Despite all of the austerity and attempts to divert money away from the real economy, and into the fictitious economy, as productivity growth slowed, due to the waning effects of the previous Innovation Cycle that peaked in 1985, employment gradually crept higher, and, as it did, the total wage fund expanded, pushing money into the demand for wage goods. As the new technologies, of the previous 30 years, now, began to materialise into ever expanding ranges of consumer products and services, demand flooded into these new areas of production, creating additional employment, some of it highly skilled, such as for computer games designers and so on.
Austerity lost its bite, and even became a spur to such development. By 2018, global growth had expanded sufficiently that interest rates were rising, causing a new 20% decline in US and other stock markets, before central banks, once again stepped in with additional liquidity, and the US engaged in a trade war against China and the EU. Even then, trade found new channels across the globe, reflecting the growing power of the East, of Latin America and increasingly Africa, and dwindling power of North America and Europe.
The consequence was an inevitable accumulation of funds by households, as they received these increasingly worthless I.O.U's, but were unable to use them to buy whole swathes of goods and services that had not been produced, precisely because the government was now paying them to stay home instead of working! That is until such time as they were released from their state imposed house arrest, and able to spend once more, which they have been doing ever since with gusto, continually confounding the prophets of doom who foretold of a slump of historic proportions following the ending of the pandemic. Only China's authoritarian regime was able to persist in that nonsense, to try to prevent its economy overheating, and causing its interest rates to rise, and its serial asset bubbles bursting, but the population there, too, grew impatient with it, and has forced the Stalinists to abandon the lockdowns.
The picture that Martin, then presents, simply doesn't fit reality. He says,
“The high interest rates of the 1980s, and the corresponding high revenues of banks and financiers then, appeared to fit neatly with an increased weight of finance within the capitalist class. But then from the 1990s high finance was able to continue high revenues, scooping up its cut through fees and so on, both from firms and from households, with relatively low interest rates.”
But, as set out earlier, the 1980's was not characterised by high rates of interest, but by the high rates developed in the 1960's and 70's, starting a long secular decline. Nor was it just real rates of interest that declined, but it can be seen by looking at the movement in the yield of the US 10 Year Treasury Bond.
Why was that, its precisely because the rate of profit surged, and huge amounts of capital was released by the technological revolution brought about in response to the previous labour shortages. Firms had huge amounts of money profits available to use to fund capital accumulation, but required a smaller proportion of it, because the new fixed capital they introduced, was far more productive, but also, frequently, cheaper than the fixed capital it replaced. Personal computers, introduced in the 1980's, costing a few hundred pounds, had as much power as a 1970's mainframe computer, costing £2 million!
So, firms could throw excess profits into money markets, causing the supply of money-capital to rise relative to demand, and so sending interest rates into a downward spiral. But, the ruling class, whilst not owning the socialised industrial capital, does own shares, and has been careful to ensure that, everywhere, company law gives control of companies to shareholders, not to the associated producers that collectively owns it.
Even where the associated producers, as with the co-determination in Germany, are allowed a role, it is essentially a sham. So, firms under the control of those shareholders, simply increased dividend payments to shareholders, even as interest rates fell, and they also simply handed money to shareholders, directly, as capital transfers. The position of the owners of loanable money-capital should have been weak, not strong, because loanable money-capital was in excess supply, and, indeed, in terms of interest rates that became manifest. But, they simply used their control of companies to pay themselves increasing proportions of profits as dividends/interest anyway, as Andy Haldane described.
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