By Mark Buckley
The current crisis of the British economy is exceptional in historical terms and even relative to the generally stagnant state of the major capitalist economies. As a result, the ruling class offensive against workers and the poor is also an exceptional one.
While many of the G7 economies have seen some small measures to either stimulate the economy and/or soften the effects of rising prices, the British government has implemented swingeing tax increases on ordinary people, administered above-inflation price rises (in energy and fares) and kept public sector wages, benefits and state pensions well below inflation. While consumer price inflation has soared to a 40-year high of 9%, public sector wages, welfare benefits and state pension increases have generally been kept in a range between zero and three per cent.
Even at the time of the Spring Statement in March the Office for Budget Responsibility was forecasting the biggest fall in household living standards since modern records began in the 1950s. Since that time, inflation has already exceeded OBR forecasts and is set to rise even further, driven by rising commodities’ prices and the effects of the fall in the pound’s exchange rate, which is ten per cent lower against the US dollar in just a few months.
These exceptional measures are a reaction to exceptional circumstances. In effect, the British economy has never come close to a full recovery from the Global Financial Crisis of 2007/08 and has instead entered a Long Depression, punctuated only by another recession arising from the government’s failure to respond appropriately to the pandemic.
In March, the OBR assumed the trend economic growth rate had halved to just over 1 per cent in the medium-term. Even that now looks optimistic with GDP falling in March and the National Institute for Economic and Social Research arguing that the risk of recession had come closer.
This is a grim outlook, for both capital and labour. But the ruling class offensive aims to ensure that it is workers and poor who pay for the crisis. So, while government policy is to increase prices it administers, raise taxes and national insurance contributions on ordinary earners, it has cut taxes for banks and big companies. Now that the spurious justification that these would raise business investment has been exposed, the government response has been to suggest it will cut business taxes even further. Clearly these policies have nothing to do with reviving growth as claimed, but are simultaneously an increase in the rate of exploitation and a transfer of the social wage from workers and the poor to capital.
Naturally, the imposition of these type of austerity measures are not unique to Britain or even unprecedented in this period. But their exceptional ferocity is explained by the exceptional weakness of the British economy.
The chart below shows the adjusted level of net national savings as a proportion of Gross National Income (GNI) for the US and for Britain since 1970. These are the net funds that are available for investment. As the chart shows, the world’s major capital economy the US is barely generating any net new capital.
But the position of the British economy is even more dire. Since 1980 the average annual level of net national savings has been just 0.5 per cent of GNI. Since 2008 it has never really climbed above zero. The annual average level over that time has been minus 1.6 per cent.
This extraordinarily weak performance means there is no capital accumulation taking place. Either capital for investment must be borrowed from overseas, or does not take place. The British economy has been experiencing a combination of the two. Business investment in the first quarter of this year is lower than it was in the 4th quarter of 2007.
The British ruling class response to this crisis has been to launch wars. These are the actual military interventions of the US where it acts as a junior partner to the US in Afghanistan, Iraq, Libya, Syria and now Ukraine.
It is also engaged in domestic class warfare, to increase the rate of exploitation and to transfer incomes and wealth from workers and the poor to capital and the bourgeoisie. This accounts for developments such as fire and rehire, the growth of zero hours, the corruption around the pandemic and continuous drive towards privatisation. The Brexit project fits into this framework, as it allows a greater deregulation, lower standards and greater degree of exploitation than is possible under common EU rules. The pandemic was used to as a battering ram to increase the rate of exploitation, including through a policy of lower wages, pensions and benefits and higher prices.
This first task of the working class and its allies is to understand both the source and scale of these attacks and how they are linked. But that is only the first task. It is also crucial that there is a sustained fightback against every single aspect of these attacks, and the racist, misogynistic and Islamophobic offensives that are used as a distraction from the real enemies of the working class and the oppressed.
To date, the response from the big battalions of the labour movement has been weak at best. But the depth of widespread desperation and anger at the effects of these policies means that impassivity may not be sustainable for much longer.