To misappropriate an early song-title by a semi-famous Scottish indie band, everything flows – from economics.
What may seem on the surface a dry and technical subject actually reveals the beating heart of the political philosophy behind it.
The economics behind Starmerism consists of massively increasing spending on weapons, to be paid for by renewed austerity, and propelling the most vulnerable in society further into destitution and misery.
While, at the same time, asset-stripping the rest of the economy by selling it off to American vulture capitalists.
What flows from this will not be pleasant. It involves entrenching the rule of profit-extracting corporations while impoverishing swathes of the population. Though it will go by a far more benevolent name, this – necessarily buttressed by authoritarian means – amounts to corporate fascism. This kind of fascism will likely creep up on us gradually rather being proclaimed by a march on the capital, an Act of Parliament, or even a general election result.
In such circumstances, the Left doesn’t merely need to get its shit together politically but also economically.
In fact, economics, traditionally the weak point of a Left more concerned with the equities of distribution than the production of wealth, can actually become its strength. This is because though the Starmer government is rhetorically obsessed with achieving economic growth, it is very bad at actually achieving it.
The Doom Loop
Growth expectations from the Office of National Statistics are terrible, and as socialist economist Michael Burke says, without higher growth, living standards will not rise.
Sustainable growth, he says “is an appropriate aim for all economic policy”. The problem for Starmer is that his avowed method – austerity and taxes rises on ordinary people in the context of ramped up state spending on weapons (military Keynesianism) – is, in reality, anti-growth.
The British economy, says Burke, is trapped in a “doom loop” of deteriorating public services, rising government debt ‘necessitating’ more spending cuts which depresses the economy even more. We need to break out of this ruinous cycle and actually achieve growth rather than merely talking it up.
The fundamental question is whether pursing growth by other means is possible, and if it is possible, whether it is desirable.
The economics of the socialist case rest on first of all not massively hiking spending in a drive to war. Money, buttressed by a wealth tax on billionaires, will instead be diverted to public investment in areas like public transport, council housing, infrastructure. At present, under the ‘Labour’ government’s Spending Review, non-defence public investment is set to fall in real terms over the coming years.
But ironically for a political ideology invariably condemned for being ‘anti-business’, socialists aim to reverse the pervasive, and long-term, weak growth of the economy. This will be attempted through methods like the above-mentioned public investment but also through ‘innovations’ like a national investment bank. The aim here is to revive private investment which is at anaemic levels, and has been for a long time. RMT trade union leader Eddie Dempsey recently told the TUC conference: “Corbyn had the right idea — we need a public investment bank funded by seed capital that can drive strategic investment in parts of the economy, where we will build proper unionised jobs, good work that will take the country forward instead of leaving us at the mercy of the money markets”.
Socialist Pro-Capitalism
If it is accurate to estimate, as is frequently done, that capitalists need annual economic growth of 3 per cent to make a decent profit, then ‘socialism’, in attempting to resuscitate growth in the economy, is not anti-capitalist at all, rather the opposite. But I don’t expect enlightened self-interest to become the fashion any time soon.
However, merely correctly understanding the aspiration is no guarantee it will be successful. Many other countries and blocs have public investment banks, but their recent growth record is nothing to write home about. In fact, the Eurozone boasts a worse growth performance than Britain despite the existence of the European Investment Bank.
Even where a public investment bank does have a tangible impact, as seems the case with Brazil’s BNDES, the remaining commercial banks are left free to concentrate on speculation and mortgage lending, which is extremely profitable but merely exacerbates the inherent flaws of the extractive economy where small minorities make huge profits but many people struggle to make ends meet.
That is why some Marxists advocate taking control, as the British Labour party once aspired to do, of the “commanding heights” of the economy which includes nationalising the big, private banks (properly nationalising not merely assuming ‘hands-off’ ownership as the government did with RBS after the financial crisis). This will direct private, now public, investment into desirable areas.
Should we aim for growth?
But we are still left with the basic assumption that economic growth is a good and necessary thing – “an appropriate aim for all economic policy” – even if, in an historical irony, only the Left or radical Left seem serious about attaining it.
However, is growth the goal we should be striving towards? Growth, as the word implies means getting bigger, over time much bigger. Economic growth of 3 per cent a year, a sweet spot for corporate profits, government finances, and personal livelihoods, means the economy doubles in size every 24 years. A little over a decade ago geographer, and Marxist, David Harvey wrote that compound growth means the result will be even more extreme.
Imagined physically, the enormous expansions in physical infrastructures, in urbanisation, in workforces, in consumption and in production capacities that have occurred since the 1970s until now will have to be dwarfed into insignificance over the coming generation if the compound rate of capital accumulation is to be maintained. Take a look at a map of the city nearest you in 1970 and contrast it with today and then imagine what it will look like when quadrupled in size and density over the next twenty years.
It is worth noting that, in Britain, the rate of capital accumulation has not been maintained – an economic malaise that has produced various maladies – but that cities and towns have nonetheless grown “in size and density”. In the context of the government’s huge housebuilding targets, totally reliant on the private sector, they are predicted to do so even more in the coming years. Many British urban areas are anticipated to have virtually whole new towns tacked onto them over the next decade, even if a sputtering housing market means that improbable government targets will not be met. Presumably had the ‘rate of capital accumulation’ been sustained, these urban conglomerations would have expanded even more.
Supporters of the idea that economic growth can be sustainable would counter that it can be directed by the state into beneficial and necessary things, such as public transport and public housing. Futurologist Jeremy Rifkin who predicts the end of capitalism in a ‘zero marginal cost’ society where copies of products can be produced for virtually nothing, believes transitioning economies from fossil fuels and nuclear power to renewable energy “will require millions of workers and spawn thousands of new businesses” (note however that that he thinks this will involve “one last surge” of wage labour and thus growth).
The Chinese Way
But it is stretching credulity to believe that all economic growth can be funnelled towards socially beneficial ends. China, the bête noire of America and the faltering West, presents an example. On the back of high public investment in infrastructure, China has achieved GDP growth rates the West can only dream about and lifted millions out of poverty. But, it was believed, this was bought at a price – exponential carbon emissions and falling life expectancy because of unbreathable air. At the Beijing Olympics in 2008, the Chinese authorities famously manipulated clouds to disperse smog, while life expectancy in northern China was five years below that of the south of the country because of air pollution.
Now, reportedly, such problems have been significantly assuaged because of the Chinese government’s war on pollution – pollution has declined by 42% in nine years, while air quality correspondingly enjoyed a massive improvement. In the face of climate change, China has also made huge investments in solar energy was a result of which the cost of generating electricity from solar has plummeted.
But pollution has not been vanquished. It is still six times higher than the World Health Organisation’s guidelines and in Beijing at about the level of Europe’s most polluted city Sarajevo. And air pollution-related deaths in China are projected to continue to rise despite the improvements.
China also features heavily in the UN’s Red List of endangered species, a fact clearly not unrelated to its high rate of economic growth.
Devil’s Pact
And in the West, where over two-thirds of economic growth can be attributed to consumption, the Left will face an additional problem. If it is to distinguish itself from the corporate automatons in government and opposition, it will not only want to encourage growth in some areas, but restrict it in others. A Left government, if it is worth its salt, will want, for example, to place restrictions on gambling or marketing to children.
It is unquestionable that the health of the UK economy has been significantly impaired by the fact that wages have been held down for years and incomes depleted. ‘Britain needs a pay rise’ as the slogan goes. But should it get one, part of that will inevitably go into becoming the willing prey of profit-driven market forces to an even greater extent. The exploitation of “culturally generated pseudo needs”, though clearly anti-social, has been a crucial element of the economic growth that has been achieved in the West (and elsewhere) in recent years, a chink of light, if you will, in an otherwise gloomy picture. Toxic consumption is a mainstay of the modern economy.
We face a quandary we seem only dimly aware of. In the corporate capitalist economy that we live in, if you don’t achieve economic growth – or only very anaemic growth – the result is misery, poverty, inequality, racism (probably in time fascism), rising public and private debt, and global conflict.
But if you do have growth, while, if it proceeds are equitably distributed, you relieve some of the pressure on individuals and government finances, you just accelerate global warming and environmental degradation, the relentless swallowing up of what’s left of the countryside, and acquiesce in the exploitation of our psychological vulnerabilities to the benefit of obscene corporate profits.
Eventually, actually probably quite soon, you hit a society that may be economically successful but that nobody wants to live in.
In the short-term this devil’s pact is, to varying degrees, in virtually everyone’s rational self-interest. But from a wider perspective it plainly isn’t in anyone’s, barring maybe that of a small, and insulted, ultra-rich elite.
Explaining Donald Trump
But then there is the problem of whether reviving economic growth is even possible – that the Left, if it by some miracle achieves power, will discredit itself in a futile drive to “save capitalism from itself”.
Looked at historically, the only time the capitalist system, in advanced countries, attained sustained healthy economic growth was in the period from 1950 until the mid-1970s – the so-called “thirty glorious years”.
In fact, according to a research group at the University of Manitoba in Canada, the reality may be even worse. Growth in Northern industrialised economies, they argue, has been falling, “with only brief and limited interruptions”, since the early 1960s. If so, economic problems cannot be placed solely at the door of bad policy, such as neoliberalism, or economic trends, like financialisation. The findings, according to the report’s author, Alan Freeman, “shed light” on seismic political developments such as the rise of Donald Trump and the far-right, the implosion of the centre and centre-left, the growth of social unrest, and rising geo-political tensions across the world. But they also indicate that:
… limited measures, whether of a left character such as fiscal and monetary stimuli unaccompanied by state-led investment in new production, or of a right character, notably austerity, but also the free-market economic nationalism of Donald Trump and other such figures, are unlikely to resolve these problems.
Why should this be so? Although, there is no consensus on what led to the post WW2 economic boom, part of the explanation must surely lie in the fact that it was preceded by the most destructive conflict in human history. The Second World War was not only physically devastating, it also vaporized capital value – the mass of money that can be deployed to build up infrastructure or enterprises. Society could, so to speak, begin again.
However, that option is no longer available. In subsequent decades, economic downturns were dissipated by the soothing balm of state intervention and subsidy because, quite rationally, nobody wanted a return to the miseries of the Great Depression of the 1930s. Meanwhile, in the West, the forces leading to war (and thus destruction of capital) were consciously repressed.
As a result, the ‘wall of money’ (capital) seeking profitable outlets, steadily grew, reaching astronomical levels. The other option, war among advanced countries, will likely lead to the end of human civilisation and the death of millions, though, astoundingly, western elites seem willing to toy with this possibility.
Such are the choices that the capitalist system, at this stage in history, presents us with.
Facing the Truth
In this 1998 book The Trouble with Capitalism, economist Harry Shutt argued against forever taking refuge in “limited measures”, against the comforting notion that capitalism could always be ‘rewired’ to work in more equitable, ‘greener’, and less amoral ways:
The truth must at last be faced that there is no realistic hope of expanding demand (and hence aggregate global output) fast enough to 1) Absorb the ever-accumulating capital surpluses generated by the private sector 2) Contain, let alone reduce, the rising burden of public-sector deficits and debt under the existing pattern of income distribution and taxation 3) reduce the huge gap between the super-rich and most other people.
And, given by now obvious environmental limits which place necessary restrictions on the expansion of the economy, the “traditional policy of seeking indiscriminately to maximise GDP will have to be jettisoned”.
In other words, growth is neither possible nor desirable.
The consequences of not striving to maximise GDP are two-fold: 1) that government finances will no longer depend, as they do now, on how much tax revenue can be squeezed out of the economy. And 2) that people’s living standards will no longer hinge, as they do now, on what they can extract from the economy from wage-labour or, if they are fortunate, from the ownership of property.
This might seem a frightening, in fact, unthinkable prospect, such are these two notions seared into our consciousness as just the way things are and always will be. However, it is important also to appreciate how much of a liberation a post-capitalist society will be. Society will be freed from the necessity to find profitable outlets for the huge wall of money seeking. At present this pathology manifests in profoundly anti-social ways such as speculation in food prices, which causes hunger around the world based on artificial, not genuine, scarcity, the privatisation mania, the hunt for profitable companies and public services that can be taken over using borrowed money and milked for returns, the vast weapons and security industry, the compulsion to seek more and more debt as a means to dabble on the stock and bond market, and the corporate juggernaut that looks on our psychological make-up as something to be exploited for profit.
Individuals, too, will be relieved from the necessity to secure their livelihood in the market and to suffer if they fail to. This has to mean that, for the first time in history, a person’s income will be unconditionally guaranteed.
All this may seems like a pipedream that will never happen except that it flows from two inescapable facts about the modern world – in Harry Shutt’s phraseology the “decline in demand” for both capital and labour.
Nature of the Problem
In Britain, the latter problem may seem belied by the eclipsing of the 4 million strong dole queues of the 1980s by high rates of employment. But the solving of the unemployment problem is in many ways illusory in that it is based on zero hour contracts, the dramatic rise of the ‘solo self-employed’ and the stifling of the healthy wage growth of previous decades. Certainly, wresting some kind of income from the economy – mimicking the huge “informal sectors” of the Global South – is not the same as the secure, decently-paid, and full-time jobs of the past.
And that is not getting into the contention of the late David Graeber that many white-collar jobs, while decently paid, are not only socially useless but economically pointless too. They are a form of “pretend work”.
But certainly, with demand for capital “fixed investment” (big things like factories and offices) in decline, there is no hope of reviving the benign equilibrium – where capital outlay and effective demand existed in a kind of symbiosis – of the post-WW2 years. And this mismatch cannot be nullified by abolishing zero-hour contracts, reinstituting collective bargaining, and welcoming back trade unions into the fold.
But there is no hope of understanding the need for a solution unless, first, the problem is recognised.
