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.
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