exchanges and commodity prices are on their way up. The world economy is
showing faltering signs of recovery. There’s no doubt that it’ll be a long
haul. Millions of people all over the world have had their lives devastated by
the economic tsunami. It will take years to clean up all the mess. But one
major national economy after another has announced that the recession is
officially over – France, Germany, Japan
and even the USA.
All except Britain.
Why is British capitalism still stubbornly stuck in the mire?
reason is rooted in the history of British capitalism. Britain was the
first country to industrialise and became the ‘workshop of the world’. It’s an
old story, picked up by Trotsky in his 1925 book ‘Where is Britain going?’, but Britain was also the first country
to deindustrialise. The British capitalists were not prepared to invest in
order to compete with more dynamic rivals such as Germany
and the USA.
As a result they fell behind in the race.
decline sections of the ruling class began to believe that this country, with
60 million people, could make a living out of ‘invisibles’ instead of
manufacturing, in particular by selling financial services to the rest of the
world. The Tories under Thatcher argued that "manufacturing didn’t matter,"
Marxists warned that finance capital was essentially parasitic upon productive
activity and total reliance upon it was a dead end.
and New Labour swallowed this fantasy hook, line and sinker. They actually
turned it into a theory – a philosophy of the absurd. New Labour guru Charles
Leadbeater even wrote a book called ‘Living on thin air’ in 1999. In fact by
turning the City of London and Canary Wharf
into a vast casino and boasting about ‘light touch regulation’ here they made Britain
uniquely vulnerable to the speculative fever that fed the boom that went bust
two years ago.
is what Brown told an assembly of finance capital at the Mansion House in 2007,
just months before the crash. “I congratulate you on these remarkable
achievements, an era that history will record as the beginning of a new golden
age for the City of London … I believe it will be said of this age, the first
decades of the 21st century, that out of the greatest restructuring of the
global economy, perhaps even greater than the industrial revolution, a new
world order was created." So New Labour stubbornly presided over a
continuing loss of jobs in manufacturing, with over a million gone since 1997.
back in the real world, this is what we predicted 18 months ago. (Crisis – is Britain immune?
12.05.08): “Alistair Darling and Gordon
Brown…say that Britain
is immune. They’ve even commissioned a Treasury report to try to prove it.
believe them. The chill winds of economic crisis are coming our way. The
parallels between the US,
which is already in the mire, and the UK are stark.
Both economies have had consumer booms
that were fundamentally unsound, based on a housing bubble…
In both the USA
and the UK
consumers, who weren’t really getting much better off, went on a spending binge
based on their rising paper wealth.
In both countries the government built
up massive deficits by spending more than they were getting in tax.
Both countries accumulated huge debts
with the rest of the world, in effect living at their expense.
In both countries, the currency took
the strain of the trade deficit, and went into an uncontrolled slide.
Now the bubble has burst.
has already started happening in the States. It’s just a matter of time before
it’s played out here.”
capitalism were worse hit than the other major capitalist powers by the world
capitalist crisis. And this was because they showed all the classic features of
relative decline compared with their rivals.
Economist echoed the point (11.10.08). “The underlying problem is that Britain’s
economy was vulnerable even before the credit crisis struck. Much of its recent
growth had been driven by the City and based on a financial model whose defects
have now been brutally exposed.”
we predicted is exactly what happened. The price of houses collapsed as we said
it would along with the credit crunch. Despite a slow climb back from the
depths, the actual level of house sales is very low. Then in October 2009 prices
slipped back again, leading FindaProperty to warn of “a growing risk of a
double-dip housing recession.”
consumer boom has gone west along with the house price bubble. And the banks
have stopped lending just when workers and firms need credit most.
Britain’s debts to other countries
haven’t gone away. The pound is in freefall, particularly against the Euro, but
cheaper exports won’t pull British capitalism out of the pickle it’s in. Why
not? Because all the countries where people might want to buy our goods are
also suffering from the world recession.
government deficit is exploding, partly because of the cost of bailing out the
banks. As tax revenues dip with the recession, so the government has to pay out
more to keep workers on the dole. Now the IMF warns that ten years of cuts and
tax rises lie ahead as a result.
capitalism is in continued decline. Its weakness is exposed by the present
crisis. To bet all our livelihoods on becoming a financial centre like a giant
version of Luxembourg or the
Cayman Islands was always ridiculous. Only a
socialist reconstruction of Britain
can stop the rot and offer decent, useful well-paid work for all.