Are The Tories and Blue Labour Neo-Liberals - Part 3 of 10

As real wages rose – especially as married women entered the workforce, and some of those workers' children also started work (at a time when it was usual for children to live with their parents until well into their twenties, when they got married) – so that, instead of a cost to the household, they became additional incomes, workers saw less reason to work long hours of overtime, in evenings and weekends. To get them to do so, in conditions of labour shortages much more noticeable than those of today (the unemployment rate fell to around 1-2%, whereas today, measured in the same way, its around 6%), employers had to offer much greater incentives, and premium rates of overtime pay. That enabled capital and surplus value to continue to expand, but at the cost of a reduced rate of surplus value, and squeeze on relative profits, as indicated by Glyn and Sutcliffe in “Workers and the Profits Squeeze”.

In a booming economy, like that of the 1960's, firms have to invest and accumulate capital, so as to grab their share of this expanding market. But, a growing squeeze on relative profits/profit share, means that, to finance this capital accumulation, they must either borrow more from capital markets, or else use more of their profits to finance that accumulation, rather than throwing that money into the capital markets. Either way, the demand for money-capital rises relative to the supply, and consequently interest rates rise. Rising interest rates, as Marx describes, cause asset prices to fall, via the process of capitalisation. Higher rates of interest cause land prices to fall, and, consequently, other property prices. They cause existing bond prices to fall, and as companies borrow by issuing additional bonds and shares, so this increased supply of them causes their price to fall.

Yet, a look at asset prices during the 1960's, and into the 1970's, does not seem to show that. The reason is that, during this process, central banks increased the supply of money tokens/currency, creating inflation. That inflation, on the one hand, meant that, although real wages rose, they did not rise by as much as the rise in nominal wages rose during that period. That was one means by which capital was able to ameliorate the rise in relative wages, and fall in relative profits. But, also, the inflation meant that, whilst asset prices fell in real terms, during that period, in nominal terms, they rose. As I have set out before, a look at the Maudling inflationary boom in 1963, that pushed up property prices, and the Barber Boom, of 1970, were early instances of what became the strategy over the next 50 years. In the US, its position of having the Dollar as global reserve currency, meant that it could finance its welfare state's creation, and its military spending for the Vietnam War etc., by simply printing more Dollar bills, and claiming they still had the same value, i.e. financing it at the expense of other countries, mainly in Europe. That continued until 1971, when Europe, led by France exposed the fallacy of the value of the Dollar, by demanding payment in gold, at the official rate of $35 an ounce.

In other words, during all of this period, the interests of real, large-scale, socialised capital prevailed and it continued to expand, with all of the implications and requirements for increased planning and regulation by the state, quite compatible with the large-scale concentration and centralisation of capital into huge conglomerates that took place during that time, as well as the growth of multinationals, and of the creation of multinational single markets, politico-economic blocs, and proto-states such as the EU. The ruling class of speculators and owners of fictitious-capital had to be content with a rise in their revenues (interest/dividends) made possible by this expansion, even whilst their wealth in the form of those paper assets, fell in real terms. But, that had a limit, and it was reached in the 1970's.

By the late 1960's, the signs of that limit were starting to be seen. Across the globe the subterranean currents and processes repeatedly broke out on to the surface, in numerous social protests. Britain, as the former world hegemon, but which had been deteriorating rapidly for more than 50 years as its position was challenged by the rise of Germany and the US, and then Japan, was simply too small, now, compared, also, to its main trading partners in Europe that had come together in the EEC, and were on their way to creating the EU. The attempts to join the EEC/Common Market, during the 1960's, which finally succeeded in 1973, were a recognition of that reality, as British capital sought to save itself.

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