Crisis? What Crisis? part 3 – down, down, deeper and down

Sterling as a picture of the future

Sterling as a picture of the future

Tory lies over Brexit and the sunlit vistas of UK sovereignty that lie ahead are nothing new.  Uncriticised by the Tory press and a BBC that is both scared of them and shares their broad establishment understanding of society, they have been able to present themselves as the only trusted stewards of a successful economy, with only its fruits perhaps needing some fairer distribution, now that they are the workers’ friend.

But the Tories have lied to themselves and everyone else that the British economy is in rude health, especially when compared to the sclerosis of the rest of Europe.  They quote statistics showing that real Gross Domestic Product has grown faster in Britain than in the bigger EU economies such as Germany, France and Italy.  What they don’t say is that GDP per person was no higher in 2014 than 2007 and that the British are no richer compared to the EU 15 average now than they were 15 years ago.  In fact Britain lags behind Spain and France on this measure.

In order for Britain to grow it has needed to increase its population and workforce, including through immigration, and make the working class work longer hours while reducing their wages, which declined by 10% between 2008 and 2014.  Productivity relative to the EU average has fallen to 90% so that output per hour is 25% below French or German levels.  In only one other region apart from London is GDP per head in excess of the EU average.  This means only 27% of Britons are wealthier than the EU average; but we are expected to believe that the EU is holding Britain back.

The Tories (and Blair before them) have relied on a high debt, low wage and low skilled economy that compensated for poor productivity by increased exploitation, symbolised by zero hours contracts on the one hand and long working hours on the other.  Such a model has no need for a comprehensive education system that can provide a highly educated and skilled workforce for employment across a wide number of economic sectors.

Increased exploitation of labour substitutes for increased capitalist investment in technology, which is mirrored in less state investment in infrastructure.   One example of the result of this is the threat of the lights going out because of a shrinking margin of spare power generation capacity.  This in turn leads to huge subsidies to foreign states to supply nuclear power that may keep the lights on – in the shape of Hinkley Point C and the French and Chinese state companies involved in its development. The lack of infrastructure puts a further drag on the development of productivity and the growth of living standards.

Brexit is being sold as the opportunity to improve this far from outstanding economy but leaving the EU will discourage the foreign investment that helps bail out Britain’s chronic deficit in trade.  Exit from the EU will diminish the financial sector and its acquisition of profits from around the world as bankers already threaten to pull out.  Trade will face new barriers and even old Tories like Michael Heseltine have laughed that there are new markets that no one has so far spotted to replace those that will be lost in Europe.

Devaluation of sterling will hit peoples’ living standards, reducing the domestic market just as foreign markets become harder to enter, while lower economic activity will reduce the capacity of the state to spend on infrastructure. A poorer Britain with reduced foreign earnings will have pressure placed on its interest rates, which will rise to cover the cost of financing a state whose currency is falling.

This risk was made clear by a market analyst quoted in the ‘Financial Times’ as saying that sterling is behaving more like an emerging markets currency and that there is no idea what its true level is. If a foreigner lent £100 to Britain, costing them say $120 in their own currency, it will mean that when she’s paid back the pounds she receives could be worth only $100.  So how much more interest on the loan would she require to protect herself against this risk?  And what sort of investment could warrant borrowing at this rate of interest?

Britain has created an economic model based on sweating its workforce.  Karl Marx noted the limits to exploitation by lengthening the working day 150 years ago, limits again being exposed today by Britain’s declining productivity.  And anyone believing that the Tories will move to create a high wage economy that involves upgrading the skills and talents of the workforce will have to explain the latest genius idea of promoting grammar schools, which relies on improving the education of a few by shiting on the rest.

An economic logic will apply to Brexit regardless of whether the Tory party realises it or not just as we have already seen its political logic unfold despite what some might have believed it was all about.  In last Monday’s ‘Financial Times’ some ‘liberal’ Brexit supports complained that they wanted an ‘open’ Brexit and not the nasty Tory variety.  But this is just as innocent of reality as the supporters of a ‘left’ exit – Lexit – thinking that a decisive move to national capitalism could be anything other than reactionary.

The economic logic of Brexit suggests increased unequal competition with other much larger state formations, such as the EU and the US, not to mention China, a la Hinkley Point C.  One weapon of the smaller and weaker is a race to the bottom with reduced corporate taxation as one example, already signalled by the late chancellor George Osborne, but this is not a credible strategy away from the current model.

There are therefore no grounds for believing that an interventionist state acting on behalf of workers will arise from any change in approach by the Tories.  However it is not excluded that the inevitable crisis that Brexit will induce could give rise to a change in direction to a more interventionist approach in order, as we have said in the previous post, to allow “a Tory government (to) save capitalism from itself.”

Unfortunately the Tories have tied themselves to those sections of the electorate least supportive of this approach; those who support lower taxes and a less interventionist state, unless its intervention is into other peoples’ countries.  The best hope of such an outcome is the influence of those sections of British big business that are tied to the Tories who do provide a constituency for such an approach.

However the weakness of a stand-alone Britain doesn’t help such change.  So for example, it is reported that the Tories may be thinking of devising restrictions on foreign investment, which had more potential within the EU than outside, but this idea will conflict with Britain’s more isolated situation and greater need for outside funding.  Their idea of increased state intervention will also be restricted by budgetary pressures arising from the weakened tax base of an ‘independent’ Britain.

As Boffy’s comment to my last post made clear, state intervention in the economy is not by definition left wing, despite much of the left’s identification of Keynesianism with socialism.  There are all manner of right wing Keynesian interventions so a Tory lurch to increased state intervention in the economy is perfectly compatible with increased authoritarian intervention by the same state with both masquerading as the workers’ friend; or more pointedly as the British workers’ friend.

The Tories newly found working class agenda, such as it is, cannot accommodate any sort of workers’ identification with their brothers and sisters beyond their own nation.   Xenophobia thus unavoidably defines the anti-working class core of the new Tory ‘left’ agenda.  This rabid xenophobia is perfectly compatible with false concerns for British workers but utterly incompatible with workers’ real interests, British or otherwise.  The Tories can feign sympathy with all sorts of working class concerns but not with its interest in solidarity across nations.  This appears most immediately in the shape of immigrant workers and, as a member of the EU, in the shape of all those workers who have moved from the EU who have now almost become hostage to the wilder delusions of the Tory right.

The centrality of workers unity was recognised by Marx long ago when he noted the two principles separating the socialists of his day from others:

“The Communists are distinguished from the other working-class parties by this only: 1. In the national struggles of the proletarians of the different countries, they point out and bring to the front the common interests of the entire proletariat, independently of all nationality. 2. In the various stages of development which the struggle of the working class against the bourgeoisie has to pass through, they always and everywhere represent the interests of the movement as a whole.”

No matter how any right wing force attempts to portray itself as the workers’ friend this is always the one area in which they can make no pretence and, in this failure, expose their true character – that they cannot accept never mind promote the identity of the interests of the workers of their own country with the interests of the workers of others.

The nationalists in Scotland in the shape of the SNP have at least temporarily succeeded in fooling many that the interests of Scottish workers are somehow radically different from those in England and Wales, although the rise of Corbynism has demonstrated that in the rest of Britain there might be more of a fight against nationalist division.  It is noteworthy that this blog draws to our attention the SNP’s approach to immigration set out in its White Paper for independence, which was a points based system, rather like that of those British nationalists like Boris Johnson.  But then nationalism is nationalism, innit?

Back to part 2

Forward to part 4

2 thoughts on “Crisis? What Crisis? part 3 – down, down, deeper and down

  1. I think part of the problem, as I wrote in a reply to George Carty on my blog, is that its hard to know exactly what is going on in the heads of the Tories at the moment. As far as the right-wing Brexiteers are concerned, I think the short answer is nothing much! I think that like sections of the far left, they were quite comfortable being able to just whinge about something, without having to worry over much about actually putting forward something concrete of what they want immediately instead. They assumed that they would lose the referendum, and so it never occurred to them that they might now be faced with having to deal with the consequences of what they were saying. That is quite clear in the case of BOJO, who saw the referendum as a means of simply negotiating some further arrangement, to the extent it was not just for him, a means of opposing Cameron and lining himself up for the job.

    But, its also not clear to me exactly where May and others actually stand. From various accounts Amber Rudd is some kind of “liberal” conservative, whose xenophobic comments at Tory Party conference were wholly out of character. May herself seem a very astute politician, which makes me wonder exactly why she put the three muppets in the positions they are in, knowing that at least two of them hate each other, and that it would almost certainly lead to frictions. Then we have her on an almost daily basis slapping down comments they have made, as soon as they have made them!

    I have a sneaking suspicion that there is still a lot of internal Tory party machinations going on here, and that the hard line stances being taken by May and Rudd and others could be an attempt to provoke the kind of market reactions seen with the Pound last week, so that a head of steam is built up for some kind of reversal of the referendum result. The hard line, indefensible position over the scrutiny in relation to the triggering of Article 50 seems almost designed to garner a wide cross party alliance in opposition.

    Of course, even if that is the case, I wouldn’t advise socialists to rely on it. As i said before the referendum, what Corbyn should have been doing was building a Socialist Campaign for Europe, based around the idea of uniting socialists and social democrats across Europe for a different kind of Europe, so we don’t give the impression that staying in on the old basis is sufficient. I think some such large scale very vocal and visible campaign is still possible, and nor do I think we can be so lightminded as to say that w should simply accept the referendum result, and not try to overturn it.

    On the interventionism, I was reminded of one of my Economics degree finals papers. At the time, it was almost taken as a truism that the newly dominant Monetarism being adopted by Thatcher (actually more correctly at that point Hayeckian Monetary restraint) was a right-wing policy, whilst Keynesian intervention was necessarily left-wing. I argued that there was nothing in either form of intervention that was necessarily right or left-wing, and that both were simply tools used at different times by the ruling class and reflected the conflicting interests of different sections of capital within it. As far as theory was concerned, Marx’s explanation of inflation was closer to Monetarism than to Keynesianism.

    I think, that all governments are being forced by objective economic realities to move away from the monetary levers and to adopt Keynesian fiscal levers, and they will be pushed by the state in that direction at a national and international level. I see it as necessarily leading to higher interest rates and lower asset prices, indeed a huge financial crisis demolishing asset prices across the board, but will by that very process facilitate the restoration – I even hazard to guess a much more rapid restoration – of real capital accumulation, and subsequent raising of yields on those financial assets. I intend to write something in the future when I have time on how I think think the long wave cycle has been disturbed, and how we might have yet to come a more powerful and more prolonged upswing.

    On Grammar Schools, I think it plays into what I said earlier, about how this might be trying to provoke a response. Its also a question of throwing the dead cat on the table, of diverting attention, and throwing Tory backwoodsmen a piece of red meat to chew, whilst the real action happens elsewhere.

    Finally, I agree entirely about the GDP. Again ironic that the GDP would not have grown other than for the effect of immigration. I have written about the false nature of GDP elsewhere. It is a measure of incomes not of the value of output. But also, besides that, and besides the point you make about GDP per capita, Marx following on from Ricardo, makes the point that the real measure is not the extent to which GDP rises, but the extent to which the Net Product – surplus value rises. In other words, Ricardo criticised Smith for focussing on the extent to which the value of output rises, whereas Ricardo and Marx point out that if the cost of producing this greater output has risen by more, the society is actually becoming worse off. It is the Net product Marx says which determines how much capital the economy can accumulate.

    • The political crisis in GB is not so hard to understand. There has been a breakdown in the long settled relationship between the two classes that make up the coalition that is the Conservative party. A few days ago I heard a spokes person for a collection of smaller British businesses giving it hell over the way they believe they all had been swindled and cheated by the big banks. He said he had in his possession details of some 17,000 small firms that had been swindled by just one bank RBS, and this was only a snapshot of the widespread discontent. Given that there are nearly 5 million firms classified as small by the national statistics office, firms employing less than 250 people, that makes for a large section of the middle class in near open rebellion against the Economic Establishment. Many off these small business people have concluded that the system is rigged against them, with the large corporation getting away with all sorts of crimes including tax avoidance that they are not permitted to get away with. So a large section of the conservative party base is in a mood of rebellion.

      There is another class factor to pay attention to, the Joseph Rowntree Trust has provided some sort of class analysis of the vote for Brexit. What it shows is that the lower income sections of the working class voted in big numbers for Brexit. the grouping that voted to leave the EU in the biggest percentage was the unemployed and the working poor, earning less than 15,000 per year. So the rebellious petty bourgeois are dragging the lower income groups into their current world view, that the system is rigged against them.

      The system that is rigged against them is not capitalism in the way Marxist’s understand it, it is more like insider capitalism, those with the best political connections get all the gains and those with no the political connections get all of the burdens and more. What these petty bourgeois REBELS know about the EU is limited in detail but not far off the mark in general. They know only the big corporations and banks have the money and political connections to get a hearing from the European Commission. There are some superb documentaries free to view on You tube showing how the big corporations and banks use the EU COMMISSION to unlock everything what they want. Any small business person viewing these films must clench with class resentment. So they conclude that a British political system outside of the EU might might not be great but it least it might be made more responsive to the needs of their own class than an EU that is forever out of their reach. I you assign just one owner to the 5 million small business owners, then had in the spouses and partners and maybe some older teenagers, then chuck in the lower income groups of the working class, you get to about 17 million voters. A similar class rot is sure to spread to the other prime European countries so the Institutions of the EU are probably living on borrowed time, unless they change radically. We can even see a similar class rot taking place in the USA, manifesting itself as upper bourgeois support for Clinton against the petty bourgeois and lower income working class support for Trump.

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