Credit crunch: A winning formula?

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The credit crunch has wiped £600 billion - more than £1 million a minute - from Britain's total wealth in the past year.

According to a recent set of figures, which seem almost impossible to take in, these losses are caused largely by falls in the value of houses and shares. They begin to highlight the scale of the economic crisis which is upon us and which shows every sign of getting much worse before it gets better.

While some of the individuals affected by these falls will attract little sympathy from socialists - the speculators on the stock market and on the housing market - these figures also spell real misery for many people, among them the growing number in negative equity and in danger of repossession because they borrowed more than their houses are now worth.

Not that the fate of those individuals bothers many of the bankers - or only insofar as their troubles will affect the profits of the big corporations. The message sent by the governor of the bank of England, Mervyn King, who last month predicted "negative growth" or recession for next year, was that little could be done about the housing market. King has gone from thinking there was very little to worry about with the British economy a year ago to a much more cataclysmic scenario.

In fact it is pretty universally accepted that things are going to get a lot worse. Recession is also the outlook for the rest of Europe.

A year ago few were so gloomy. When the credit crunch first hit, many commentators said it would not affect the main economy, that it was much more confined to the US and that the British banking system was not nearly as exposed to subprime housing as that in the US. Yet Britain's own equivalent of subprime has been the expansion of the buy to let market, with half of all new flats being sold to private landlords.

Over the summer unemployment rose, the rate of repossessions rose and the pound weakened as a currency. It seemed that every day new price rises added to the woes of working people: gas, electricity, water, train fares, petrol and, of course, food all up well beyond the average rate of inflation - which itself shot up to 4.4 or 5 percent, depending on which measure you use.

This is a major economic crisis which threatens workers' living standards in a way not seen for more than 30 years. It is already affecting very badly industries such as construction, retailing and finance, but it will spread to other sectors. Those who told us they had got rid of boom and bust are now saying, well, maybe there is bust but we all have to sacrifice until it's over. By "we all" they, of course, mean us. The big companies still make huge profits, shareholders are protected and rewarded handsomely and failing executives leave companies with golden handshakes.

Meanwhile the rest of us become poorer, more insecure, in some cases our lives are ruined by loss of homes or jobs. There are encouraging signs that many workers aren't taking this lying down. The number of strikes is rising, and groups of workers as diverse as bus workers, Argos workers, teachers and refuse collectors are showing they will not put up with a wage cut.

Those strikes need to be extended and joined up between the different sectors so that they begin to mount a more generalised response to attacks from government and the employers. And we need to fight on every front - the political, the economic and the ideological - if we are to move forward. The housing crisis is not just or even mainly about falling prices, but about government policy which for a quarter of a century has favoured and subsidised private over public housing. The rise in utility prices is to do with privatisation and the determination by government to put no barrier whatever in the way of companies making profit.

The low pay of public sector workers results from priorities which allow endless billions for war, Trident, bailing out banks and cutting corporation tax but which have starved schools, council facilities and the health service of the resources they need.

The People Before Profit Charter launched this summer, and supported by many trade unionists and activists, points the way to organising against these priorities. Windfall taxes, raising taxes paid by the rich and big business, price controls on energy and food, no repossessions and wage rises to keep pace with inflation are crucial demands if we are to challenge the political and economic offensive being mounted against us.

Gordon Brown is facing his own personal crisis again this month. He and his government must fear meltdown. New Labour's unpopularity rests in its less than winning formula of recession at home and war abroad. A rising tide of protest and action now is exactly the right answer to the crisis.