Bank of England Governor to bosses –

When the baggage handlers at British Airways walked out in support of their brothers and sisters (and wives and husbands) who had been sacked from British Airway’s in-flight caterer, Gate Gourmet, the British press unleashed the usual anti-union abuse with claims that the dispute was a conspiracy planned by the trade unions. Several months ago, however, there was a report in some British papers of an unusual speech by the Governor of the Bank of England, Mervyn King, which suggests a different picture. The speech, perhaps unwittingly, gives a glimpse of a discussion that has taken place amongst the British capitalists, and which the Gate Gourmet dispute is a direct consequence of.

The speech was reported in the Guardian on June 14^th (see http://www.guardian.co.uk/business/story/0,,1505870,00.html for the full text) under the headline “Migrants hold down inflation says governor”. In a speech in Yorkshire the governor was reported as saying “the 120,000 eastern Europeans who had arrived in Britain since 10 more countries joined the European Union in May 2004 had kept the lid on wages and prevented inflation from rising… Private-sector regular pay growth has been subdued, which is somewhat puzzling in the context of 30-year-high employment rates, and 30-year-low unemployment rates, which we would usually associate with a tight labour market. It is possible, indeed likely, that inflows of migrant labour have eased labour market pressure.”

If there has been a conspiracy it is this: the Governor is pointing out, in the guarded and hypocritical way the British capitalists speak when they might be overheard, that the expansion of the European Union has been an opportunity for the capitalists of Western Europe to gain access to a new pool of cheap labour. After the Second World War capitalism was ended in Eastern Europe; the establishment of planned economies in those countries had the potential for an unparalleled economic development in that region. But the regimes that were installed by Moscow as the Red Army swept through Europe started where the Soviet leaders had ended up - corrupt, degenerate, bureaucratic. Despite the enormous potential, the economies were wrecked by the bureaucracy, by their waste and mismanagement, and above all by their crushing of any form of genuine workers democracy.

Now, in desperation, some workers from Eastern Europe prefer to take their chances in the ghettoes and slums of Western Europe, where they will end up in low-paid jobs - working for companies such as Gate Gourmet. It’s been widely reported that the Gate Gourmet management intend to replace the sacked workers (once a new and better contract has been squeezed out of British Airways) with immigrants from Eastern European, working on worse terms and conditions. Most of the existing workforce at Gate Gourmet, and those who have been sacked, are from families who moved to Britain from the Indian sub-continent in the 1960s and 1970s. This part of the British working class suffers the lowest pay and has amongst the worst conditions in the country. But they are now too expensive and will be replaced by even lower paid workers from Eastern Europe.

Speaking in public, the Governor has to choose his words carefully. He embellishes his speech by talking in terms of “keeping down inflation”. He takes the opportunity to circulate again the old lie that wage rises cause inflation, which Marx and Engels answered many years ago – wage rises cause a reduction in the profit of the capitalist; the price the capitalist can sell his goods is set by the value of those goods and by the market and not by the wages he pays. This is even admitted later in the same article: “May's figures for producer prices showed the cost of the fuel and raw materials used by manufacturers still growing strongly but the increases being largely absorbed in lower profit margins… the weakness of demand and the strength of competitive pressures meant the price of goods leaving factory prices fell by 0.2% last month.” Although he’s not prepared to admit it, it’s clear that if wage costs rose it would also not be possible to raise prices – and that too, perish the thought, would lead to lower profit margins.

Despite his disingenuity, the central message from the Governor is still clear – immigrants from Eastern Europe are an opportunity for lower wages. When BA contracted out its catering services shortly after privatisation its plan always was to cut costs, and thousands of jobs were lost that have been replaced by worse paid jobs at the new contractors. Gate Gourmet was originally an offshoot from Swiss Air, which had similarly attempted cost-cutting by this approach before going bankrupt. It was then sold to Texas Pacific Group, a Texas based investment fund, who have systematically attempted to drive down pay and working conditions. They provoked the recent dispute, which led to the walkout of the 650 workers who were immediately sacked. They hadn’t counted on the sympathy action by the baggage handlers, which grounded BA flights for 5 days, and the subsequent pressure from BA to restore supplies. But Gate Gourmet’s plans still largely remain intact – the redundancy agreement they are now offering is a retreat from their original position of sacking workers for walking out, but the terms (currently two weeks pay – low pay – per year of service) are peanuts. Compared to the $10 million dollars that the head of Texas Pacific spent on his 60^th birthday, with private performances from the Rolling Stones, it is a very small price to pay to be let off the hook.

Are we seeing here, in the Governor’s speech and in the actions of Gate Gourmet, a small part of a discussion that has taken place amongst the British and American capitalists, in the gentlemen’s clubs in London and in Austin Texas? The Governor pretends that lower wage rises as a result of immigration from Eastern Europe are almost a surprise, almost unexpected. Yet in raising the topic in public is he giving some guarded recommendations to his class? The speech is ominously similar to the Financial Times headline from the 1980’s: “Pay cuts now possible in the West Midlands”.

It is in disputes such as this, however, that the British Trade Union movement has the opportunity to recruit and rebuild and to regain a consciousness of its strength. Union activists will seize this opportunity, despite the inertia of the Trade Union tops, who would prefer instead to negotiate “better terms for redundancy” (there are no better terms for redundancy). And the new recruits to the unions, the lowest paid and the most exploited current and future members of the British working class, these will be the most committed and the most serious class fighters in coming battles.