Blue Labour, in line with its petty-bourgeois, nationalist ideology is seeking salvation by returning to the ideas of deregulation, previously advocated by the likes of the Miseans, and manifest in the short lived government of Liz Truss that represented the high-point of that trend in Britain. It was, of course, portrayed by the likes of Truss, and the Miseans, as one of the “benefits” of Brexit, to be able to “take back control”, and turn Britain even more into a casino economy, rather like the days of Batista's Cuba. It is, as with Thatcher, in the 1980's, where petty-bourgeois reaction meets, conservative social-democracy (neoliberalism).
In the 1980's, Thatcher began as a continuation of that conservative social-democracy, hence the initial enthusiasm for the development of the EU single-market, seen as a means of creating a much larger market, with common rules and regulation (a level playing field for capital), and so, also, considerably reduced costs that would boost profits, and, thereby, the revenues of the owners of fictitious capital (dividends/interest and rents). But, by the end of the 1980's, the growth of the petty-bourgeoisie, and its increasing social weight, began to be seen in the Tory Party, and Thatcher, who had championed the ideas of Hayek, as a means of undermining the position of workers, and forcing employers to confront them, was driven, inevitably, into its logical extension. The battle raged on in the Tory Party, from then to today.
As Marx and Engels described, even 150 years ago, planning and regulation is not some anathema to large-scale capital, but is central to it. It is what distinguishes that large-scale capital from its immature predecessors, whose remnants linger on in the form of the small private capitals, family businesses, and self-employed, i.e. the petty-bourgeoisie. In the late 1980's, as productivity rose sharply, as a result of the microchip revolution (itself a response to the crisis of overproduction of capital of the 1970's), it caused a huge jump in the rate of profit, as wages fell, with labour being replaced. The value of constant capital dropped massively, as a result of rising productivity, and fixed capital suffered a huge moral depreciation. Not only did a smaller proportion of current output need to go to replace the consumed constant and variable capital (a release of capital), but also meant that any given amount of profit would buy an increased quantity of both of constant and variable-capital, Marx's definition of the rate of profit. It meant that realised profits hugely exceeded the requirements for capital accumulation. Interest rates, inevitably fell, and so asset prices rose.
With labour being replaced, and wages falling, aggregate demand was constrained, and only sustained as a result of a huge increase in the availability of credit. Household debt rose astronomically, not just in Britain, but in the US too, and that was accompanied by further growth of debt of these economies, as deindustrialisation saw a shift of material production to Asia and elsewhere. In both the US and UK, under Reagan and Thatcher, respectively, credit controls were removed, and financial regulation was scrapped, setting the conditions for an even bigger growth of debt, but also, for financial speculation that blew up the asset price bubbles in property, shares, bonds, and an exotic and growing array of derivatives based upon them. It was the foundation for the financial crises of 1997, 1998, 2000, and 2008.
As with the 1929 stock market crash, which resulted in the introduction of the various financial regulations and credit controls that were scrapped in the 1980's, the 2008 global financial crash, and need to bail out the banks and financial institutions, led to the reimposition of some tentative regulation, but a ruling class that had become addicted to capital gains on its already inflated paper wealth, rather than the revenues (interest/dividends, rents) it obtained from those paper assets, could not countenance any severe restrictions that would prevent those asset prices from being further inflated, as central banks pumped increasing amounts of liquidity into them, via QE, and governments constrained economic growth, via austerity, to prevent the underlying rise in the demand for capital from causing interest rates to rise.
Conservative social-democracy, which bases itself on the interests of that ruling-class, and its form of property – fictitious-capital – as opposed to progressive social-democracy, which bases itself on the interests of real, socialised industrial capital, pursued that course, not only under Thatcher, and then Major, but also under Blair and Brown. The same was seen in the US, and across the EU, and Asia. But, as I have set out, elsewhere, it had a very definite shelf-life, and sowed the seeds of its own destruction. The warning shock came in 2000, and was followed by the global financial crisis of 2008, which spelled its end.
The ruling class, and its conservative socal-democratic representatives had no solution, other than ever more surreal injections of liquidity to devalue currencies, and inflate asset prices, as well as an obvious undermining of real capital itself, via austerity and other methods of reducing economic growth, trade and capital accumulation, so as to restrain the demand for capital, and so interest rates. All of them, eventually failed to achieve that end, even the physical lockdown of economies, on the pretext of COVID, which itself had the consequence that governments felt impelled to provide income replacement schemes, financed by even more liquidity injections, which destroyed currencies even further, producing not just an inevitable commodity price inflation, but also, a surge in demand, and demand for additional capital, once the lockdowns had to be lifted.
The ruling class has run out of road, but the working-class, the collective owners of real socialised capital, neither understands its position as owners of that capital, nor yet has the class consciousness to demand its rightful control over it. It certainly lacks any mass workers' party able to represent its interests in that regard. It has been left in the old position of trades union consciousness, simply bargaining within the system, albeit, now, in conditions far more favourable than over the previous 40 years, as a result, now, of a growing relative shortage of labour.
A lot has been made of the fact that earnings have not been rising, but, as I have set out, previously, Marx describes the way that, initially, whilst hourly wages do not rise, certainly not in real terms, those wages do rise, because workers work more hours, including overtime, and, as employment rises, more members of households are employed, bringing in additional income. So household income rises, even while individual hourly wages may not. That is what happened in the 1950's, and early 60's.
A look at the US, shows a clear distinction in how Democrat voters – mostly wage workers – viewed the state of the economy, as against Republican voters – largely petty-bourgeois. Democrat voters saw the economy as having done much better than did Republican voters, and that is explained, not because of a political bias, of one group looking through rose-tinted glasses, as compared to the other. It is a reflection of the fact that, in conditions of a growing relative labour shortage, wage workers have, overall, seen an improvement in their household income, whereas the petty-bourgeoisie, the small business people, self-employed etc., have seen a clear deterioration.
The petty-bourgeoisie cannot take advantage of labour shortages to increase its income, because its income dos not come from wages, but from the sale of its goods and services. While increased demand has meant it sold more, inflation has raised its own production costs even more. What is more, in so far as it employs a small number of workers itself, it has seen the wages of those workers rise, raising its costs, and squeezing its small profits even further. It is that petty-bourgeoisie that turned out for Trump, whilst the Democrats, who were seen, under Biden/Harris, to repeatedly intervene on behalf of big capital to force workers back to work, and to accept contracts, at the same time as siding with racist cops, and a Zionist genocide, failed to turn out 12 million of their voters.
Those same processes are seen in Britain and Europe too. The consequence is far more pronounced in Britain, as a result of Brexit. Britain no longer has the protection of the EU, has cut itself off from its largest market, further increasing its own costs, and is 3,000 miles away from the US, making any thought of it becoming the 51st state, or benefiting from any potential trade deal with it, impractical.
The obvious solution for Britain is to re-join the EU. The Governor of the Bank of England, has said that Britain should try to get closer to it, but as James O'Brien, commented, after his speech, exactly what does that mean? Its like leaving a club, and then asking to still use its facilities.
If Britain wants the benefits of the single market and customs union, then, its necessary to join them, and that means accepting the terms of membership, and all the rules and regulations. But, then, why do that, but not be part of the EU itself, so as to have a say in formulating those rules? But, Blue Labour has set its face against any such approach. It is set adrift, and the consequence is seen in the fact that, having taken over an economy that was growing, it now presides over one that has stagnated, since it took office, and, in September, has actually seen GDP fall! That is disastrous for a government that set all of its eggs in the basket of economic growth, as the basis of its entire programme.
The Tories, of course, claim that it's Blue Labour's tax policies that are to blame. Yet, Blue Labour has failed to actually implement any kind of real tax rises that could have provided it with the revenues to finance its meagre programme for investment in infrastructure. As I wrote before the election, it is somewhat constrained in that, again, precisely, because of Brexit. Large firms facing higher taxes in Britain can simply move to the EU, whereas there is little benefit in such firms already operating in the EU, moving to Britain, even if they face higher taxes in the EU, simply because it is a much bigger market, and the costs of business are much lower, offsetting any marginal tax differences. The position in respect of wealth taxes on individuals, is even more acute, as such individuals, can move anywhere in the world to live.
So, its no surprise, therefore, that Blue Labour has reached for that old petty-bourgeois ideology of deregulation once more, as it seeks to finance its plans without raising taxes. Speaking to bankers, Rachel Reeves said that the regulations introduced after 2008 were now too much, despite the minimal nature of those regulations. The same petty-bourgeois approach has been seen in Blue Labour continuation of the Tory policies in respect of Free Ports and so on, where all sorts of cowboys can set up, and avoid even the most minimal regulations.
Blue Labour's proposals for pension funds have all the hallmarks of what happened prior to 2008, in respect of the creation of mortgage backed securities, and other such investment vehicles. The idea of the MBS was that, by packaging a large number of individual mortgages into one security, the small number of individual mortgages that were high risk (that turned out to be the mortgages given to people who had no means of ever repaying them) would be balanced by a larger number of very safe mortgages, so that a bank or other speculators could buy these MBS, thereby, providing the finance to the mortgage companies who would then be able to hand out a much larger number of mortgages. Its what bookies do when they lay off big bets to a series of other bookies.
The sub-prime crisis showed the problem with that. When interest rates started to rise, in the early 2000's, as the global economy grew rapidly, and the demand for capital rose, all of those sub-prime mortgages started to default. When property prices, also fell, the mortgage providers couldn't even get back the value of their loans from selling the house, and the more houses went into a fire sale, the more it depressed property prices further. Eventually, it became apparent that the “good” mortgages, within the MBS were overwhelmed by the bad. The rest was history.
Blue Labour's proposal to create much bigger “mega” pension funds, in itself, is unobjectionable. Bigger funds, mean that overhead costs of administering the funds, and so on, are proportionally less. It does mean that, such larger funds can play the averages, so as to put money into some higher risk ventures, with higher returns. But, the experience of 2008, and of the MBS etc., shows the risks. Another example is that of the Co-op Bank, which took over Britannia Building Society, which also had made a lot of bad loans to people to buy property. These were institutions we were told belonged to their members, and yet the Co-op Bank went bust, and subsequently, it was seen that it had engaged in behaviour that its members, and certainly its workers, would never have condoned, if they had actually had democratic control over it.
There is a good reason that the large majority of ordinary workers who put their savings into ISA's, each year, put most of that money into cash ISA's, rather than into the share or bond ISA's, despite the fact that the latter provide higher returns. It is that they have seen the earlier periods of such higher returns on shares and bonds, which, then turned into large capital losses. Indeed, one reason that regulations were put in place to require pension funds to put money into long-term government bonds, was to ensure a safer long-term source of them funding future pension liabilities. The other reason was, of course, that at a time when those bonds, were themselves over priced, as a result of QE, it pumped further liquidity into them, in the hope of preventing a fall in their price. If workers had control over their pension funds, which, of course, they should, it might well be the case that they would put some of that money into some more risky ventures, but they would ensure that such risk was minimised.
Moreover, workers have a reason to use such funds to actually invest in real capital accumulation, as opposed to what most pension funds and other financial institutions do, which is simply to buy the shares or bonds of companies. The vast majority of the money that goes into the purchase of such shares and bonds, is not used to finance real capital accumulation. It simply changes the ownership of existing paper assets, and acts to push up their price. Workers, by contrast, would have an interest in using the money in their funds to directly finance the purchase of real capital, i.e. the building of new factories, offices and so on, as well as machines, materials, and labour-power.
That real investment is, in fact, anathema to the financial institutions, because it directly produces economic expansion, drawing additional liquidity into the real economy, and away from financial speculation. When the financial institutions, and press talk about “investment”, what they really mean is not investment at all, but only the purchase of financial assets, i.e. gambling on the prices of those assets rising.
Of course, Reeves and Blue Labour are not going to propose giving workers their rightful control over their pension funds, any more than they are going to give them their rightful control over their socialised capital. Reeves simply wants to use the hundreds of billions in those pension funds to finance her governments spending plans, with workers having no say in the matter at all. The media have claimed that the state stands behind these local government pension funds, but that is not true. Like any other company pension fund, both employer and worker pay into them, and the money is managed via a board, and “invested” into various financial assets, usually via a financial institution. The future pensions are paid out of the fund created by these investments, not by the state. However, if Blue Labour seeks to pressure, in some way, these new mega funds to finance more speculative ventures, workers would have every right to demand that the state underwrite any losses sustained as a result of it.
The contradictions in Blue Labour's agenda become more obvious each day, as it pursues that petty-bourgeois, nationalist programme. The Blair-right, former advisor John McTiernan, the other day, caused some concern in the ranks of Blue Labour, when he responded to the whining of small farmers about losing some of their tax advantages, in the budget, by saying that the government should treat them in the same way that Thatcher treated the miners. Such straight talking is not the method for Blue Labour, especially as it talks out of both sides of its mouth, in order to lie to each component of its shaky electoral coalition simultaneously. But, of course, McTiernan is basically correct. The Tories, and the petty-bourgeoisie are quick to point out that workers cannot expect the state to keep them in work, in industries that are not profitable.
Brexit, which many small farmers backed, as with many small fishing businesses, have, now, found the reality of the consequences of that action. But, also, those small farms, and fishing enterprises, are not rational, efficient businesses anyway. Just as many other small businesses disappeared over the last 200 years, because they are not competitive compared to large-scale capital, so too that applies to farming and fishing. They have been kept going by the state, and, indeed, by the EU, via the CAP, where most of them should have been merged into much larger businesses long ago.
No comments:
Post a Comment