Chapter 7 – Conservatism
These material conditions underpinned the conservative ideology that assumed dominance during this period, from the 1980's onwards. However, they also sowed the seeds of its own destruction. The more asset prices rose, for stocks, bonds and property, the lower the yields on those assets became, requiring that either profits rose by ever larger proportions, in order to produce ever larger amounts of dividends, interests and rents, or else that an ever larger proportion of profits went to pay dividends, interest and rent, so as to maintain yields, thereby reducing the proportion of profit available as profit of enterprise, to be accumulated, and consequently slowing growth, and the potential for future profits. As Andy Haldane at the Bank of England pointed out, in the 1970's only 10% of profits went to pay dividends, but has risen now to around 70%, and Hillary Clinton pointed to similar figures for the US.
Moreover, with the idea taking hold that it was asset price inflation, and capital gain, rather than production, which was the source of the wealth of nations,the owners of loanable money-capital became more likely to use it for such speculation (buying existing stocks, bonds and property rather than financing real capital accumulation from new stock and bond issues) than to use it productively, in the way that Marx refers to in the quote cited earlier. Similarly, the representatives of this fictitious capital, of the shareholders in particular, the CEO's, saw the potential to flatter their own performance, and to boost their own capital gains on their share options, by diverting realised company profits away from real capital accumulation, and into that same speculation, buying back company stock, and thereby pushing up the nominal earnings per share, and the share price.
And the owners of landed property similarly became more interested in speculative financial gain from rises in land and property prices than in the receipt of rents. Hence the large numbers of properties in London, built and left empty, the retention of land banks by big building companies and so on. The former speculation in financial assets is facilitated by a near monopoly of ownership of such fictitious capital, by less than 1% of the population, the latter by a similar monopoly of land ownership, facilitated by other monopolies over land use, imposed by grossly restrictive and outmoded policies such as the Green Belt.
This is what determined the topography of the economic, social and political landscape. Old manufacturing industries that had employed large amounts of unskilled and semi-skilled labour-power had either disappeared altogether, having moved to Asia and other low wage economies, or else had become transformed by high levels of mechanisation and robotisation, so that they now produce higher levels of output, but with much less labour. It became harder for unskilled and semi-skilled workers to find secure, well-paid employed in developed economies, as the demand for that kind of labour-power had shifted to other parts of the globe.
It was not that the jobs of workers in the US, UK etc. were somehow stolen by workers in these low wage economies, The global working-class more than doubled in size from the 1980's to today, and has grown by a third since 2000 alone. It was that a new international division of labour arose. The old jobs in the developed economies, in mining, steel production etc. will not return, as Trump et al promise, because any increase in that production that may occur will come from even greater mechanisation and robotisation.
The rise in demand for labour-power, in the developed economies was for better educated and skilled labour. Even with high levels of general unemployment, causing the wages of unskilled and semiskilled workers to stagnate, there appeared shortages of skilled and educated labour, causing wages to rise, and thereby creating a widening gap in those pay differentials. It led Federal Reserve Chairman, Alan Greenspan, to call for much greater attention to developing US education. In the UK, Blair raised the idea of 50% of people going to university.
But, there was no enthusiasm for paying for such educated and skilled labour, especially when cheaper, more immediate solutions were to hand. The UK adopted the same principle as the US, where student debt now stands at over $1 trillion. In other words, it shifted the onus for producing educated and skilled labour-power away from the welfare state, via fiscal policy, and on to the individual worker, via debt. Student grants were abolished, and tuition fees introduced.
Simultaneously, the shortages of educated and skilled workers was addressed by simply importing that labour-power, ready made from elsewhere in the globe. Its often forgotten that the reason Britain began to import Polish plumbers, in the early 2000's, was that a shortage of plumbers and other such craftsmen had sent wages for such labour-power soaring, leading to workers in professions such as teaching, re-training, so as to jump on that bandwagon. Two million EU workers came to Britain during that period, but the economy during that period enjoyed full-employment.
In the US, as this report, from the Brookings Institute shows, high value jobs, in the advanced industries have been at the forefront of the demand for labour-power. And, an article, by Forbes, indicates that it is not just among white collar workers in these high value areas that this growth in demand has occurred.
The gap between a generally younger, and better educated section of workers, and a generally older, less well educated section of workers, is the real division running across society, as opposed to the myth of the metropolitan elite. But, this division is affected by other factors too.