It’s their crisis–why should we pay?

Leaflet distributed by Solidarity students at Sydney University seminar on the financial crisis

The world is suffering its most serious financial crisis since the 1930s. Most economists believe that more banks will fail regardless of the billions being poured into failed banks across the world.

After all the years of rhetoric about privatisation, small government, the miracles of the free market and private profit, governments have had to intervene to effectively nationalise huge swathes of the banking system.

But the cost of this will be borne by ordinary people, not the corporate executives who created this mess. The US$700 billion spent on bailing out the US financial system will be paid for by increased taxes and cuts to public services for ordinary Americans. Yet the CEOs of the banks that survive will keep raking in millions. Even the executives of collapsed banks like Lehman Brothers will not be asked to hand back the millions of dollars they made.

Several major economies, including the US economy, are already in recession. Growth in China is slowing too. Australian companies are already cutting jobs. Predictions from forecasters at NAB are that 300,000 jobs will go by the end of next year. Even optimistic forecasts say the Australian economy will grow only one or two per cent. Inflation is officially over 5 per cent.

Even before the crisis hit, state governments have been trying to force wage cuts on public sector workers by holding their pay rises below inflation. Kevin Rudd too was calling for wage moderation. Now there will be more calls for those workers who manage to keep their jobs to take wage cuts or more forced overtime to make up for those who have been sacked.

The federal Labor government was quick to inject $4 billion into non-bank home loan companies but workers superannuation has taken an enormous hit.

Product of the free market

This crisis may have been precipitated by the toxic debts of the subprime crisis but it is a product of the neo-liberal free market madness of the last 25 years. The deregulation of financial markets created incredible global speculation as money chased profits around the world.

But the real causes of the credit crunch lie in the long-term crisis of profitability with which global capitalism has been struggling since the end of the 1960s. We have experienced 25 years of attacks on ordinary people’s living standards through forcing people to work longer and harder for less as business has attempted to restore profitability. Now the boom has gone bust and so has the myth that neo-liberalism was a new paradigm for capitalist prosperity.

At the very least we need to push for wage claims of at least 5 per cent to keep up with inflation. We need to push for the Rudd government to scrap all of Howard’s WorkChoices laws. It is a disgrace that a Victorian CFMEU organiser is facing a jail sentence for standing up to Howard’s anti-union building task force.

Cutbacks at universities

The Sydney Uni management is trying to make staff and students accept cuts in the name of the economic crisis. Last week the Vice-Chancellor claimed university revenue was down $100 million a year due to money lost gambling on the stock market, and so cuts to departments were necessary. This was also used to claim that the university could only afford 4 per cent wage increases for staff—less than inflation and so effectively a pay cut.

The university has now admitted in a briefing to the staff union the NTEU that it actually had a $53 million surplus overall last financial year and that “core University activities of learning, teaching and research do not rely on any investment income at all”. Last year Sydney Uni increased its payments to executives on more than $240,000 by 25 per cent and paid recently departed Vice-Chancellor Gavin Brown $940,000. But courses are already threatened as the university has demanded departments become profitable through taking full-fee students and corporate donations.

Sydney Uni has already been operating more and more like a corporation. Instead the university should be leading a concerted campaign to restore public funding. The Rudd government came to office promising an education revolution—yet it has failed to reverse Howard’s spending priorities.

The global financial crisis has thrown the whole ideological underpinnings of capitalism into the air. Now we know why the Howard government tried to silence dissent. University management went along with turning the university into a corporate degree factory trying to marginalise political economy and stifle critical thinking.

The Wall Street crash and the recession that is spreading around the world will bring even more misery in its wake. University staff and students have a role to play, standing up against the demands for cuts to pay and courses, and questioning the basis of the new world order brought to us by Howard, Bush and Blair.

Their system has failed. But neo-liberalism won’t just collapse under the weight of its own contradictions. The ideas of Marx are back on the agenda. But there remains an enormous weight from the past period in which we were told there was no alternative to the market.

We need to re-new the discussion of what is the socialist alternative to the market. That discussion needs to go hand in hand with the fight against demands to make us pay for their crisis. It took strikes and demonstrations to win reforms like free education in the first place. It will take such movements to win them back.


Solidarity meetings

Latest articles

Read more

Evergrande crisis shows Chinese growth figures built on sand

The looming potential default of the Chinese property giant Evergrande is sending shivers down the spines of capitalists across the world.

Editorial: Morrison’s recovery plan means cuts and casualisation—it’s time to start...

While Scott Morrison’s budget has handed tens of billions of dollars to business in tax breaks and wage subsidies, workers will be expected to sacrifice to deliver any economic recovery from the pandemic.

Handouts for business and the rich in budget that fails those...

The Liberals will shovel billions in subsidies and handouts to business and the rich, in a budget that fails those worst hit by the pandemic.


  1. Hi

    I have read the above article and the one on “Rudd’s spending”. Both a very interesting reading.

    I just wanted a brief explanation on the sentence below which appears on the second last paragraph of the article “It’s their crisis—why should we pay?”

    “But neo-liberalism won’t just collapse under the weight of its own contradictions”.

    Did you mean to say “capitalism”?

    The term “neo-liberalism” is much used these days by the left to replace the term “capitalism”, but isn’t neo-liberalism a phase/stage of the capitalist system not the capitalist system itself as a whole?

    What is the definition of Neo-liberalism?


  2. Hi Joe, we have an article just out here
    & there is a great article here that goes through this question in detail

    The term neo-liberalism does get used ambiguously, to refer either to free market ideology, to this ideology in practice ie various anti-reforms such as privatisation, attacks on workers rights, attacks on welfare etc (you could call this a stage of capitalism, or a product of the decline of profitablity in late capitalism), or sometimes even as a synonym for capitalism itself.

    I didnt write the above article, but I think what it means here is that even though the financial crisis is a blow to the ideology of neo-liberalism, & the idea that the free market can solve our problems, our rulers are not about to abandon it in practice. Around the world we see bail outs for the banks, while people lose their homes & jobs. Wayne Swan was yesterday trying to dampen down any expectations that a Labor government could improve people’s lives because of a 40 billion hole caused by the crisis.

    Though the article is referring the ideology of neoliberalism, if you substitute “capitalism” above as you suggest it would still make sense: ie just because the system doesn’t work, doesn’t mean those who run it & benefit from it are about to abandon it.

    Ruling class ideology is currently running to catch up, so Rudd talks of the problem being “extreme capitalism”, and backs calls for more regulation, but isn’t about to end commitment to the market itself. Workchoices-lite privatisations, public private partnerships etc are still the order of the day. Politicans makes noises about obscene salaries paid to CEO’s but they aren’t about to do anything about it.

    To get real improvement in our lives requires resistance and struggle.


Please enter your comment!
Please enter your name here