Friday, September 11, 2026

I Don't Know What to Title This.


Richard Mellor

Afscme Local 444, retired

HEO/GED

9-11-26

 

It's nothing I haven't stated before. I was just thinking about childcare and the stress this imposes on young married couples. It's expensive, it's a business like health care in general. But the state could provide creche's every few blocks. The state can provide communal laundries communal kitchens whatever, organized and run by working people in those communities. Control of the state means real power, that is why the Chinese are out competing and undermining US hegemony on the global stage. 

 

This does not mean I support the Chinese misnamed Communist Party of the bureaucracy there. It's important to understand the role of the state though. I personally believe that there will be some major battles ahead as the Chinese working class is forced to control the bureaucracy. 

 

We live in a bourgeois democracy. A capitalist democracy in other words. But we need to remind ourselves that in Athenian Democracy that the western world claims is its origins, the slaves had no right to vote. In a capitalist democracy we get to vote for one of the candidates of the class that rules (capitalists) every four years. They didn't want to give us that right, we took it. I think the indigenous people in the US never won that right until the 1940's. 

 

In a workers' democracy, the class that rules would be the formerly oppressed class in the old system, the working class would be the ruling class, we would have the access to all that social power that a state has. I understand the anarchists disagree with this view but I am not an anarchist, I accept Marx's view of the state as clarified by Lenin after the 1917 revolution. I am not a Leninist either. I am a worker first and foremost; this is a good start for any would be revolutionary. 

 

Marx, like the anarchists saw a future society where there was no oppressive organ like the state. But the state cannot be ignored in the struggle for this future and it has to be conquered by the working class and used to build a genuine communist society in which there is no class antagonism. In that effort working class people will be forced to battle with the remnants of the oppressive system from which we freed ourselves and we cannot do that without organising ourselves as the class with state power. 

 

I am going to end it there because I don't intend to continue in the debate between the withering away of the state under workers' control according to Marx and the anarchist view (correct me if I'm wrong my anarchist comrades) that the state itself is at the root of the problem no matter which class controls it. See why I couldn't decide on a title. I think it’s the beer.

The road to 9/11: Out of a Clear Blue Sky?

By Cain O’Mahony

To mark the 25th anniversary of the 9/11 attacks, this two-part article looks at the growth of Jihadist fundamentalism, and how it was cynically used by US imperialism to launch a ‘war for oil’. 

Twenty five years on, it is still not a cliché to say ‘you knew exactly where you were and what you were doing’ on that fateful day. We all do. Everyone around the world was glued to television sets watching the jaw-dropping scenes coming out of New York.

It was not just the horrific, almost surreal images of destruction of everyday New Yorkers, running for their lives and chased by a tsunami of dust and rubble. It was the sudden icy feeling of ‘what now?’. Was this the start of a World War? And who is the enemy? And then the eventual near disbelief that just 13 members of Al Qaeda could kill 3,000 people, destroy large parts of one of the world’s most famous cities, put the US President in lock-down, attack the Pentagon, put the White House under threat, and change the course of world politics, armed only with plastic knives and a rudimentary knowledge of flying jet aircraft.

A key phrase repeatedly used by the Western media in its coverage of 9/11 was that it came “out of a clear blue sky”. It was as though the attacks had just inexplicably  dropped from the heavens.

Meddling in the Middle East

Rather, the events were intrinsically linked to Western imperialism’s meddling in the Middle East. The road to 9/11 resulted from the failure, firstly of Arab nationalism, but then mainly from the cynical manipulation of the resultant Islamic fundamentalism that filled the vacuum, by a blinkered, short-sighted US and Western imperialism.

The post-war hopes of pan-Arab nationalism, led by Nasser in Egypt, were dealt a hammer blow by the disaster of the Six Day War in 1967, when to everyone’s astonishment, the combined armies of Egypt, Syria and Jordan were smashed by Israel in a lighting war, mainly because they had been supplied by US and Western imperialism with the latest US and French jet fighters.

It was a disaster for the ideals of pan-Arabism, with Israel occupying Sinai, Gaza, the Golan Heights, the West Bank in Jordan, and Jerusalem, there to remain.

Conventional war had failed, and the failure pushed the liberation movements to the left. But rather than look to the revolutionary socialist method, basing itself on mass movements, and policies that offered the idea of a socialist federation in the Middle East, which still could have appealed to Israeli workers, especially the youth on the kibbutzim, in the heady days of 1968, the movements instead looked to the dead end of ultra-leftism and guerillaism.

Movements, in particular the secular Palestine Liberation Organisation and the Christian based Popular Front for the Liberation of Palestine, looked to the work of the likes of Regis Debray.

A strategy that ignored mass struggle

Debray, a French radical who had spent time with Che Guevara, argued for what he called  a ‘Focus Strategy’, saying the working masses had let the revolutionaries down, so they should use terrorism and ideological persuasion to act as a ‘catalyst’. It was a strategy was adopted by the PFLP in its struggle against Israel, and to an extent by the PLO.

As Jason Burke commented: “This so-called ‘Focus’ strategy went against decades of traditional Marxist orthodoxy, which maintained that successful revolutions depended on the right ‘objective conditions’ and the importance of patient work by activists over decades to raise the consciousness of the masses.

  “Instead, ‘Foco-ists’ argued, revolutionary violence created its own conditions for success and anyone could overturn the established order with little more than authentic revolutionary commitment, courage and modern automatic weapons” (The Revolutionists, Jason Burke, 2025).

This ‘strategy’ of course failed – small groups, no matter how ‘spectacular’ their terrorist attacks, were never going to outgun the Israeli military machine, armed to the teeth as it was by  US and Western imperialism.

As the Arab masses became disillusioned with the ideas of this supposed ‘left’, Islamic fundamentalists filled the vacuum. The turning point came in 1979 with the Iranian revolution against the dictatorship of the Shah of Iran. The weary populace did not look either left or right but adopted a ‘plague on both your houses’ attitude and turned to the Islamic fundamentalism of the Shia clerics.

Tragically, this disillusionment was compounded by the Iranian Communist Party, the Tudeh, aiding and abetting the new Islamic regime. They went into alliance with the Shia clerics grouped around Ayatollah Khomeini, when they should have been drawing clear political demarcation lines between themselves and the clerics.

Instead, they gave the clerics a ‘revolutionary veneer’ and helped propel them to power. Indeed, they supported the regime right up until 1982, when Khomeini turned on them, closing down their papers and offices, and imprisoning 10,000 Tudeh members.

A reactionary, misogynistic force

The fundamentalists are a reactionary, misogynist force that wants to drag society back to the Middle Ages. They are the ‘black hundreds’ [antisemitic pogromists of the old Russian Czarist empire] of the Islamic world. The victory of the Shia fundamentalists in Iran inspired their Sunni counterparts in the rest of the Middle East, equally embittered by the failure of a Palestinian leadership veering between terrorism and patronising Arab sheikhs and presidents. Added to which, there was no let-up in the continuing oppression by Israel and Western imperialism.

Osama Bin Laden (from Wikimedia Commons)

And now they had a new enemy to fight. The Soviet Union was becoming equally embroiled. As their puppet regime in Kabul look set to fall, the Red Army invaded Afghanistan in 1979. What focussed the Soviet Union’s mind was fear of the new fundamentalist contagion spreading into its southern Muslim states from Iran.

For the Sunni fundamentalists, the conflicts in Lebanon, Palestine and now Afghanistan was confirmation in their minds that all the powers of the world were out to crush Islam. Their war became global.

A key architect was Shaykh Abdullah ‘Azzam. A Palestinian university lecturer, active in the fight for Palestinian liberation, he saw that a victory in Afghanistan as a means to “… mobilise Muslims to action in other conflict zones.”

 ‘Azzam declared: “I am certain that working in Afghanistan constitutes a revival of the spirit of jihad…We have been deprived from waging jihad in Palestine because of the borders, restraints and prisons… We must prepare for jihad in any spot of the earth we can.” ‘He led the call for Arab volunteers to join the fray against the Soviet-supported Afghan state. (The Arabs – a history, Eugene Roberts, 2011)

While ‘Azzam organised the new Arab volunteers, the money man was Osama bin Laden. The son of a billionaire, he used his personal inherited fortune of $30 million to set up what was called ‘the Base’ (Al Queda) in Afghanistan to co-ordinate the fight against the Red Army.

USA supported mujahidin fighting in Afghanistan

US and Western imperialism were enthusiastic supporters of their new proxy  ‘Holy Warriors’ or Mujahidin, in the fight against the Soviet Union. They poured in money – to the tune of $250 million every year –  and dispatched military special forces to train them, particularly in the use of shoulder-fired anti-aircraft missiles. Incredibly, throughout the 1980s, future members of Al Queda were flown to Scotland to be trained in the use of the ‘Blowpipe’ missile by the SAS (‘We taught terrorists’, Sunday Mirror, 16.02.03).

US and Western imperialism were indifferent to the reactionary sectarianism of the Mujahidin, turning a blind eye when, at the behest of the Pakistani military,  Bin Laden undertook an edict from them to suppress a Shia uprising in the Gilgit-Balistan region of Pakistan. Leading a force of Afghan Sunni tribesmen in May 1988, they massacred and raped several hundred Shia civilians in the town of Gilgit.

After over 60,000 casualties from the fighting in Afghanistan, the Red Army eventually retreated from the bloody quagmire, as at home it was clear the Soviet economy was grinding to a halt, leading to the final collapse of the Soviet model throughout Eastern Europe.

In the isolated, delusional mind of the jihadists, they thought that they and they alone had been responsible – and if their forces could topple the ‘Communist Empire’, why not the US capitalist one too? On February 23, 1998, bin Laden announced the creation of the ‘International Islamic Front for Jihad Against the Jews and Crusaders’. The US and the West had created a Frankenstein which was now coming back to bite them, culminating in 9/11.

In part II, Cain O’Mahony charts how US imperialism cynically used the 9/11 attack for its ‘forever war’ on Iraq. 

Britain's settlement trade ban is cosmetic. For it to work, it must sanction Israel

Britain's settlement trade ban is cosmetic. For it to work, it must sanction Israel

The UK may end up assisting Tel Aviv by reinforcing a preposterous distinction between 'illegal' Jewish settlements and a supposedly 'law-abiding' Israel

Johnathan Cook Sept. 11 

[First published by Middle East Eye]

Ed Miliband, Britain’s foreign secretary, this week announced plans for a banon trade and services with Israel’s illegal Jewish settlements, in a move the government has hyped as a “comprehensive reset” of relations with Israel.

The UK was joined by 11 other western states unveiling or proposing similar sanctions: Canada, Denmark, Finland, France, Iceland, Ireland, Norway, Poland, Portugal, Spain and Sweden.

They presumably hope it will look like they are amassing strength through numbers, upping the pressure on Israel to end the occupation and clear the way for Palestinian statehood.

More realistically, each is hoping it will prove harder for the Trump administration and Israel to single them out as a target in the inevitable backlash against these all-too-modest measures. In quick retaliation, Israel took the unprecedented step of shuttering the British consulate in East Jerusalem – that is, in territory it occupies in violation of international law.

But the idea that these sanctions will amount to a “reset” for UK-Israeli relations looks more like wishful thinking. Shortly before Miliband’s announcement, Bloomberg reported that British diplomats had been privately reassuring Washington that the trade ban on settlements was “largely symbolic”.

According to Alex Wickham, the news agency’s UK political editor, the government’s measures would “have no material impact on the UK’s wider relationship with Israel on trade or security”.

The UK’s trade with Israel’s Jewish settlements is a tiny fraction of its £6 billion ($8bn) overall trade with Israel. And after two decades of largely ineffectual “threats” from Europe to start labelling settlement goods, Israel long ago devised ways to conceal the provenance of such trade. It simply relabels items from the settlements as “made in Israel”.

This is why the Foreign Office has long argued a ban on trade with settlements would be impossible to implement. The “material impact”, as British diplomats are reportedly telling Washington, will be virtually non-existent.

Dishonest reasoning

Similarly, British Prime Minister Andy Burnham’s officials have been downplaying the significance to Labour MPs.

The night before Miliband’s speech, Newsnight reported that backbenchers had been told the government would carefully avoid any echo of the longstanding Palestinian demand for boycott, divestment and sanctions (BDS) against both Israel and the settlements.

A decade ago, Burnham described the BDS movement – backed by leading members of Palestinian civil society – as “spiteful”. During his speech, Miliband similarly went out of his way to emphasise his “wholehearted” opposition to BDS.

But there is something fundamentally, and transparently, dishonest about this approach.

The British public is being told that the UK needs to take “decisive action” in the form of sanctions against West Bank settlements, while Israel itself is to be left untouched. And the government justifies its half-hearted measures on the grounds that the settlements are the chief threat to a two-state solution.

But neither argument makes the slightest sense.

Of particular concern to the British government is a recent decision by Israel to advance a large settlement project called E1, on Palestinian land close to Jerusalem. It is seen as the final nail in the coffin for Palestinian statehood.

The truth, however, is that Israel has been expanding its illegal West Bank settlements for decades, using armed militias to drive Palestinians off their land. This is nothing new.

If the UK were really serious about punishing Israel for its lawbreaking, it would have “reset” relations over the even graver matter of Israel levelling Gaza and slaughtering and maiming tens of thousands of children over the past three years.

It is quite preposterous for Burnham’s government to engage in public handwringing over the damage being done to the chances of a two-state solution by Israel building 1,200 homes in the heart of a future Palestinian state. Britain, after all, has just spent three years helping Israel erase half of that potential state – the half comprising Gaza.

Israel’s wholesale destruction of the tiny enclave ought to be front and centre of any justification for a change of policy, were Burnham really intending to punish Israel and end British complicity. Instead, Israel’s genocide has been shunted into the background, while the spotlight is turned on longstanding settler violence.

This isn’t “decisive action”. This is more smoke and mirrors.

No ‘law-abiding’ Israel

More worrying still, the UK may actually assist Israel by reinforcing a laughable distinction between “illegal” settlements, on the one hand, and a supposedly “law-biding” Israel, on the other.

The effect will be to suggest, quite falsely, that the settlements are somehow discrete from Israel itself. But it is Israel establishing the settlements on stolen Palestinian land. It is Israel servicing them with infrastructure, from roads and electricity to schools and public transport.

It is Israel encouraging Jews to move into the illegal settlements through housing and other subsidies. It is Israel sending soldiers to protect the settlements and crush any opposition from Palestinians.

And it is Israel arming settler militias to terrorise Palestinians off land desired by Israel for further colonisation.

It is the Israeli state – hiding behind its self-declared “Jewish” status – responsible for this decades-long process of ethnic cleansing, designed to eradicate any chance of a Palestinian state emerging.

Despite Miliband’s references to the “conduct of the Israeli government” – meaning the far-right government of Prime Minister Benjamin Netanyahu – there is cross-party support in Israel for the expansion of the settlements and the thwarting of Palestinian statehood.

Yair Lapid, the Israeli opposition leader, seen as on the centre-left in Israel, lambasted the UK sanctions against the settlements, calling them “a boost for Hamas and terror organisations”.

If Britain wants to stop the criminal settlements, it has to wield its stick not just against these visible symptoms of the occupation, but against the root cause: the Israeli state.

An apartheid ally

Indisputably, there were welcome aspects to Miliband’s address to the House of Commons – not least, the government’s decision to finally accept a 2024 ruling from the International Court of Justice (ICJ) that Israel’s occupation of the state of Palestine is itself unlawful, not just the settlements.

Miliband’s use of the term “ethnic cleansing” in reference to the West Bank – though not, it appears, to Gaza – sets a precedent that is already liberating some prominent journalists to speak up against the occupation, if very belatedly.

The government’s inclusion in its measures of financial services that fund settlement expansion provides a potential tool for sanctioning foreign companies and Israeli banks that operate in Britain, should the UK choose to use it.

There was a forthrightness too in Miliband’s description of the settlers currently carrying out pogroms in Palestinian communities across the occupied West Bank as “terrorists”. Such language sounds bold only because all previous British governments have shied away from naming a longstanding reality.

But Miliband downplayed the fact that all Israeli governments have backed these settler terrorists. It was a convenient fiction for Miliband to suggest instead that the violence was largely a result of Netanyahu’s far-right government turning a “blind eye” to this criminality.

Other aspects of Miliband’s speech were even more troubling. He declaredthat he was “unwavering in my support for the state of Israel”.

But the ICJ, the world’s highest court, also concluded in 2024 that Israel had imposed a system of apartheid rule over the Palestinian people for more than half a century. How can Britain claim to be taking the moral high ground, and carrying out a “reset” in relations, when it expresses “unwavering support” for an Israeli state engaged in apartheid?

Miliband also stated: “Our argument is not with the people of Israel, with whom the UK has unshakeable bonds. Our argument is with the conduct of its government.”

But how, if we continue to have “unshakeable bonds” with the people of Israel, do we pressure that society – one steeped in the Jewish supremacist ideology of Zionism – to stop electing governments, year after year, decade after decade, that seek the ethnic cleansing of Palestinians from their historic homeland?

Poll after poll shows Israel’s Jewish population overwhelmingly against the creation of a Palestinian state – the explicit goal of Britain’s new sanctions policy – and in favour of the expulsion of Palestinians from all parts of their homeland. In the midst of the Gaza genocide, almost half of Israelis expressed support for killing the enclave’s entire population, including its children.

How would apartheid in South Africa have been brought to an end if Britain and other western states had preferred to maintain “unshakeable bonds” with the white population, rather than impose boycotts and sanctions on the whole society?

Miliband’s aim is to treat Israel as discrete from its settler militias and the more fanatical members of the current government – figures such as National Security Minister Itamar Ben Gvir and Finance Minister Bezalel Smotrich.

But it is a distinction without a meaningful difference. It falsely regards the crude, open and relatively small-scale violence of settler terrorists as categorically more important than the controlled, covert, incremental and far larger-scale violence wielded against Palestinians by every government in Israel’s history.

Culpability rests not with a few rogue elements in the settlements, but with the entirety of a society that has chosen apartheid, ethnic cleansing and finally genocide, as its “solutions” to silence the claim of the native Palestinian people to sovereignty over part of their historic homeland.

Elephant in the room

The elephant marauding through the room, the one we are supposed to ignore, is the UK’s three years of complicity in Gaza’s destruction.

The Labour Party has burned its credibility on the single most important moral foreign policy issue of our time by allowing Britain to actively collude in Israeli atrocities. The new prime minister understands this problem only too well.

Shortly before he took over from Keir Starmer, Burnham issued a public apology via social media in an attempt to distance himself from his predecessor.

In a three-minute monologue to camera, he offered vague contrition for Labour “getting it wrong” on Gaza, without specifying how. He feebly noted that war crimes “appear to have been committed”, and lamented the “humanitarian” suffering of Palestinians in the enclave.

Burnham also committed the UK to upholding the vision of a two-state solution, with a Palestinian state alongside a self-declared Jewish state. But Starmer stole Burnham’s potential thunder by recognising Palestinian statehood nearly a year ago – though predictably, the declaration had negligible effect.

That recognition – hailed as momentous too – has turned out to be utterly inconsequential. So much so that, as John Whitbeck, a long-time legal adviser to Palestinian negotiators, pointed out in an email, Miliband repeatedly made reference to settler violence in the “occupied territories” rather than – as official UK policy should dictate – the “occupied state of Palestine”.

With a Labour Party conference looming, Burnham has needed his own rabbit to pull out of the hat and demonstrate his seriousness. He found it in trade sanctions on settlements in the occupied West Bank. They appear to punish Israel, while having minimal practical impact.

The noisy backlash from Israel, the Trump administration and Israel’s plentiful apologists at home, Burnham assesses, will win back leftwing voters hounded out of Labour by Starmer and into the arms of Zack Polanski’s Green Party. Those voters are needed if Burnham and Labour are to stand any chance of winning the next general election.

But at the same time, the lack of real teeth from his government’s settlement sanctions are designed to forestall meaningful retaliation from Washington. That may explain Secretary of State Marco Rubio’s unexpectedly tepid response in the immediate wake of Miliband’s speech.

Active role in genocide

Burnham knows he needs to be seen doing something. And there are signs that the British public may be swayed by all the furore over his settlement sanctions into assuming significant action has been taken.

An opinion poll published this week shows nearly half of Britons favour a trade ban on settlement goods, with only 18 percent opposed. But sadly, Miliband’s speech gave every impression of preferring to change the rhetoric – and optics – rather than the substance of British foreign policy towards Israel.

Miliband noted “the most unimaginable trauma and suffering” of Palestinians in Gaza, as if they had endured an act of God rather than a campaign of genocide by Israel. He acknowledged a “deep sense of shame” over the international community’s failure to act sooner, while ignoring the active part Britain played – and is still playing – in the Gaza genocide.

The UK may soon bar British shops from selling “Israeli” wine from vines cultivated on stolen Palestinian land. But Britain continues to provide the trade and services needed by Israel to further erase the tiny enclave of Gaza, where some two million surviving Palestinians are now confined to less than a third of its ruins.

The UK continues to sell arms to Israel, including components for its F-35 warplanes and killer drones. Britain continues to transfer US and German arms via a Royal Air Force base on Cyprus, and to carry out surveillance flights over Gaza and provide Israel with intelligence.

The UK continues to stay silent as Washington wages war on the International Criminal Court for seeking to hold Israel accountable for the crimes of an occupation the Burnham government says it wants to end. 

Britain is similarly quiet on the continuing abuses by the US of the United Nations’ expert on the occupied territories, Francesca Albanese.

At home, the government continues to outlaw as a terrorist organisation Palestine Action, and it arrests and jails those who protest too loudly against British collusion in genocide.

By contrast, the same government refuses to investigate the actions of British citizens – at least 2,000 of them – who reportedly participated or assisted in the Gaza genocide. They continue to freely move in and out of the UK.

Israel’s lobby groups in Britain, shamefully all too ready to excuse Israel’s crimes and incite against Palestinians, continue to attract British politicians, including Labour government ministers, as members.

Were Burnham really serious about changing Britain’s relations with Israel, all of this would have to be addressed, not swept under the carpet. His “decisive action” on settlement trade is, in truth, cover for the government’s continuing “decisive inaction” on Israel’s genocidal crimes and British collusion in them.

Horrifying subtext

But one final, horrifying subtext to Miliband’s speech should not go unremarked.

In desperately trying to keep alive the West’s two-state solution, Burnham’s government is not just ignoring reality: the fact that there is no partner in Israel – electable or otherwise – to implement such a vision.

Burnham and Miliband are also insisting, in the entirely improbable event that a Palestinian state can be extracted from Israel, that the Palestinian people should be required to make peace with an unrepentant, heavily militarised, racist state that has recently committed genocide in Gaza.

None of the 11 states that joined the UK this week in sanctioning the settlements can apparently imagine Palestinians ever living in anything more than a small, demilitarised, economically dependent pseudo-state, with no real choice over its leaders, or control over its borders and economy.

Similarly, there is no suggestion that a neighbouring, territorially reduced Israeli state would need to be reformed ideologically, or made to engage in any kind of truth and reconciliation process, or face sanctions until it sees the error of its ways.

The Jewish supremacist ideology of Zionism, the dehumanising logic of the Israeli settler-colonial mindset, and the religious fundamentalism of large swaths of the Israeli population - all critical to the rationalisation of the Gaza genocide - would remain unchallenged.

On this view, it seems, long-established impulses towards apartheid and genocide would simply evaporate, even as the West continues to indulge Israel’s every whim.

This isn’t a recipe for peace, even of the flawed kind. It is a demand that the Palestinian lamb continue to dwell with the Israeli wolf.

The truth that Burnham’s government refuses to face, as with every government before it, is that peace won’t magically arrive with Palestinian statehood. A Palestinian state – or, more likely, a single state embracing Palestinians and Israeli Jews – can emerge only when Israel has been dismantled as a heavily armed settler-colonial state, as happened with apartheid South Africa.

Israeli society will need to be re-educated through a painful truth and reconciliation process, as also happened in apartheid South Africa. Israelis will have to be made to confront the facts about a century of atrocities committed against the native Palestinian people.

Britain is not contemplating doing any of this – because the threads from unravelling the crimes of Israel and the Zionist movement would lead straight to the door of 10 Downing Street and other western powers.

Israel isn’t some Frankenstein’s monster. It is doing exactly what it was set up to do: serve as a western colonial implant – a militarised fortress state – projecting power into the oil-rich Middle East.

Israel wants to be nothing less – and, rhetoric aside, the British establishment is not about to do anything practical to cut it down to size.

Thursday, September 10, 2026

Michael Roberts: Is Keynesianism dead?

Is Keynesianism dead?

by Michael Roberts

“Is Keynesianism dead?” says Andy Haldane, former chief economist at the Bank of England, writing in the Financial Times.  Haldane’s answer is “Keynesianism, if not dead, is potentially defunct.”

What does he mean and why raise the question in the first place?  The gist of it is that Haldane reckons Keynesian theory, namely that economic slumps or stagnation can be overcome by increased public spending, which “could revive the animal spirits of the private sector and, with them, growth,” no longer works. The reason is that “when debt is the disease, fiscal medicine may be as likely to harm as heal” by driving up bond yields and so raising the cost of borrowing for the capitalist sector.

So what’s the answer?  Haldane says, instead of spending more, governments need to save more ie by cutting spending and/or raising taxes so that the private sector can expand. In essence, Haldane is delivering a new (or old) argument for austerity ie cut public services (except defence of course – assuming you consider defence as a ‘public service’) and raise taxes so that majority of us pay down the rising debt.

There are so many things wrong with this so-called “expansionary consolidation“, as Haldane calls it, (the idea that trimming state debt can actually encourage private spending and confidence), it is difficult to know where to start.

First, why are public debt levels so high in the major capitalist economies?  Is it because of profligate spending by governments on public services, welfare benefits, infrastructure and pensions?  This is just manifestly untrue. 

In the OECD, public social expenditure amounted to less than 10% of GDP in 1960, but has more than doubled to just over 20% on average across the OECD since.  But two-thirds of this spending goes towards pensions and health services as populations in the major economies get older. ‘Other social spending’ is a mixture of income support to the working-age population and social services other than health. It is no more than an average 6.5% of GDP. Income support worth 1.6% of GDP is on sickness and disability cash payments, 1.1% on family cash benefits and 0.6% on unemployment benefits.  This spending is tiny compared to government subsidies to industry (1.5%, now at the highest level the global financial crash of 2008) and defence (now averaging 2.0-2.5% and targeted to rise to 3.0-5.0% of GDP by the end of this decade).

Take the UK. The Resolution Foundation think-tank estimates that total social security or welfare spending in Britain in 2025-26 will be 10.8 per cent of GDP. This is 0.8 per cent of GDP higher than it stood on the eve of the global financial crisis in 2007-08. But compared to 2012-13 (the peak in the post-GFC recession), total welfare spending has fallen by 1.2 per cent of GDP. Added to this, welfare spending is expected to rise by only 0.1 per cent of GDP until 2029-30.

So when Haldane talks about needing to end ‘fiscal stimulus’ Keynesian style because of excessive public debt, this cannot be blamed on welfare spending. 

Moreover, Haldane does not say why public debt levels have risen so much in the major economies. But if you look at the time series for public debt to GDP, you can clearly see that the sharpest and ‘step change’ rises took place in conjunction with financial crashes and recessions in the capitalist economy. It was these that forced governments to bail out the banks and other financial institutions in 2008-9 and to fund employers and businesses in the COVID pandemic slump.  Both before and between these two events, public debt levels hardly rose. 

As for annual budget deficits, again the biggest deficits were in the period of the two economic crises as governments paid out more on unemployment and other benefits while receving less tax revenues.

In the relatively faster growth periods (1991-2007), annual budget deficits averaged 3% of GDP, as they did between 2014-19.  Annual deficits have been higher since the end of the pandemic slump and this is due to the rise in interest costs as debt levels built up and interest rates rose, along with very poor economic growth in most major economies. Throughout the periods of austerity, while the majority of people faced higher taxes, others got cuts in income tax (particularly for higher income groups) and in corporate profits tax. That meant that government tax revenues as share of GDP remained flat at around 36% of GDP, ensuring a rise in annual budget deficits. 

Haldane argues that Keynesian policies of macro-management ie increased government spending and lower taxes to boost economic growth are ‘defunct’ in the current world of high public debt, because Keynesian measures will drive up debt not growth.  Haldane reckons that this means the famous Keynesian ‘multiplier’ no longer works.  The Keynesier multiplier argues that increased government spending boosts consumption and investment and so will lead to increased real GDP growth. That growth in real GDP will outstrip the extra spending and public debt and so pay for itself.

My issue here is that the problem with the multiplier is not that it does not work in a world of high public debt, but that it does not work in a capitalist economy if the profitabilty of capital does not rise from government spendng.  As Guglielmo Carchedi and I explained way back in 2013, the difference between the Keynesian multiplier (the ratio of change in publc spending to growth) and the Marxist multiplier (i.e. the ratio of the change in profits to growth) is that “in the Keynesian multiplier, …..Profitability plays a subordinate role and the effects (of public spending) on the economy are always apparently positive.  In the Marxist multiplier, profitability is central…. The question is whether rounds of subsequent investments generate a rate of profit higher than, lower than, or equal to the original average rate of profit”.  As we explained in our paper, what matters in a capitalist economy is not the movement of ‘aggregate demand’, but the movement of the profitability of capital. The Keynesian multiplier is a feeble driver of growth compared to the Marxist multiplier of profitability (see World in Crisis, p26 Figure 1.10).

After the Great Recession ended, there is little evidence that those countries that ran higher budget deficits and thus increased public sector debt recovered quicker and increased GDP more than those that did not.  Several studies show the so-called Keynesian multiplier (the ratio of real GDP growth to an increase in government spending or budget deficit) is poorly correlated with the economic recovery after 2009.The EU Commission found that the Keynesian multiplier was well below 1 in the post-Great Recession period.  The average output cost of a fiscal adjustment equal to 1% of GDP was no more than 0.5% of GDP for the EU as a whole.

Haldane’s argument against the Keynesian multiplier is different.  Increased government spending, even if directed towards public investment rather than ‘welfare’ or public services, will actually depress growth, he claims. “In a study of 44 countries, Ilzetzki, Mendoza and Végh find evidence of fiscal stimulus depressing growth — a negative fiscal multiplier — when countries’ public debt exceeds 60 per cent of GDP. With all of the G7 having debt ratios above this threshold, might we now be entering the twilight zone for Keynesian policies?”

Here Haldane falls back on the discredited theory of Rogoff and Reinhart who argued in their (in)famous book, This Time is Different, that economies with high public debt ratios (they argued a threshold of 90% of GDP) would have lower growth and eventually a financial crisis. The empirical study behind this claim was subsquently exposed as riddled with coding and statistical errors. It’s true that other studies like the one Haldane cites show a correlation between high public debt and lower growth. But does that imply that it is high public debt that depresses growth or is it the other way round: slowing growth or outright recessions cause higher public debt?  It is clearly the latter as the evidence above shows.

And if we look for rising debt as a cause of slower growth and financial crises, private sector debt, in particular excessive corporate debt and financial debt ie what Marx called fictitious capital, is a much more iikely culprit than public debt.  Rising private debt started to outstrip public debt to GDP in the so-called neoliberal period and remained larger than public debt right up to the global financial crash of 2008-9.

And as the OECD put it recently: “Since 2008, corporate bond issuance has grown significantly above trend, while corporate investment has not. Cumulative bond issuance by non-financial companies in 2009-23 was USD 12.9 trillion higher than the pre-2008 trend, while corporate investment was USD 8.4 trillion lower. Rather than productive investment, a lot of debt in recent years has been used to fund financial operations like refinancings and shareholder payouts. This suggests existing debt is unlikely to pay itself off through returns on productive investment.” 

For Haldane, ‘fiscal consolidation’ (ie austerity) will help boost growth. For the Keynesians, ‘fiscal stimulus’ (government spending) will boost growth.  In my view, both are wrong.  What boosts growth is investment in the productive (value-creating) sectors of the economy, and what boosts productive investment is increased profitability for the capitalist sector, which contributes between 15-18% of GDP in investment compared to public investment at less than 3% of GDP.  While that ratio remains, it will be the voices of the capitalists that will dominate. And they will claim that high public debt causes recessions, and so the only way to restore growth is to cut debt through austerity. And yet it is clear that it is excessive debt and the subsequent busts in the capitalist sector that leads to high public debt.

There are several ways to reduce the debt ratio burden: higher inflation, which reduces the real value of the debt and raises nominal GDP. This solution shifts the losses to the holders of debt, which is why the financial sector opposes inflation so vehemently. But it also shifts the burden onto the majority of working people through a rising cost of living.  

The other way to lower the debt ratio is to increase growth in real GDP through higher investment.  But that won’t happen as long as investment depends on the profitability expectations (‘animal spirits’) of the capitalist sector.  And no existing government is prepared to bring the strategic sectors of the capitalist economy: banks and corporates, into public ownership to enable an expansion of public sector investment. Thus ‘expansionary fisal consolidation’ (Haldane) or what used to be called fiscal austerity will remain the policy of pro-capitalist governments.