RACHEL REEVES is not satisfied. And nor should she be. Britain’s economy barely grew over the summer months. One explanation being touted is uncertainty about the Budget.
This can be spun as a reluctance on the part of consumers to buy things. But the major factor influencing consumer behaviour is because, compared to now fairly distant memory, people simply don’t have the spare cash.
The bosses’ outfit, the Confederation of British Industry was frank. Business bosses put decision-making on hold, it said.
The Budget increase in National Insurance contributions and the increase in the minimum wage “is expected to trigger a more cautious approach to pay, hiring and investment.”
In summary then, the bosses hold back on investment because they don’t want to pay a more for maintaining the the national environment in which they make profits and they think that increasing the overall spending power of the working class should not be at the expense of their costs of doing business.
This is not quite a capitalist strike by bosses. It is more analogous to a go slow. But taken over the piece — or to put it another way — the post-war decline in British capitalism it does look very much like a decades-long investment strike.
The fact is that Britain has been falling behind most developed capitalist economies — those grouped in the Organisation for Economic Co-operation and Development (OECD) and the G7 states in that key indicator of economic health, gross capital formation, capital investment.
The London mayor’s office — which keeps a sharp eye on its home turf as the country’s most productive region — ie the one with highest profits and greatest consumption — is clear: “The role of investment as an integral component of GDP and long-term economic growth is hardly in question. Many economists have pointed to the UK’s poor economic productivity since the 2008 financial crisis as a principal reason behind the country’s failure to sufficiently boost its people’s living standards since.”
British industry is infamously unproductive compared to other capitalist economies and its lacks both the dirigiste features of France with long-term state investment or Germany’s distinctive regional banking and investment culture.
An over reliance of the finance sector and the strong drive to find the most profitable investment destinations abroad are the outstanding characteristics of our capitalist class for whom patriotism is a matter of windy rhetoric on the steps of the Cenotaph rather than concrete measures to invest in infrastructure, the productive economy and working people’s skill set.
The most recent occasion in which Britain’s level of investment as a a proportion of GDP was above the G7 median was 35 years ago.
This is not due to an unpatriotic aversion to consumer spending by working people but to conscious decisions by government and bossess.
Reeves understands the problem. But having abandoned even the vestigial remains of a social democratic understanding she is divested of even the Keynesian tools that hitherto sufficed.
None of these problems will get better, most especially if the Trumpian deviation from neoliberal orthodoxy chokes off transatlantic profit-making. They might be alleviated if Labour restored its Green New Deal and adopted a more harmonious trading relationship with the Global South, China and Russia.
But the root cause of Britain’s capitalist crisis is ... capitalism. And the only sensible, long-term solution is to secure for the workers by hand or by brain the full fruits of their industry the most equitable distribution thereof that may be possible upon the basis of the best obtainable system of popular administration and control of each industry or service. Socialism.
