Tory Short-termism

The British ruling class is renowned for being short-termist. The Tories are emblematic of it.

The landed aristocracy, knowing that any improvements that capitalist farmers introduced to the land, would be appropriated by them as soon as existing leases ran out, increasingly sought to turn all leases into short term rentals. The consequence was that capitalist farmers were thereby dissuaded from making improvements, and investing  capital in the land, which would have raised output and productivity.

In the early 19th century, when machine industry, driven by the introduction of large numbers of steam engines, replaced handicraft production, the huge expansion of production drew in millions of workers from the countryside into squalid conditions in the towns and cities, but the incentive for the individual capitalist owners, driven by competition, to make the most intensive and extensive use of these machines, drove them to work their labourers for excessive amounts of time. The workers were, in fact, their most valuable resource, the basis for the creation of new  value, and of their profits . But, the employers, seeing what they thought was an inexhaustible supply of this  labour-power, paid it no heed. Only when that supply of labour-power started to be exhausted, did the employers begin to realise the need to put some kind of regulation on their competition, and abuse of that resource. Even then, it was the action of workers through their Trades Unions, and the representations of the officials of the capitalist state, such as Leonard Horner, and other Factory Inspectors that provided the main drive that forced the individual employers to set aside their individual interests, in favour of the general interest of their class.

Some of the penny-pinching measures taken by these individual employers, during this early period, did not even make any sense. For example, Marx relates one Inspectors' Report which showed that firms were failing to put guards on machines that cost just a few pence, but which would save them pounds in lost production due to injuries to the machine operators. Only when new machines were introduced, which had the guard already built in, did that problem get resolved.

When it comes to shareholders, the problem of short-termism is again apparent. Andy Haldane, the Chief Economist at the Bank of England, has talked about capitalism eating itself, as the representatives of shareholders on company boards have pushed up the proportion of profits taken as dividends from around 10% in the 1970's, to around 70% today. Hillary Clinton, a couple of years ago, discussed the same problem in the US, which she called, Quarterly Capitalism, as these same executives representing the interests of shareholders, prioritise pushing up the share price, the payment of dividends, etc. over investment in, and the future growth of the company.

Shareholders have little interest in taking a long-term view, particularly when they are nowadays more concerned with the potential for making short term, capital gains, from rising share prices than obtaining a  revenue stream from the shares they own. The most obvious example of that is high frequency trading, whereby machines buy and sell billions of shares in a fraction of a second, making money, from even the smallest variation in the share price of companies. But, in general, when the owners of loanable money-capital can move that  money more or less instantaneously from the shares of one company to those of another anywhere in the world, or can move their money from shares to bonds, and so on, even less is their any requirement for them to have any affinity to any particular company, or country, or its long term development.

The Tories are the political representative of all these groups – the owners of landed property, the owners of loanable money-capital, and the remnants of that class of private industrial capitalists, that linger on in the shape of the small an medium sized private firms. It is no wonder then that the Tories themselves have a short term view, one consequence of which was Cameron's disastrous gamble on the EU Referendum, as a means of trying merely to deal with internal Tory party squabbles. The Tories are led to adopt these short term perspectives consistent with the ideas of the class fractions they represent, as opposed to the interest of the dominant form of capital –  socialised capital – which requires by contrast a long term perspective. Like all bourgeois parties, of course, the Tories are also led to adopt a short-termist perspective, in order to try to win votes, as has just been seen in the Budget, and as was seen in the previous Budget, when Hammond was forced to drop his plans for National Insurance for the self-employed, when it provoked a backlash amongst that particular fraction of Tory voters.

Two different stories in the last week caught my attention, in this context. Hammond made a big thing about proposals for introducing self-driving cars on to Britain's roads by 2021. In fact, as with all new innovations, the real drive to introduce self-driving vehicles will be to reduce the costs for capital. Steam engines were first used to replace water and wind-power, and to replace horses for traction, and only later were used to provide a range of consumption goods, such as passenger trains, and so on. Electric motors first powered sewing machines etc. in factories, before they were used in a range of consumer electronics, and the same is true of the petrol engine. Similarly, the major use of self-driving vehicles – as already on the railways – will be to introduce self-driving trucks, as well as to replace taxi drivers, and van drivers. Self driving electric cars will only become commonplace after that industrial use has been well established. But, for that to happen, the government needs to spend a lot of money on infrastructure for charging points and so on. Even so, I expect the development to be rapid, and we are likely to see electric cars replace petrol cars fairly quickly, and for self-driving electric cars to become commonplace, much more quickly than was the spread of petrol engine cars, during the last century.

Thinking now about the introduction of self-driving electric cars, and the infrastructure requirements that entails is a good start on having a more long-term perspective. But, the other story from last week that makes me question that was a story that the new West Midlands Metropolitan Mayor had supported funds going to Dudley for the creation of a new tram system. But, if you envisage driverless electric cars being on the road by 2021, as Hammond has said, why waste million of pounds on electric trams?

The reason that trams disappeared in the first place, was that like trains, they may be very good at going from A to B, but they are useless at going to anywhere even a few hundred yards either side of the train line between the two. Petrol driven buses were able to overcome that problem, by not being constrained by the need to run on fixed rails, and being able to utilise existing roads. The same is true of cars, which extended that flexibility even further allowing the car owner to take whatever route they chose to best meet their needs. A bus is all very well if its route takes you on the various stops you might need to make, but the practicality of someone going to work in a morning, who needs to take the kids to school in the process, and may need to make a number of other stops, is not at all suited to fixed bus routes, especially as those routes get reduced, and the connections of buses on different routes do not exist without long waits.

Why waste money on trams, when instead the money would be better spent laying down the infrastructure required for self driving electric cars, which as with an Uber, you could simply call up as and when you wanted it, and have it go anywhere, you wanted, by whatever route you wanted, simply by telling it, where to go, and then when you have reached your destination, simply forget about it?

And, of course, the same applies with that other white elephant HS2. HS2 is useless for more effectively transporting freight around the country, and when it comes to transporting passengers, it is again largely pointless. As with a tram, it is fine if you want to go from Manchester to London, which is its real intention, thereby to bring additional workers in to feed the insatiable appetite of the capital for labour-power, and thereby to bring in cheaper labour-power from the North. But, if you want to go ten miles either side of the HS2 route it is as useful as a chocolate teapot. Without large scale investment in East-West transport links, all that will result is congestion along the route of HS2, and there is no sign that the required investment in East-West transport links will be undertaken.

If the government wanted to adopt a more strategic long-term view, then instead of HS2, it would have put much more resources into the development of truly high-speed broadband at least equal to the 1GBPS speeds in Singapore. That is especially the case given that its in services that 80% of the economy now resides.

In the last few months I have had occasion to drive on the M6 to Manchester and Liverpool, and again the consequence of the government's short-termism is apparent. The Tories are fond of talking about mending the roof when the sun is shining, but the truth is that wherever you look in relation to the country's infrastructure, they most certainly have not spent money mending the roof, or the doors and windows, or the roads or anything else whilst the sun of 300 year record low  interest rates have shone on them! Instead they have simply used those low rates to blow up enormous asset price bubbles in property, and stock and bond markets. The roads and motorways were neglected for decades, and now the widening of the M6 drags on year after year, causing traffic to crawl along it at a snail's pace.

If you want an explanation for Britain's stagnant productivity, the queues of static lorries along the M6 are emblematic of it, and with Brexit those queues of lorries will not just extend along the motorways, but back for miles from the ports and airports.