Yesterday, the FT carried an article calling for the bond markets to discipline the American public to force them to accept austerity. Given that US states and cities have already been forcing through draconian spending cuts, this shows up the savagery of the commentariat when they're talking about other people's money and other people's services. Notably, the FT did not cite the recent experience of Ireland, where the cuts remedy has compounded the deficit and resulted in an unprecedented political crisis and a further round of cuts. It did cite the experience of Portugal, though. It was a bad example. Today it's been announced that despite (or because of) Portugal's austerity measures, its credit rating has been revised down by Moodys credit agency, just days after it has already cut Ireland's credit rating down by 5 points. This is because the austerity measures are damaging growth and thus harming Portugal's ability to repay its debts.

Now Britain's austerity programme may face similar problems. Despite all the 'quantitative easing', which was never going to overcome the problems posed by austerity, and despite slashing spending at record levels, the public sector borrowing requirement has continued to rise. The Tories, with the assistance of their unlovely Liberal props, are determined to keep to their targets of reducing the deficit, which they intend to achieve solely by cutting, and have only more quantitative easing to fall back on. Growth is unlikely to rescue the situation, because even the CBI, which supports the cuts, doesn't expect growth to be higher than 0.2% in the first quarter of 2011. The trading deficit has increased, which means that the manufacturing sector certainly isn't able to take advantage of the weak pound to pick up the slack in the economy. If growth remains stagnant, or if we enter another slump, then Treasury revenues will fall further, and borrowing will have to rise further. If borrowing continues to rise despite previous and current cuts, then the logic of the government's position leads them to further cuts. So, we could be on our way to a second emergency budget - Ireland style.

Still, though global ruling classes have always been divided on the details of this strategy, and have every reason to worry about years of stagnation and low profits, the major voices of capital such as the IMF have not ceased to demand further austerity, privatization and deregulation. And the OECD yesterday demanded that Spain should try to overcome its difficulties by such neoliberal measures. There is, in my opinion, a very simple reason for this. The only plausible alternative to neoliberalism is to attack the wealth and power of the rich - to kill off the rentier, nationalise the banks and convert them into public utilities, redistribute wealth to support demand, engage in mass public housing projects (no more bonanzas from property speculation), and to strengthen the bargaining power of labour to support incomes and demands in the future. This is simply not something the CBI or the British Chambers of Commerce would ever be interested in, even if the alternative was to pull up the drawbridges and allow the economy to tank for a generation. The austerity agenda is thus not just a gamble on squeezing another few years of growth out of the neoliberal accumulation model, but a defensive project against the Left.

The only thing that will make them think twice is if the resultant labour insurgencies prove to be so powerful, and empowering for the constituencies that neoliberalism has previously smashed, that they risk the re-emergence of an anticapitalist pole of attraction. Then they'll be forced to negotiate terms. "Right," said Thucydides, "as the world goes, is only in question between equals in power, while the strong do what they can and the weak suffer what they must". If we cannot yet defeat the ruling classes, let us at least aspire to be their equal in power.