Friday, 1 April 2011

Enterprise Zones - Part 3

But, even for the highly ideological Thatcher Government, which came in emphasising its commitment to reducing the size of the State – but which ended up increasing its size – Enterprise Zones were a deeply contradictory policy.
Shutt quotes the view expressed by the official monitoring agency in relation to the fundamental role that had to be be played by spending by the Capitalist State.

“..some of the most successful enterprise zones to date are those which were already the subject of major public sector programmes at the time of designation e.g. Corby, Swansea, Clydebank” (Roger Tym, 1983, p118)

In Swansea it was the Lower Swansea Valley reclamation programme developed by Swansea City Council, the Welsh Development Agency and the Land Authority for Wales. In Corby it was work being done by the New Town Commission, and subsidies from Development Area Status, EEC low interest loans, and money from BSC following the closure of the steel works. In Clydebank it was the Scottish Development Agency which had been acquiring sites such as the BL Albion Works. In fact, the SDA was responsible for 70% of the £10.4 million of site development in the first year of EZ status.

Shutt states,

“Enterprsie Zones are, then, contributing to an expansion of state expenditure which aims to reduce land investment costs for private capital.”

Even then with this direct subsidy to private Capital by State Capitalism, finance Capital was not convinced. Shut writes,

“UK finance capital, ever cautious, prefers to play a waiting game, as yet unconvinced, that these areas can be recapitalised. It will happily allow construction and commercial capital to battle it out with the local authorities until sound investment opportunities have been created.”

But, this was not the only subsidy to private capital given by State Capitalism. In 1981/2 the Treasury paid back £5.2 million to local authorities for tax relief and capital allowances on Corporation Tax of 100% on capital expenditure for the construction, extension and improvement of industrial and commercial buildings amounted to £17.5 million. And as Shutt points out, the more successful the zones, the more expensive they become for the Treasury! He quotes the FT for October 18th 1983, which stated that for the ten year period rate relief alone at 1981 prices would amount to £60 million.

But, Shutt was right then, and the same thing applies now, when he said,

“Contrary, then to the rhetoric, enterprise zones are heavily underwritten by the state and the evidence suggests that they are not performing functions which differ significantly from traditional regional policies. They are based on the assumption that 'bribing capital' to shift location and subsidising development costs for construction and finance capital can actually halt the processes of industrial restructuring which is creating chaos in our conurbations and contribute to new job creation. Tinkering with the economic geography of the UK in this way will not solve the long-term crisis facing UK capital. It cannot create the conditions for a new innovative wave, nor can redistribution of local employment into the zones provide a solution to unemployment in the areas surrounding the zones.”

It is, if anything, typical of the general incompetence shown by this Liberal-Tory Government so far, it will be introducing these new EZ's at a time when that structure previously so important for the establishment of them, has itself been scrapped! It is inevitable that despite the stated aim of the Government to scrap QUANGOS, the absence of the RDA's, together with the squeeze on Local Authority financing, will mean that the channelling of State funds needed to establish the zones will have to come through yet another swathe of QUANGO creation.

But, as I said at the beginning, Enterprise Zones then and now were not really intended as a substantial means of creating a vibrant economy, or of solving the problems of deprived Inner City Areas, and high unemployment.
Then and now they performed rather an ideological function for the Tories. The real nature of the Tories has to be understood, to grasp this properly. I have set out previously Engels analysis of the nature of British Capital at the end of the 19th Century.
On the one hand, there was still a large number of small firms, but already by that time British Capitalism was really dominated by a relatively small number of very large firms, if not the kind of monopoly capitalism that existed in Germany and the US. As Engels pointed out this Big Capital had outgrown many of the traits of the small capitalist enterprises that dominated the earlier part of the century. Its use of large amounts of Capital equipment to back up an increasingly educated workforce, meant that Surplus Value was no longer extracted by the means of penny-pinching, and cheating of the small-capitalist, but the far more effective means of the extraction of Relative Surplus Value. The concomitant of that was large-scale production, long production runs, relatively stable market conditions, and relatively stable labour relations. The introduction of Universal Male Suffrage towards the end of the 19th Century was a part of this socialisation process of Labour, along with the new relation that the bosses forged with the Trade Union bureaucracy around the acceptance of, and incorporation of Collective Bargaining. In other words, the big bosses themselves adopted as Engels suggests the kind of ideas of “Social Democracy” that ran through the Labour Movement itself. Its manifestation in the US was "Fordism". It had the advantage for them, that the kinds of regulations that this imposed on all employers could be accommodated by the bigger Capitalists, but placed considerable burdens on their smaller brethren. As Engels points out, in doing so, it facilitated the process of consolidation, and centralisation of Capital that was taking place already.

In the US, that was manifest, because the two bosses parties, in fact, reflect this split. In Britain it was essentially reflected in the two bosses parties – the Liberals and the Tories. When the Liberals, who originally represented the free market industrialists as well as the working-class, were replaced by the Labour Party, it was only natural that the Capitalists of all stripes should see the remaining bosses Party, as their Party, rather than the Labour Party. And, for much of the twentieth century, the Tory Party did indeed continue to fulfil that function as a bosses party, but one that operated still on the basis of what were essentially social-democratic principles.
It was Neville Chamberlain that drew up the basic ideas of the Welfare State, and after WWII, Tory Governments made no real attempt to roll back the nationalisations of the Attlee Government, and certainly not the principles of the Welfare State, by which the Capitalist State fulfilled its function of ensuring the reproduction of labour power. The term “Buttskillism” was adopted to reflect this fact, being the conflation of the names of Tory, R.A. Butler and Labour leader, Hugh Gaitskill. It was only with the onset of the Long Wave Slump in the 1970's that this began to change. Even then, inside the Tory Party of Margaret Thatcher there was considerable opposition to her policies, from what were termed the “Wets”, i.e. essentially those Tories who continued to believe in that old Social-Democratic consensus. Nor was support for Thatcher's open class war policies unanimous from within the ranks of Capital either. But, the Capitalist class does represent a class as against Labour, and the Tory Party continues to be its political representative. Yet, as Engels noted, that class is far from homogeneous, its interests far from being undivided. The Tory Party represents like all parties a coalition of views and interests. The majority of its members are comprised of those very small capitalists, whose penny pinching methods Engels set out as having been discarded by the Bigger Capitalists, as well as by the middle class, and aspiring middle class elements from within the backward sections of the workers and petit-bourgeoisie. This coalition of views within the Party is only a microcosm of the electoral coalition it needs to mobilise in order to ensure that it can gain a Parliamentary Majority. In fact, Peter Hitchens was probably correct when he said recently, that the Tories are probably incapable now of mobilising such a coalition of votes on their own, which is why they need the Liberals. But, they can only mobilise such votes if they appeal to those small minded views, and the interests of those elements, and without the ability to win Parliamentary majorities they are no use to Capital as a whole.

In the 1980's Thatcherism worked because it was able to mobilise that electoral coalition, whilst being given freedom of movement by Big Capital, which was facing its own problems resulting from the Long Wave slump, and the problems of resolving those problems via the extraction of further Relative Surplus Value.
The nature of the crisis following the Financial Meltdown is providing Cameron with similar conditions today, yet the reality is that globally the world economy is in a Long Wave Boom. In reality, the ideological basis of Cameron's policies are contradictory to the interests of Big Capital today. That can be seen by the demise already of some large companies such as Connaught that are a direct result of those policies. Many other firms dependent upon the Public Sector for contracts within construction and through to ICT, are also being hit badly. But, even in the High Street, large firms are also suffering from the Liberal-Tory policies and are saying so. The latest example is Dixons, who as the FT here reports made clear that its dramatic fall in sales of 11% in 11 weeks, was a direct result of Government policy.

"It cited the “chilling” effect of public sector workers waiting to hear whether they would lose their jobs."

"John Browett, chief executive, said: “The issue ... at the moment is more to do with mid-market families who maybe have somebody who works for the government, or both people who work in government.”

"“Areas with heavy reliance on government employment are the most difficult markets.”

Source: FT.Com

But these policies are being driven firstly because of the nature of the Tory Party itself, and because of its need to appeal to its electoral base. Enterprise Zones are merely a reflection of that. As stated earlier they have absolutely nothing to offer Big Capital. But, they do fulfil another function, just as they did in the 1980's. That is as an ideological battering ram.

Back To Part 2

Forward To Part 4

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