Blue Labour Will Fail, Prepare For It Now - Part 5 of 10

Social-democracy is based upon socialised capital, and its function is to promote the interests of that capital, as the dominant form of property. That socialised capital requires the same kind of planning and regulation that applies in its own operation to the economy as a whole, and that is the function of the social-democratic state. But, the social democratic states that have been created, over the last century, as the political regime of imperialism, are also faced with a contradiction. The ruling class, more than a century ago, became a ruling class of owners not of real industrial capital, but of fictitious-capital. That was an inevitable consequence of industrial capital becoming socialised capital, i.e. the collective property of the associated producers (workers), as Marx described it, in Capital III, Chapter 27.

Except in the worker cooperatives, the workers, however, do not exercise control over their collective property. Control resides with shareholders. For most of the last century, that did not matter. Shareholders, like bondholders and other owners of interest-bearing capital, obtained their revenues as interest payments on the money they loaned. The more industrial capital expanded, and produced more profits, the more it was able to pay from these profits as interest payments. Capital accumulation, which is fundamental to real industrial capital, was also the route to higher payments of interest. Ever larger levels of fixed capital expenditure required ever larger regulated markets, and stability, which required the development of multinational economic blocs, like the EU.

In the post-war period, in Britain, both Conservative and Labour Parties were essentially social-democratic parties, as were the Republicans and Democrats, in the US, and their international equivalents, although all such parties are coalitions, reflecting a spectrum of class interests and ideologies. In the late 1980's that changed. Firstly, the crash of 1987 seriously impacted the paper wealth of the global ruling class, as it saw the prices of its shares drop by 25% in a day.

The crash itself was the product of the fact that, in the years preceding it, a surge in the rate of profit, arising from a huge moral depreciation of capital, produced by the new technological revolution, combined with a massive release of capital, in conditions of intensive accumulation, and stagnation, caused interest rates to fall, and asset prices to rise. It was compounded by the fact that, conservative governments in the US and UK, in particular, encouraged a huge rise in household debt, to offset falling wages, so as to maintain levels of consumption, and aggregate demand.

When global financial markets crashed, it created panic, and it was only ended when the Chairman of the US Federal Reserve, Alan Greenspan, acted to cut official interest rates, and increase liquidity, thus initiating the period of what came to be called “The Greenspan Put”, whereby markets could count on the fact that, whenever asset prices fell, the central bank could be counted on to intervene, and push those prices higher again. That was a completely different condition than existed with the financial crises of 1847 or 1857, or even with that of 1929, when asset prices, having crashed, took decades to recover. The Dow Jones did not recover its pre-1929 crash level until the 1950's, for example. The consequence of this was that the ruling class, which now owns its wealth, exclusively, in the form of this fictitious-capital, increasingly, became concerned with not only preventing any fall in the value of that capital, but with seeing the kind of annual increase in its value, experienced in the 1980's, and 1990's, continue.

That was compatible with an increase in all of those social-democratic measures of planning and regulation of the economy, and extension of the borders of the state to ever greater distances, as with the expansion of the EU, because what that did, even without additional capital accumulation, was to rationalise the operation of capital, to reduce overhead costs and frictions, and, thereby, to raise profits and the rate of profit, including by raising the rate of turnover of capital. The idea of increasing the mass of profit, and rate of profit, without having to significantly, in proportion, raise the level of capital investment, was the holy grail for a ruling class of owners of fictitious-capital, because the price of their assets depends upon two things: first the amount of revenue (interest/dividends) those assets produce, and second the rate of interest. The first is a function of the mass of profit that industrial capital produces, and the second is a function of the balance of demand and supply for money-capital.

Reducing overhead expenditures does not increase the amount of surplus value produced, because that is a function of the mass of productive labour employed, and the rate of surplus value, but it does increase the amount of realised profits. Firms have to employ unproductive labour, as a necessary cost of realising their profits. The more they can reduce that expenditure, the greater their realised profits, which is why they utilise, commercial capital, for example, which carries out these functions on a larger scale, and enjoys economies of scale. The EU represented a huge benefit for large-scale capital, in reducing these overhead costs, and so facilitated a rise in the mass and rate of profit, including by speeding up the movement of goods and services, a rise in the rate of turnover of capital, and rise in the annual rate of profit.

That is why, not only the interests of real industrial capital (collectively owned by workers), and of the ruling class (owners of fictitious-capital) was damaged by Brexit, as it is with other similar measures of protectionism, and attempts to roll back globalisation. But, these measures were also part of a wider process. First, this was a means of increasing profits without the accompanying increase in capital accumulation, which meant that the slower growth of the economy continued. In particular, there was a slower growth of large-scale capital, especially as a lot of manufacturing activity shifted to other parts of the globe, where a higher rate of profit was available from employing large reserves of cheap labour that was migrating from rural areas to the towns and cities.

In developed economies, that slower growth of large scale capital, opened the door to a faster growth of small scale capital, and very small scale capital, particularly in the old urban industrial areas, where former industrial workers, faced long-term unemployment, or precarious employment, or becoming self-employed, petty-bourgeois producers themselves.

This reversed the long-term trend, identified by Marx, of the continual shrinkage of the petty-bourgeoisie, as it was forced out of business, and into the ranks of the proletariat. All of those elements of the petty-bourgeoisie that had formerly been the foot-soldiers of the Conservative Party, but subordinated to its dominant echelons that catered for the needs of big capital, and the ruling class of shareholders, now found their social weight increased mightily, and it found its reflection in an upsurge of petty-bourgeois, nationalist fervour, whose culmination was Brexit, just as a similar process unfurled in the US leading to the Tea Party, and then, Trump.

The petty-bourgeoisie has become big enough to capture conservative parties, and form an electoral coalition to win elections, but, it can never form the ruling-class, and its interests can never be those dominating the state. Hence the heightened contradiction over the last decade, or so, both in the UK and US, in particular. It adds another facet to the contradiction also facing Blue Labour that has tailed that reactionary, electoral coalition, into that dead-end.

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