astonishing spectacle.  The political leadership of the dominant capitalist states is now trying to shred the public investment that has hitherto acted as a lifeline to their economies.  They are talking about savagely reducing labour costs, ostensibly to compete with China or India.  And they're being urged on by the banks and business federations despite their awareness of the tremendous peril involved.  This is actually going to undercut the conditions that led to their dominance in the first place.  It's as if they've given up on the idea of having a relatively stable economy with a productive, educated, healthy workforce, and have decided instead to jack up the absolute rate of exploitation, take as much as possible until the economy crashes again, and then raise the flood barriers, hoard their capital, let others take the pain, and allow governments to police the inevitable fall out.  

My assumption was that the austerity project was mainly opportunistic, that it condensed policies long desired by capital, and that it was pushed rapidly in order to preempt the Left and keep the initiative in the hands of the ruling class.  As a result, I anticipated that they would have enough flexibility to backtrack on or delay any measure that looked like seriously endangering their long-term profitability.  They could always return to the 'Keynesian' emergency management of 2008.  Perhaps that is still the best assessment.  But in these circumstances, ruling class opinion is likely to be fractured and highly unstable.  And it's not impossible that as the economy continues in its parlous state, as the ruling ideologies lose their plausibility and traction, and as states lose the ability to coordinate workable policy responses, the weight of opinion will form behind the slash-and-burn option.

The outlines of the deal between the White House and Congressional Republicans on the debt ceiling are now becoming clear.  The White House, of course, celebrates it as a victory for bipartisanship, compromise, economic prudence, and - but what else? - "the American people".  Ask not for whom the ticker tape falls... The deal is simply this.  The government will get its debt ceiling increase, so there will be no default.  The matter will not return to debate until after 2012, meaning that Obama doesn't have to go to the polls with this potential for sabotage hanging over his campaign.  And in return, he will fund repayment of the deficit almost entirely from spending cuts.  This will mean deep cuts to medicare and social security.  Obama is colluding with the Republicans to attack his base.  This is Jared Bernstein's account:

Of course, the centre-left commentators and economists are angry.  Paul Krugman and Robert Reich are typically nonplussed.  How could the president be so stupid?  How could he surrender?  He had alternatives to force through an increase in the debt ceiling.  He had legal manouevres, political manouevres.  He has thrown away the Democrats' advantage on medicare, caved in to blackmail from right-wing extremists, systematically refused to make the argument for protecting jobs and stimulus.  It's a comprehensive victory for the radical right.  

Well, all this is true.  But Obama isn't stupid, and he didn't surrender.  As Krugman has himself suggested, Obama has ideological (and as he did not suggest, strategic) reasons to embrace cuts.  He never subscribed to the Keynesian revival that intellectuals did - that was just emergency management.  He's a committed neoliberal, heading a neoliberal bloc within the Democrats.  He has demonstrated from the start that his major duty is to the banks, to finance.  Their hegemony the alliance of capitalist class fractions condensed within the Democratic leadership ensured that whatever took place, Obama would find a way to eviscerate public spending programmes.  And above all, he would eventually find his way to approaching, by some sleight of hand, the road to social security privatization - which I would predict will soon be on the agenda.

Recall that Bush attempted to attack social security in 2005, and was defeated by an impressive union-led campaign.  Obama was happy to capitalise on this, attacking McCain for favouring the privatization of social security.  He has continued to position the Democrats as defenders of social security and medicare.  Yet, things were never as rosy.  His cabinet was filled with Clinton-era retreads, and officials who had been complicit in the very neoliberal policies that brought about the crash.  His economic advisors were, from the start, neoliberals.  His strategically important debt commission was filled with apologists for spending cuts and privatization.  He consistently sends right-wing advocates of cuts and privatization to his commissions.  The leading Democratic opinion formers in the elite media, such as the Washington Post, and in think-tanks such as the Brookings Institute, have been pushing for social security 'reform' for some time.  Former president Clinton is himself a leading advocate of privatization who plotted with Newt Gingrich to try to bring it about, as are most of his former officials now recycled in the Obama administration.  The administration is studded with leading personnel from finance, and the banks are desperate to get their hands on social security.  And despite Obama's rhetoric, he and his Congressional allies have signalled a willingness to arrive at a more gradual, gentle and bipartisan route to social security privatization.   In short, there is every reason to believe that the Democrats will take any opportunity, particularly those presented by the blackmail of the Republican Right, to push for privatization.  These cuts, savage as they are, will almost certainly be used to demand privatization on the grounds that the economy can't sustain a publicly owned model. 

Of course, this isn't the end of the matter.  There is some Democratic opposition to the deal.  But more important, perhaps, is the intransigence of the 'tea partiers' (actually, just the Republican right) who think they can hold out for more.  Now, you may say this is insanity on their part.  You may say it is impolitic, especially if it inflicts embarrassing defeats on the GOP leadership just at their moment of apparent triumph.  But they have their uses, providing a suitable contrast to the apparently sober and rational Obama administration - in contrast to their 'ideological' and 'sectional' lobbying, the executive takes on the mantle of the nation, the blessed American people, on whose behalf he tries to negotiate a route out of catastrophe and national suicide.  It isn't quite correct that the 'tea party' movement can be reduced to a corporate astroturfing operation.  It resembles classical anticommunist networks in many respects, a movement with some (petty bourgeois) civil society roots enjoying the support of the most reactionary sectors of the ruling class.  So it is somewhat autonomous.  What it presently lacks is the support of the state, which made past anticommunist networks so deadly.  It has not occupied the Justice Department and is unlikely to take the executive or any such directive position, short of a major crisis and decomposition of the state apparatus.  So, though having some autonomy, it is subordinate.  It is a supporting player in the delicate choreography that has shifted the US from stimulus to austerity.  One would therefore expect the leadership to discipline them rather harshly as soon as this is all over, just to avoid any further embarrassments.

"If we listen to lulling consensus from the career-oriented left the best we will get in 2015 is a slightly kinder, gentler neoliberal party presiding over a country dominated by a bloated and larcenous financial sector. The NHS will have been privatized and the rest of the public sector shattered and opened up to profit-taking by corporations on a vastly greater scale."

The economy shrank by 0.5% in the last quarter of 2010. If that continues into the next quarter, then the feared 'double dip' recession is on. So, what does the government do? They blame the weather. As Chris Dillow points out, the implication is that the bad weather stopped service sector workers from getting to work, but didn't inhibit industrial workers on their commutes. It's bollocks, in other words. The fall in the construction industry was particularly bad, but I wonder if, rather than being due to very bad weather, this wasn't in part because of 1) the cancellation of major public works by the government and local councils, and 2) the slump in the housing market resulting in a decline in house-building? The Federation of Master Builders, representing small-to-medium sized construction firms, puts it like this:

The construction sector has still not reached the bottom of the most savage recession for the industry in living memory. Cuts in government expenditure are making matters worse with more than half of building companies reporting falling levels of work in public repair and maintenance work. Our survey shows a sharp increase in those expecting workloads to contract once again in the first quarter of 2011.

The Government is pinning its hopes of economic recovery on the creation of new jobs in the private sector but its policies are having exactly the opposite effect in the building sector. The increase in the rate of VAT earlier this month will cost the construction sector nearly 7,500 jobs this year alone. Cuts in public sector spending on social housing are having a particularly adverse impact with nearly half of building companies reporting that work in this sector had fallen.

The construction sector has the potential to build Britain out of recession and we know that for every £1 spent on construction output generates a total of £2.84 in total economic activity. If this could be coupled with expenditure on infrastructure projects as well as tackling the growing housing crisis the Government would be building the real foundations for a sustained economic recovery.

There are some in the ruling class who aren't very happy. Though the CBI has generally been approving of the government's 'austerity' programme, its outgoing chief has said that: "It's not enough just to slam on the spending brakes. Measures that cut spending but killed demand would actually make matters worse." Like many of the bosses, he seems to want some sort of magical remedy whereby the government could cut spending and stimulate growth at the same time. Finance capital is also gravely murmuring about the "stunningly bad" GDP data - but they fucking asked for this, and it can't be long before they'll be demanding more money from the public purse, then pushing for another austerity budget to pay off the bankers and keep the financial assets of the rich afloat for another few months before the whole thing collapses again.

Despite the denials and the absurd, utterly feeble attempt to pin this on the weather, these figures represent a political problem for the government - especially if they're starting to lose sections of business and the petit bourgoisie on account of it. I expect the medium term effect might be to see more businesses swing behind Labour and its quasi-Keynesian remedies. For its part, Labour, in a bid to remain in capital's orbit, will constantly feel a gravitational pull to the right. Unless, of course, the student rebellions and the strike ballots being prepared in the public sector become a much more power countervailing force.

Keep huddling around the collapsing centre-ground:

Class has never been less relevant to how people vote. We are a culturally more cohesive society than we have ever been. From Ikea to Ryanair to X Factor, our way of life is converging...

Thus Tessa Jowell, whose way of life is more akin to those of the spivs who've just destroyed the global economy than that of the 'middle' she is assiduously courting. These people really have no idea how hated they are. Anyway, as this is nothing more than a regurgitation of a piece written by Peter Kellner, a Blairite married to Lady Ashton, here's one I prepared earlier.

Today, the Éireann republic has opted for mass rebellion. Yesterday, I was in Belfast, capital of the northern counties, to speak at the FBU's Political School. My speech was on the Tories and the cuts, but I won't rehearse the material - read the speech at the end of this post which has much of the same commentary. I will say that it produced a brilliant debate afterward. The main thing I wanted to talk about, though, was the Question Time-style debate with politicians and members of the FBU, because it was an eye-opener about politics in the north of Ireland, and the prospects ahead of us.

First of all, there's a near consensus in favour of pro-free market and pro-business policies across all political parties, bar Eamonn McCann's 'People Before Profit' alliance. For example, everyone from Sinn Fein to the DUP backed a cut in corporation tax to 12.5%. That was their only growth strategy, as far as I could tell. Secondly, sectarianism remains the basis for political mobilisation in Northern Ireland, but it's become a curiously convivial kind of sectarianism at official levels - it's almost an in-joke when the Unionist says that some policy is being blocked by the Sinn Feiners or something like that. Thirdly, there's a degree of openness and concord with the unions that is unthinkable in the mainland. Brian Coleman wants to "break the FBU", but at the moment it's difficult to imagine a politician in the six counties being that brash. The assembly is a small quasi-autonomous body, and I suspect the last thing it wants is the big fight with the public sector that it has coming up.

The first issue that was raised was who was responsible for the crisis. Mitchell McLaughlin of Sinn Fein said it was the banks and the IMF, and the governments who empowered them, and he looked forward to seeing the government of Éire duly punished for this - which, after Sinn Fein's victory in the Donegal South-West bye-election, is straightforward tub-thumping for the coming general election in the south. Jeffrey Donaldson of the DUP sounded a bit like a Labour politician in some respects. I later learned that the DUP voted 87% of the time with Labour in Westminster rather than the Tories, which tells you how they build a base - they're not, like the UUP, just an auxiliary of the Conservative Party. He said that the problem was that the Tories had let the financial sector run amok at the expense of a stable manufacturing sector, that this had created a foundation of sand, and that he was only sorry that ordinary people would pay the price while banks got off scot-free. He was quite charismatic and jocular, and you can see how he gets elected.

Stephen Farry of the Alliance maintained that some governments, like Australia, had avoided the worst by having different policies (he didn't mention that this actually involved an unprecedented stimulus). He said that the problem was with government policy as much as with the banks, for creating an imbalanced economy based too much on property. Then he repeated the hateful catechism that "we are all in this together". On that, a firefighter spoke up from the floor and told him off, pointing out that the pain was not being distributed equally or fairly, that it was mostly hitting those who didn't do anything to cause the crisis, and that to claim "we're all in it together" is patronising, condescending and not even true. Farry stuck to his guns, but said that he aspired to distribute the cuts as fairly as possible within the Assembly's limited fiscal powers. Alistair McDonnell of the SDLP cautioned against getting angry and emotional. Yes, the banks and the exchequer are to blame, but we have too look for a solution, he said. But he admitted that he didn't quite know what that solution would be. John McCallister, of the Ulster Unionists' Party, was the only one who sounded like a full-blown Tory, I suppose because that's what he is. He blamed people for borrowing too much, he blamed the banks for lending too much, he blamed Labour for taking its foot off the brakes on public spending after 2000, saying they "spent and spent and spent" so that the country is effectively broke. But he did acknowledge that we can't have an unfettered free market any more.

Eamonn McCann argued that to ask who is responsible for the crisis is to ask who has been in control of the economy. "It hasn't been the trade unions, and it hasn't been working class communities, and it has been none of the people facing the cutting edge of austerity". The people in charge are capital, specifically finance capital, who acknowledge now law but profits. The problem was not who, but what - the problem was the capitalist system. He agreed with other speakers that the problem was global, and that the Assembly's ability to deal with it was limited, but this meant there couldn't be any specifically local solution. There had to be a movement of resistance across borders. I have to say, the reactions of the other politicians to Eamonn was warily respectful. They tended to try and find common ground with rather than, as I would have expected if this were taking place in London, exhibit contempt for his arguments. I'm not sure if this is because of his own standing, or just because the argument for resistance to capitalism has become that much more like common sense after the crisis. But it's something to think about.

The next issue, therefore, was what politicians proposed to do to solve the problem, and make sure it didn't happen again. Jeffrey Donaldson's argument was buck-passing. Essentially, he said, we get half of our budget from taxes, and half from the central government. The government has cut our budget, so either we cut public spending, or we raise taxes. Our only tax-raising powers are with the rates, or we can apply water charges. Both of these are unpopular, barring some hypothecated tax for health and education, so de facto people want us to cut spending. He also said to "our friends from England" that the English taxpayer pays much higher rates (council tax) than people in Northern Ireland, and that Northern Ireland is heavily subsidised by the central government in terms of public spending. Interesting to see how eager John McCallister said we need to have a pay freeze in the public sector, because there's already pay cuts in the private sector, and perhaps we could raise regional rates. Alistair McDonnell favoured cutting quangos, reducing senior civil servants' pay, further regulation, more restrictions on personal finance.

Mitchell McLaughlin argued that we're not going to prevent it from happening again, because the system is too global and Northern Ireland's ability to influence the global system is negligible. The best we can do, he said, is fight for more fiscal powers for the six counties. He's still working the nationalist angle, for all the good it'll do. He also argued that the cuts should be focused more on people with higher incomes, but said little specific in this regard. In general, three points of agreement among the bourgeois politicians, were that: 1) finance should be more regulated, with no more 110% mortgages and no more shady bank deals; 2) the "pain" should be shared as "fairly" as possible; and 3) "frontline services" should be protected as far as possible. None of them appeared to have thought through what that would involve - the system has relied on speculation and debt for the last thirty years or so, and no one suggested an alternative. They certainly aren't talking about boosting workers' wages or bargaining power to support consumption. When pushed about spreading the "pain" "fairly", Stephen Farry said that this was more of an aspiration than anything else. And as Eamonn McCann pointed out, frontline services aren't going to be protected because they aren't even being protected now, before Northern Ireland's austerity budget has been agreed.

A critic from the audience said he was "disappointed by the defeatist attitude of the panel. So far, no one is talking about creating employment, which would generate the revenue to support public spending". And that's where the old Tory argument came back in. Free up private enterprise, get the burden of the public sector off their backs, and they'll invest in jobs. Start by cutting corporation tax to 12.5% to match the south. Mitchell McLaughlin supports this because he wants "a level playing field" with the south. He said that he didn't favour the private sector, for his own ideological reasons which he didn't spell out, and added that if the south raises their rate, the north would "meet them on the way down". But he said "to have a strong public sector, you need to have a strong private sector generating the revenues to support that". This was more or less identical to the argument of those who were ideologically disposed to support the private sector. They all said much the same thing - cutting the corporate taxes worked in the south and, anyway, we now have to compete with Eastern Europe where the cost base is much lower. Eamonn McCann pointed out that this amounted to a redistribution of wealth from the public sector to private enterprise, on the basis of a prejudice that the private sector is more efficient. Indeed, there's an assumption that the public sector is somehow parasitic on the private sector, when the evidence is that at the moment the public sector is supporting the private sector. But, he argued, there is no evidence that more jobs will be created by cutting jobs in the public sector. The private sector only invests if it's profitable for them to do so, and only creates jobs if it suits them, so handing them a load of money won't necessarily make them more likely to employ more people. But above all, he argued, you can't begin to argue about creating jobs in the future if you can't first defend what you have.

Then it was pointed out, again by a firefighter, that the government is talking about cutting 25% from the Northern Ireland fire and rescue service, and that this will mean at best scrapping fire appliances all across the country. Another firefighter said: "you know that cutting the fire and rescue service won't be a soft option for you, because we won't let it be a soft option for you." This was a friendly, but authoritative, warning. There was not much that could be said on this point. All of the assembled politicians were aware of what cuts of that scale would mean, and there were some promises - to my mind, half-hearted and vague - that they would 'try' to see that they would do about that, citing the issue of public safety and the increased security threat as reasons to lessen the swinge of the axe. Eamonn McCann argued that the 'terrorist threat' was itself the result of the problems with capitalism - it is not an upsurge of Republicanism, but the fact that young people in deprived areas want to fight that is leading them to sympathise with the 'Real IRA'. He said he had spoken to supporters of the Reals, and they had told him, "Eamonn, at least they're still fuckin fightin." He said it has to do with the distribution of resources in society, and that if anything the public sector needed to be expanded not reduced, with more youth services and schools provided.

Mitchell McLaughlin said he didn't disagree with this, but argued that this only underlined further the need for the devolution of fiscal powers. McCann said that the problem could be solved by simply collecting existing tax. £123bn had gone uncollected every year, he said, allowing businesses like Vodafone to escape from the lion's share of their tax duty. If all the tax was collected, we wouldn't even be having a discussion about cuts. "People say you can never do that, these people are too powerful. But is that really so? Or does it depend on will?" He argued that it was necessary to build the social forces that could make them pay their taxes and make governments defend the public sector. Mitchell McLaughlin closed by agreeing that the Vodafone issue said it all, and that it would be necessary to build up the energies that could take this issue on. On the other hand, he said, "these people own the system"... And that, I think, is Mitchell McLaughlin and the Sinn Fein leadership. They are reluctant neoliberals. In fact, the only thing that seemed to distinguish the mainstream politicians was their degree of reluctance in implementing the same basic agenda of cutting spending, reducing taxes on businesses, talking up regulation (they don't have to do anything), and hoping for the best. The question, then, is whether the trade unions in Northern Ireland form part of a wider sweep of resistance, across the UK and Ireland and effectively across the continent.

Ireland is on the brink of a political meltdown. The republic, says Eamonn McCann, is going down the tubes, as the basket-case property and financial system that powered the so-called 'Celtic Tiger' further degenerates. The author Joseph O'Connor says that he cannot a remember a time, even in past recessions, when public anger was at such a level. The government has been trying to lash together a series of stop-gap measures, temporary coalitions, and patch-up agreements for some time. It has long since lost public opinion, has lost the confidence of capitalist elites, is in conflict with organised labour, and has even had its own police force (Garda) protesting against the cuts - the same Garda who brutalised students in Dublin at the start of the month. Now, as the government is forced into bailing out the banking system further, with the mountainous assistance of the EU, the Green Party has withdrawn from the governing coalition and called for a general election. Brian Cowen, the prime minister (taoieseach), is under pressure to resign.

Here's why. Ireland's capitalist system, dubbed a 'tiger' after the 'Asian Tigers' that were also driven by financialised neoliberal growth, has been through three phases of neoliberalism. First, growth driven by overseas (especially US) investment in a relatively low wage, recently liberalised economy. Secondly, once overseas capital started to desert Ireland for the even cheaper waged economies of Eastern Europe, growth driven by a property boom created through the rationing of social housing. The latter produced a sudden upsurge in construction, such that it eventually accounted for a fifth of all economic activity. Of course, the employers and the state didn't give up on attacking wages. You may recall that prior to the credit crunch, the employers were complaining that obscenely high wages were eating into their profits.

Throughout both these phases, a labyrinthine financial sector has provided the capital for investment, as well as lavish, out-sized rewards to shareholders. It has acted as an auxiliary to the City of London and sucked in a huge amount of American capital, providing ample opportunity for people to line their pockets. The capital coming in from Wall Street was attracted by the de facto duty-free policy that the Irish government applied, and a lax regulatory regime which permitted the banks such as the Anglo Irish to cover their losses and give investors a more sanguine picture of their finances than actually obtained. The eye-popping brazenness of the Irish ruling class was such at that Charlie McCreevy of the Fianna Fail - essentially a party for the property developers and construction industry in recent years - and more recently the EU's internal markets commissioner, suggested that the collapse of Northern Rock just proved that the banking system was too transparent.

The third stage has been the collapse of that system. Ireland, as one of the 'PIIGS' countries, was grossly over-exposed to all of the weaknesses of the neoliberal system. When Wall Street hit the fan, Dublin got sprayed in the face. Despite the sometimes heroic resistance of the working class, the government and the ruling class has succeeded in getting its way a lot of the time. The re-run of the EU Treaty ballot was a victory for Intel and Ryanair, and for the blackmail of the EU which threatened that Ireland would be cut out of future financial assistance if it didn't vote 'yes' - considerable leverage to bring to bear in the middle of a recession. The truth is that, just as in the UK and most of the advanced capitalist world, labour was mostly put on the back foot by the scale of the crisis and the ruling class offensive.

The Irish government was thus able to impose its solution. And its answer to the crisis of neoliberalism was to re-up neoliberalism, cut wages under pressure from the employers, and cut spending. Spending cuts were deep, seeking to reduce total government expenditure by a quarter. On that basis, it hoped to eventually stimulate a new round of neoliberal accumulation. The line was that this would enable the government to pay off the deficit, prove Ireland's mettle as a fiscally solvent financial redoubt, and get the investment flowing again. But the effect of the cuts was, as most people expected, to reduce growth, deflate the economy and produce a fiscal crisis. The government has found itself much less able to pay off its debts, and the banks are in a worse state than before. This is why the government has had to go running to the EU.

The mutating crisis of capitalism is such that what started as a financial crisis exposed all the weaknesses in the global capitalist system, becoming a crisis of the 'real' economy, before becoming a crisis of the state as capital seeks to solve its problems through a process of accumulation-by-dispossession. Of course, 'austerity' shouldn't just be seen as a process dictated by the needs of 'the economy'. It's also a political process, a defensive measure to foreclose any more democratic or socialist economic agendas from emerging in response to the crisis. It is designed to pre-empt anything that smacks of redistribution and nationalisation, to dictate the lines of the new post-crisis settlement and have it set in stone before anyone else gets a look in. It's also intended to shatter the forces of the grassroots opposition, of organised labour and community resistance, and to engineer a more divided, frightened, conservative society that will accept a greatly reduced standard of living in the long-term.

That's why the political crisis in Ireland is significant in so many ways. Fianna Fail, now down to 17% in the polls, has traditionally operated as a hegemonic right-wing populist party which could integrated some sections of the working class into the system through nationalism and protectionism. The neoliberal turn and the subsequent crisis has resulted in a profound break with Fianna Fail. (When Luke Kelly, a founder of The Dubliners, asked "For what died the Sons Of Róisín?", I wonder if he was thinking of the hypocritical capitalist spivs, the reactionaries of the Fianna Fail ilk who appeal to patriotism and the republican tradition, but are comfortable bedfellows of multinational capitalism.)

This breakdown of Fianna Fail's support hasn't yet benefited the Left in a big way, but it can do so. Labour is the main centre-left opposition party, and has made serious gains in the polls as a result of Fianna Fail's difficulties, rising to 27%, an increase of 10% since last year. The radical left has previously demonstrated its ability to make surprising break-throughs, and is probably represented in the 8% support that 'independents' get. The Greens are worried about their own position, and they're right to be worried. They gambled on collusion with the government's austerity measures, justifying every betrayal on similar grounds to those offered by the Liberals - because we're in government, we can implement some of the beneficial policies that we want to see. But they now know they face the wrath of the voters and are trying to limit the damage. They certainly have no ability to channel any protest, as they've made themselves the objects of protest: they garner a miserable 3% in the polls. As yet, it still looks like the right-wing Fine Gael will be the main beneficiary of the protest vote, with 33% support.

The long-term result of this crisis of legitimacy, though, might be to galvanise precisely those social forces that can really sustain a left-wing alternative. As the scale of the crisis and the ruling class attack becomes manifest, the opposition is certainly becoming more militant. If you thought our students were radical, think of the Irish protesters who broke into Brian Cowen's offices last week. The immediate impact of recession and ruling class attack stunned the left and the labour movements, but now at last we might be starting to see the kinds of militancy that will be proportionate to the scale of the problem that we face.

Overall, public spending is being cut by about a fifth in this spending review. Let's have a quick look:

*£7bn additional cuts in welfare spending. That's a huge figure. Total welfare spending including income replacement benefits and social exclusion spending is £60.4bn. If it's coming out of the whole, it's more than 10% cuts. If it's just coming out of income replacement benefits, it's closer to 26% cuts. Judging from the BBC's coverage, it's mainly coming out of income replacement benefits. Either way, it's going to be extremely messy if you're disabled, on the dole, or on low incomes.
*7.1% a year reductions in council spending for four years, which I think is a total of 28.4% cuts - that's your libraries, rubbish collection, street lighting, paving, all the basic quality of life stuff, savaged. Social housing is to be 'reformed', which basically means torn to pieces.
*7.1% cuts a year in the Department of Business Innovation and Skills, which deals with higher education, investment in R&D, consumer protection, trade issues, etc. Over four years, I guess that amounts to 28.4% cuts.
*40% cuts to higher education are included in that figure. This was anticipated by the Browne review, which basically recommended tearing up funding for teaching, while keeping most research funding.
*3.4% cuts in the Department of Education, with 40,000 teaching jobs lost.
*Higher rail fares, which will raise by 3% above the rate of inflation until 2012, presumably to make up for a shortfall in investment. Rail fares in the UK are already among the highest in Europe, especially in London - where the system is going into chaos under Boris Johnson.
*Retirement age to rise to 66, thus saving on pensions in the long-term. The Hutton review, which has already recommended cuts to public sector pensions, is cited in support of this measure - thanks again, New Labour.
*490,000 public sector job losses are expected, and if this government's track record is anything to go by, that's an optimistic assumption.

There are also a whole swathe of cuts coming in environment, justice, the foreign office, and the department for energy and climate change. Apart from everything else, this is not a green budget. Let's also take a quick look at police and defence. The police are going to lose 16% of their budget over the next four years. That's quite shockingly high to my mind, more than I would have expected, and it takes a risk with the police's political support for the administration - which I would have thought they would want to safeguard in a potentially turbulent era. The MoD is going to lose 8% of its budget - way lower than the 20% initially flagged up, probably due as much to US pressure as to pressure from the military brass itself. But it does mean fewer troops, and a delay in the replacement of Trident. For Cameron, this probably means not a break with the 'special relationship', but much more dependence on the US.

Well, that's it. The Tories, of course, have tried to sell this as 'progressive' in that they claim it will affect the rich more than the poor, and are massively overselling a puny bank levy which they claim will raise £2.5bn a year. No one is going to buy the progressive sell, beyond the dippiest of Liberal loyalists. I await a fairly comprehensive trashing of this dubious cover from the Institute of Fiscal Studies or a similar think-tank. The situation could not be clearer: either we stop them or they finish us off.

I take it as read that the austerity project is an inherently unstable project with a narrow and fissile social base supporting it. There are two ways in which this instability can become a crisis - economic collapse, and political insurgency. But when does crisis become a potential defeat?

Allow for the fact that the ruling classes driving this policy, and the political executives guiding them through parliaments, parlements, Bundestags, senates, Cortes, upper chambers and lower houses, have planned in advance for unpopularity, strikes, and potentially some degree of economic turmoil. The end goal of refuelling the City through a stupendous transfer of wealth from the poor to the rich, of reducing wages, of breaking up the public sector unions, and of opening up more of the state to private profit and speculation, is more than enough to justify some temporary unrest, and even a brief dip in economic growth - indeed, for those of an Austrian persuasion, a renewed recession would arguably help by flushing out more bad investments and debts.

Of course, the political fall-out from this attack on what is essentially still a compromise of some kind between capital and labour could well revitalise those social forces that were so depleted by the Thatcher/Reagan 'revolution'. And the austerity project is certainly generating some unease among ruling class fractions in the United Kingdom. A Conservative government stakes its legitimacy strongly on its ability to make capitalism work better for capital, and if its measures don't appear to be restoring profitability - or even risk making the situation grimly worse - then it can lose business support very quickly. On the other hand, if the marxist analysis is right, then the Conservative Party's role is also to take executive decisions on behalf of its class, the ruling class, to win its political struggles even where that class is itself divided and lacks resolve. And the Tories are ruthless political pugilists who are more than prepared to be hated as long as they can achieve their ends without fundamentally damaging their ability to act as a hegemonic party of the ruling class.

So, what would it take to for them to start worrying about defeat, and backing down? An ominous sign for the government is what is happening on the other frontiers of fiscal retrenchment, where the process is more advanced. In France and Greece, as you already know, political and industrial rebellions are putting austerity governments under severe pressure. In Ireland, the trade unions are being joined by the police, and even by some business lobbies, in opposing Brian Cowen's latest cuts programme. (Obviously, one expects the peelers to be paid off before things go too far, because no government wants to lose effective authority on the streets). The opposition is being generated by one simple fact: the cuts are not even delivering the advertised outcome, of 'fiscal consolidation'. They are actually strangling all signs of economic recovery, thereby increasing the deficit. It's contributing to a profound political crisis for the government, which they're having to try to resolve by coopting opposition parties into the process. That's the sort of scale of crisis, in which fractions of capital start turning against the government of the day, and in which the government's authority and ability to implement its agenda is in question, that would do for the Tories.

The evidence suggests that the British economy is sinking again, as the more far-sighted pundits anticipated. That will worry and potentially divide the capitalist class. Unemployment is rising. The housing markets are also suffering, which will punish the very middle class voters that both Tories and Liberals have been trying to woo. That will contribute to fracturing and eroding the coalition's popular base. The government's popularity was already in the negative before these trends became apparent, and before the first concrete examples of the depth and depravity of these cuts became known. We now have the tuition fees debacle in front of us, and the attack on public sector pensions. We have the signs of industrial action starting in the capital, and potentially coordinated - the germ of an idea that ought to be nationalised has taken root. Considering this, and looking overseas, the government has to be dusting off those worst case scenarios and preparing for a difficult ride.

A situation of this character places a heightened premium on political leadership, and the question is whether the Tories, as ruthless and hard-headed as they are, are made of the same mettle as the bonecrunchers of the New Right. I do not believe they are. I have explained elsewhere why I think they are electorally weak, and ideologically incoherent. It is worth adding that it's been a while since they were the powerful and dangerous entity of the Thatcher era, landing blow after blow on the labour movement. They're out of practise, out of training, only recently recovering from shambolic opposition. No less important is the question of leadership in the organised labour movement, of course, but that is for another post.

A former boss of British Petroleum, Lord Browne, is the man whom first New Labour then the Tories selected to reform higher education. Lord Browne has no experience in higher education, or indeed in any aspect of education. He has forty one years of experience in BP, but that is an oil company whose primary motive is to accumulate handsome profits. He is popular with the capitalist press, and the FT once dubbed him - in a luridly grovelling interview - the Sun King of BP. He is currently a Lord who runs a private equity firm, and chairs the Tate. One thing he does have experience of, however, is of ruthless cost-cutting, which contributed to several high-profile disasters while he was in charge of BP. I presume it was upon this basis that he was chosen by a New Labour government to slash higher education funding.

Today, Lord Browne's review has been published. As has been anticipated for a while, it's devastating. Essentially, it recommends the following: raise tuition fees, further the market in education, axe arts and humanities funding, close the less prestigious universities, cut support for living costs, abolish loans for students with 'low grades', raise the interest rate at which loans are repaid, and abolish minimum bursaries. Of course, the business press loves it. The FT is drooling over the potential "free market revolution". And the coalition government is united behind it. Anyone who expected the Liberals to oppose this attack are going to hit the earth with a crash. Both Clegg and Cable have welcomed this report - 'fairness', 'on the right lines', and so on. It's exactly what they expected, they signed up to it when they joined the Tory government, and any left-of-centre pledges they made in opposition to gain support from disappointed Labour voters are now dead in the water.

Universities UK, the organisation of vice chancellors, has produced a sycophantic response to the cuts. But their own research has previously shown that they know full well that raising tuition fees will drive the poor out of higher education. So, they know what this is. I understand that the press release from David Latchman of my alma mater, Birkbeck, is equally blasé. So, the university bosses are largely satisfied - but they've no reason to be, even if they are as selfish and greedy as they are overpaid. They were warned by Cable a while back that even if students had to pay more, it wouldn't plug the gap created by the cuts. Students pay money in the long run, but the Treasury forks out in the immediate term. This, they've made clear, will still leave a gap, and there will still be deep cuts that will even affect their eminences.

Education activists are calling this a declaration of war. The NUS rightly argues that the removal of the tuition fees cap simply passes the costs of the bankers' crisis onto students. They would do well to acknowledge right away that their strategy of batting their eyelashes at successive governments hasn't really borne fruit. Students are likely to get very very uppity. I've spoken at a few Unis this year, and noticeably there's a left growing in some formerly untouched territories, largely because of the dread of what the Tories are about to do to us. The wave of occupations that greeted the invasion of Gaza will, I suspect, look like a tea party in comparison to what now follows. But that's not enough. We also need the unions to step up to the plate. And the UCU, to its credit, is uncompromising in its attack on the Brown review:

If enacted England will have the most expensive public degrees in the world, with families having to shell out between £76,000 and 136,000 to put two children through university.*

According to UCU calculations, a three-year degree with annual tuition fees of £6,000 would cost a total of £38,286, including maintenance loans and interest payments. A three-year degree with annual tuition fees of £12,000 would cost a total of £68,329, including maintenance loans and interest payments (see notes below for full calculations).

The report also proposes to create a market in student places which it suggests will facilitate a large reduction in public funding which 'may be equivalent to removing all funding from anything other than priority subjects'.

The union said that, if implemented, the proposals would be the final nail in the coffin for an affordable university degree for the vast majority of ordinary families. It forecast that as a result of the creation of a market for student places, some universities would close, and only so-called priority courses would survive, making innovative new courses unviable and so weakening the UK's position as a global knowledge centre.

And further:

UCU believes big business should be taxed for the substantial benefits it gains from a plentiful supply of graduates and has proposed a modest Business Education Tax for the top 4% of companies – those who make profits of over £1.5m a year. Increasing Business Education Tax to the G7 average of 32.87p and hypothecating the extra revenue to higher education would generate enough annually to abolish tuition fees.

Well, of course, I'm sure the government will be most attentive to what "UCU believes", and will be only to happy to tax their business allies to keep the public sector afloat. I'm not sure why no one has suggested it. Sarcasm aside, these words only mean anything if the UCU is prepared to back this up with action, and that has to include industrial action. It isn't only students who will be affected after all. We're talking about the closure of universities and departments, and the rapid shedding of staff. We're talking about a profession which is about to be savagely downsized.

Some will argue from a strictly capitalist viewpoint that these cuts are short-sighted, that they will undermine the skill-based labour market that is needed to make Britain competitive in the global economy. This is true in a broad sense, and it's roughly the case that the vice chancellors made to the government ahead of the Browne review. However, business isn't stupid. The capitalist class has been prepared for a massively pared down infrastructure on all fronts for a while now. They knew that this would come with some disadvantages, but they prefer that to them being forced to bear the costs of higher public investment. And this is an impeccably pro-business set of reforms, which preserves some basic funding for a core set of courses outside the arts and humanities that is most directly useful for capitalist enterprise. Anything else will be delivered informally, through philanthropy and patronage. So that, having pushing through the destruction of our education system, the ruling class can pose as its unofficial saviours.

Ideologically speaking, the cuts will almost certainly come with a new spiel about 'excellence'. The ideology of 'excellence' has been integral to the neoconservative assault on education in the United States, the deliberate engineering of a system to create narrow, educated elites with implicit property bars to exclude the vast majority of people from the system. In the UK, we've heard the Tories promise to introduce a "brazen elitism" in education supposedly on the basis that this would serve talented students best. It's a commonplace of right-wing axe-grinding in papers like the Daily Mail that the rise in the number of students doing well at exams is actually a sign of a collapsing education system. They argue that this can only happen because the tests are being made easier. This chimes with the complaints of employers that more people getting A, B and C grades makes it harder for them to recruit effectively, and to distinguish between the genuinely talented and those who have benefited from falling testing standards. Underlying this position is the standard elitist assumption that only a few can excel, that there is a fundamental conflict between quality and equality, and that anything else is political correctness. But though such arguments are part and parcel of the revival of elitist thought, the Tories will try to use the discourse of 'meritocracy' to bind the new 'streamlined' education system to some vaguely progressive goals. They will do this by claiming that one of the sources of high inequality is that egalitarian education fails talented students from poor backgrounds, and that a more selective education system is a vital means for the talented few to escape the drudgery of being stuck with their inferior peers in a static, rigid, know-your-place class system. For years, the mainstream of social democracy has embraced the founding assumptions of this drivel. This may be a good time to break with that habit.

It has come to a pretty pass when the most free market of free market liberals, the most hawkish, pro-austerity member of an austerity coalition, launches what is billed as a blistering attack on "capitalism". The planned speech is being widely described in the press as "left-wing rhetoric". Predictably, the CBI are reacting with feigned outrage, the Daily Heil insinuating that Cable might in fact be a closet Marxist, and the scum Express is leaping to the defence of free enterprise.

It's crap, of course. What Cable favours is a better regulated capitalism with a humbled financial sector, but he knows he can't even deliver that while he's a helpmeet to George Osborne, the trust fund chancellor who is one of the many millionaires in the Tory front bench, and who is committed to defending a robust, liberated financial sector. The "capitalism" that he impugns is a particularly rapacious form of financialisation, and I don't believe he's winning the policy arguments in the cabinet. Still, he feels he has to name and shame the system in a way that most bourgeois politicians haven't done for decades. Undoubtedly this is intended to staunch the flow of defecting voters, members and councillors, while re-asserting Cable's reputation as a sort of maverick - a reputation that has already been soiled and bloodied due to his involvement in this savage and unpopular austerity agenda. Undoubtedly, it is meant to reassure the dissenters that the 'instincts' of the Liberal leadership are still basically decent and socially conscious, and that they have not been captured by 'sectional' interests, ie those of capital.

Whether anyone buys it or not is almost secondary. That capitalism is a system that people acquiesce in and tolerate for want of an organised alternative is increasingly obvious. That the vast majority of people blame capitalists and bankers for the austerity agenda, more so than they blame anyone else, is also clear in the polls. The interesting thing will be how Labour MPs respond. I am certain that the reflex of most of the leadership candidates will be to defend "capitalism", and to complain about Cable's empty promises and to agree with Lord Turner that it's policy that counts not greed, etc etc. So it is that a right-wing, senior cabinet member in a hard right government perpetrating an unprecedented attack on the welfare state ends up saying what few social democrats have dared say since the defeat of the miners.