Especially in conditions of
“deindustrialisation”, in western economies, this rise in asset prices, and availability of cheap credit, increased by the
abolition of credit controls and financial regulation, in 1986, facilitated the financing of continued consumption, even as
real wages stagnated. The idea that
“wealth” could be simply created out of thin air, by printing
“money” (in reality only
money tokens) attempted many times in history before, with disastrous consequences, took hold, not just amongst the population, but amongst politicians too.
Many years ago, I wrote about my experiences of talking to Blair-Right politicians who lauded the fact that all of this easy money was enabling hundreds of thousands to
“buy” houses they could not afford, and that the subsequent
inflation of the price of those houses was making them rich. I told them it could not last, and a couple of years later, it ended. One effect, today, is seen in the fact that young workers, even with low
interest rates, can't afford houses, and prisoners released early from gaol, can't find affordable housing, and so, are led to re-offend, to get a roof over their head back in gaol.
In the 1960's, as
relative wages rose, and real
capital expanded, the result was also that interest rates rose, and asset prices fell, but it was hidden by two facts. Firstly, economic growth was, itself, occurring, but secondly, the state created inflation, so that, although asset prices fell in real terms, they continued to rise in nominal terms. It stored up trouble for later, as broke out in the stagflation of the 1970's, and early 80's, but, it smoothed the path, in the 60's, and early 70's. The reality is that real capital is currently driven to expand, as a consequence of
the long wave cycle. It is that, which led to the 2008 GFC, as interest rates rose, causing asset prices to crash. Only by the most extraordinary measures, after 2010, has that drive for real capital expansion been suppressed, using a combination of fiscal austerity, and even greater liquidity to funnel money into asset markets and away from the real economy. One consequence of that has been an even greater relative advance of China, in relation to the western economies, which itself is now fuelling the desperate attempts to constrain it, by US imperialism and its subordinates.
So, we are back at the reality described above, and which I set out after 2008, that the conditions that enabled the ideas of the
Third Way/neoliberalism/conservative-social democracy to dominate, in the twenty years prior to that, have gone. Since, 2008, the attempt by governments to act as though they have not has led to increasingly surreal conditions, such as, at one point, $20 trillion of global bonds having negative yields, as a result of QE by central banks, to buy up worthless paper. It led to the implementation of austerity to slow down economic growth, and capital accumulation, as well as to the introduction of protectionist measures, such as Brexit and Trump's global trade war, continued by Biden. When even that failed to prevent global trade and growth expanding, after 2018, economies were locked down, on the basis of a response to COVID, that was totally irrational, and based on a lie, as
Professor Woolhouse noted. But, as I wrote at the time, whilst lockdowns slowed economies, and enabled another huge rise in asset prices, they had to end at some point, and the result would be that the huge mass of liquidity injected by central banks would lead to a huge rise in inflation, as, indeed, it did.
The options, then, have closed. Blairism/neo-liberalism is no longer possible. It means ever more surreal conditions on the basis of QE, which, also, requires fiscal austerity alongside it, to prevent economic growth, capital accumulation, and inflation. Those policies, also mean that, as
large-scale capital is constrained, small private capital fills the void, expanding the size of the petty-bourgeoisie, whose own production is inefficient and is the basis of the low levels of productivity in the UK and other economies. It also means that other developing economies fill the void, diminishing the power of the imperialist economies, and leading them to try to respond to that with even more mercantilist and protectionist measures, such as Brexit, now pursued by Blue Labour, as well as by Trump/Biden/Harris. As always, such trade wars lead to shooting wars, as now seen, also, in relation to Ukraine and the Middle-East, as US imperialism seeks to assert its dominance.
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