Despite the reality facing millions of low paid workers, we are again faced with a barrage of propaganda about the British economy “turning the corner”. Unbelievably, they have been talking about this “corner-turning” and “green shoots” for the past five years.
Of course, once in a while they can seize upon some “good news”. This time they are pointing to a rise in consumer confidence (well, it couldn’t get much lower), and better news on housing. Mortgage costs are lower and house prices are rising. Even the UK’s Gross Domestic Product has risen, albeit slightly.
But this stands at odds with reality. “What do house prices have to do with recovery”, asks a perceptive reader’s letter in the Metro. “Do they fuel manufacturing output?”
The reality is that both the manufacturing and construction sectors are still more than 10% below their 2008 peak. GDP is still significantly below pre-crisis levels. And this after five years of “recovery”!
In fact, the capitalist crisis has been so deep – it has been even deeper than in the 1930s - that the “recovery”, for want of a better word, has been the weakest in over 100 years, probably in British economic history.
“The recovery of gross domestic product – goods and services produced – has undoubtedly been the worst of any in the past century”, stated the Financial Times.
There has been no bounce back to “normality”. In fact, there is a “new” normality, one of on-going austerity and mass unemployment. Unemployment is no longer cyclical but has become a permanent feature everywhere. Youth unemployment has reached horrendous levels, condemning a new generation to the scrap heap and a life of despair.
All this talk of “recovery” is hot air. Even The Economist was forced to ask: “The question is how long it will last”? While interest rates are at a 300-year low, they are nevertheless fretting about a “credit crunch” for big business.
Bank lending to businesses has dropped by around 32% and the decline is accelerating. In January lending to businesses was falling at an annualised rate of 3%. By June the pace had more than doubled to 7%.
Banks are still saddled by bad debts, due to their greed. Eurozone banks need to shed €3.2tn euros of debt in the next 3-5 years. This is significant as it is foreign-owned banks which account for one third of UK banking assets.
But these excuses do not explain the fact that British businesses are sitting on a mountain of cash – some £750bn. So there is no shortage of money. Big business is loaded. The problem is they are not investing to develop the economy. In fact, investment is actually falling! In Britain, it fell by 34% in the last five years. This failure of the capitalists to invest has meant that the position of the UK has now dropped to a miserable 159th in the world. Its research and development spending is one of the lowest in the West.
These figures are quite startling. They reflect a devastating picture for British capitalism. The failure of the capitalists to invest to keep the system going means that there can be no hope of a lasting recovery.
The whole historic role of the capitalists was to reinvest back into productive investment the surplus extracted from the unpaid labour of the working class. But they have no incentive to invest as capitalism is awash with excess capacity, which it cannot profitably use. The system can only use about 80% of capacity in booms and about 65% in slumps.
Capitalism has reached its limits. Austerity means further cuts in living standards and in the market. That is why there is no investment in machinery and production. Why invest when there is already over-capacity? Why take on workers when there is enough slack to get by?
Some hope that a boom in the housing market will do the trick. “Britain’s house prices are rising again, and household debt is starting to swell”, explained The Economist (10th August). But there are clear limits to this, as even The Economist understands. “This is sustainable only if workers’ future wages justify the mortgages granted against them.”
But real wages are being cut year after year. Consumer spending has recovered but only on the basis of credit, which has to be paid back. How can this be sustained when British workers have suffered the biggest fall in real wages in Europe, down by 5.5% since 2010, according to data produced by the House of Commons? Real wages in Britain fell faster than in crisis-ridden Spain and Cyprus. Under the Coalition, pay in the UK has fallen for 35 months in a row – the worst such run since records started, certainly since 1870!
No wonder that in the latest YouGov poll nearly 60% of people believed the economy is either still getting worse or not getting better.
At the same time, figures revealed that there were more bankers in Britain “earning” over £1million than in the rest of the Europe put together! There is no crisis for the rich. In fact, the rich have never been richer.
Whatever the short-term ups and downs of the economy, the long-term reality is one of prolonged austerity and crisis.
The capitalist system is suffering from an intractable and fundamental crisis. The Con-Dem Coalition, a government of the rich for the rich, is forcing us to pay for this crisis. However, the alternative of “responsible capitalism” and “making markets work for working people”, put forward by Ed Miliband, is a pipedream. Markets are subject to their own anarchy. While the economy is in private hands, it will always be ruled by profit and the dog-eat-dog laws of capitalism. Markets, and through them big business, dictate to governments and not the other way around. You cannot plan what you do not control and you cannot control what you do not own. Labour should be fighting to change society not pandering to big business.
The only solution to this crisis of capitalism is to put an end to the profit system. This means taking over the commanding heights of the economy - the major banks, insurance giants and top 200 monopolies - and running it under democratic workers’ control and management. Only then can our resources be planned in the interests of the majority instead of the interests of a tiny handful. We can then use the industry, science and technique to put everybody back to work and systematically raise living standards by introducing a real living wage, reducing the hours of work and boosting spending on schools, hospitals and social services.
Instead of the nightmare of capitalist austerity, we can have a future free of the evils of unemployment, poverty and homelessness.
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