UK election: British capital in disarray

The UK election result is a personal disaster for the Conservative leader Theresa May. She called the snap election to get a big majority and crush the opposition Labour party and its left-wing leadership. But instead the Conservatives lost seats and its majority in parliament and Labour under leftist Jeremy Corbyn increased its share of the vote dramatically after a vigorous campaign.

The turnout was 69%, the highest since 1997, when the figure was 71.4 per cent. It seems that young people turned out for Labour, particularly in the big cities. Labour gained 10% to reach 40%, while the Conservatives also increased their share by 5% to 42%. The big loser was the anti-EU anti-immigration party UKIP which collapsed.

There is now what is called a ‘hung parliament’ with no overall majority for one party. This makes the upcoming Brexit talks with the EU in a mess as there is no ‘strong and stable’ government to negotiate.

But more than a disaster for May and the Conservatives, this is one for the British ruling class.  The negotiations over the terms of Britain leaving the European Union are supposed to start on 19 June and now the EU negotiators will face British ones having lost their majority in the British parliament.  The terms of any deal are going to be hard on the interests of British capital: on the terms of trade, employment mobility and on capital flows for the City of London.

At the same time, the UK economy is already struggling.  In the first quarter of 2017, the UK’s real GDP grew more slowly than any other top (G7) economy. The British pound dropped sharply after the election result and it is likely to fall further as foreign investors consider their options, given the uncertainty of what will happen with Brexit and the paralysed position of a minority Conservative government unable to carry out any economic policy measures.  Sterling has already fallen by over 15% since the Brexit referendum result last year.

That has led to substantial rise in prices in the shops from higher import prices.  Inflation is likely to rise further, driving down real incomes for the average British household.

And that is after British households have suffered the longest stagnation in real incomes in the last 166 years!

The UK trade deficit with the rest of the world keeps widening as British exporters fail to take advantage of a weaker pound and import prices rise.

The reason that British capital is not gaining from the devaluation of the currency is that British manufacturing and services are still not competitive because productivity growth is virtually zero.

It’s nine years since the start of the global financial crash in 2008. Since then, real GDP per person in the major economies has risen on average at less than 1% a year. That’s well below the trend average before the global crash. Germany has done best with a cumulative rise of 8.7%, even better than the lucky country, Australia (6.8%). But the UK has managed just 2% over nine years!

The main reason is the sharp fallback in the growth of the productivity of labour. The UK economy has depended instead for its (limited) growth since the end of the Great Recession from a consumer boom and a big increase in immigration of young people from Eastern Europe and the EU.  According to the most recent ONS statistics, there has been no increase in the number of UK-born in employment over the last year. All the net increase in employment has been due to those born abroad. If the Brexit negotiations go ahead and the free movement of labour is lost, British business is going to have to use domestic labour and skills.  Employment growth will slow and national output will falter unless productivity rises.

And the main reason it won’t is the failure of British businesses to invest in productive capital ie new machinery, plant and computer software.  Business investment has hardly risen since the Great Recession even as profitability recovered.

That’s because profits were concentrated in the large companies while the small and medium sized companies made little and could not get credit. The large companies (mainly tech and finance) returned their profits to shareholders in dividends and share buybacks or held cash abroad in tax havens, rather than invest.  And business profitability in the UK started to fall back even before the Brexit vote.

The UK economy is set to enter a period of stagnation at best. The OECD’s economists are already forecasting that the UK economy will slow down to just 1% next year as Brexit bites.  And there is every likelihood of a new global recession in the next year or two.

After the 2015 election which the Conservatives won narrowly, I argued that the victory was a poisoned chalice and the Tories would not win the next election. I said that because of the likely global recession before 2020.  But Brexit cut across all that for a while.  This result was partly a follow-up from Brexit as the Conservatives did better in the areas that voted to leave the EU and Labour did better in those that voted to stay in.  But now the election also brought back the issue of living standards of the many against the wealth of the few.  That led to May’s failure.

This minority Conservative government is going to find it difficult to survive for long.  There could well be a new general election before the year is out and that could well lead to a Labour government aiming to reverse the neo-liberal policies of the last 30 years.  But if the UK capitalist economy is in dire straits, a Labour government will face an immediate challenge to the implementation of its policies.

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22 Responses to “UK election: British capital in disarray”

  1. Pantić-Mardešić Ivana Says:

    God, thank you for this!

  2. humphries346 Says:

    Excellent Analysis .well Done Michael. Laurence

  3. Adam Rose Says:

    Michael, have you mislabelled your graph ? It seems to be saying that the mass of profit has collapsed since 2011 but the rate of profit has gradually risen. The only way that could happen is if the quantity of capital had been massively reduced during that period. Or am I misreading something ?

  4. Arthur Thiry Says:

    Thank you Michael for this quick report. We need the facts not “alternative facts”. I imagine the anti-Corbyn flank are confused. Your last paragraph sums up the situation. Social reform or revolution?

  5. Choppa Morph Says:

    Your last two sentences are: “There could well be a new general election before the year is out and that could well lead to a Labour government aiming to reverse the neo-liberal policies of the last 30 years. But if the UK capitalist economy is in dire straits, a Labour government will face an immediate challenge to the implementation of its policies.”

    I think you’re wrong that a new Labour government would aim to reverse the neo-liberal policies of recent decades, unless you mean this in a very narrow piecemeal way – so how exactly do you see this attempted “reversal”?

    And even if we assume Labour policies that encroach on the power of capital, what kind of immediate challenge do you envisage?

  6. Wal Buchenberg Says:

    The EU is a form of organizing the competition of European capital. The aim of Brexit was to improve the competitive conditions of British capital. This will probably not work.

  7. Charles Says:

    “there is every likelihood of a new global recession in the next year or two.” But “2018 is likely to be trough of this fourth K-cycle and the bottom of the depression period.” (previous post) How does one sort that out?

  8. Don Sutherland Says:

    Reblogged this on Don Sutherland's Blog and commented:
    This is a strong political economy analysis of the outcome of the British election. Michael’s suspicion of another election before the end of the year on the basis of Corbyn’s courageous and intelligent campaign that connected to working people and the young among them drives me to a re-watch of “The Secret State” for clues about what might happen after that. Corbyn’s trajectory at this time is left social democratic but we must have a strategy that defends it if and when it is successful. That would be our big strategic breakthrough.

  9. Edgar Says:

    “And even if we assume Labour policies that encroach on the power of capital, what kind of immediate challenge do you envisage?”

    Power of capital! Stop it with these alien enemies already. My enemy shits and eats just like me! While I wouldn’t say that Corbyn makes the bourgeois tremble he certainly freaks them out! He represents what they fear more than anything else, a growth of working class consciousness, a challenge to what they believed was their unchallengeable authority.

    Corbyn is their worst nightmare and he very nearly became a reality.

    So think of the challenge to the power of the bourgeois in this way and work it out from there comrade!

    • sartesian Says:

      Two years ago, Syriza was the bourgeoisie’s worst nightmare. Turned out, the bourgeoisie weren’t asleep, and Syriza was nuisance not nightmare.

      Podemos, remember them?– they were a worst nightmare, too. Now? not so much.

      And a dozen or so years ago, Morales was a nightmare. And Chavez. And Lula…… and…..and…and ad nauseum.

      Corbyn is their worst nightmare? Not even close.

      • Edgar Says:

        I disagree, you should their faces that is all I would day. Personally I said Syriza was a welcome development but on their own they couldn’t affect anything, they needed allies.

        You are clearly coming at this from a purely economistic view, viewed from the class struggle this is a momentous development, It would be a mistake to underestimate it.

        Corbyn will be giving the bourgeois sleepless nights, In Britian at least their worst fears are being realised.

      • sartesian Says:

        I don’t think I am “coming at this in a purely economistic view”– no more than any analysis or criticism of Lula, Syriza, Morales, etc. is “economistic.” I’m looking at what it means for the real nightmare of the bourgeoisie; the overthrow of their system, their institutions of power. Anybody see a single sign from Corbyn that there is even a shred of class struggle creating organs of dual power anywhere in his program?

        I would suggest everyone who thinks Corbyn is a “nightmare” read the “Manifesto” he agreed to distribute as the LP platform. Oh yeah… re-funding the Trident program; endorsing the possibility of nuclear first strike– hell, nuclear ANY strike, may be a nightmare for some, but those some don’t include the British bourgeoisie.

        This is the bourgeoisie’s “worst nightmare”? Corbyn didn’t even win. The Labour Party is not able to take power.

        This is not a proletarian revolution, which I always thought was the bourgeoisie’s worst nightmare.

        “Worst fears”??? Corbyn and the Labour Party, wouldn’t make a pimple on Allende’s ass, much less Lenin’s.

        Looks on their faces? You should have seen the look on faces on Wall Street when Obama won in 2008; or even when Trump won in 2016. And so what?

      • Edgar Says:

        I read the manifesto very carefully actually, including his proposals for extending worker owned businesses and extending industrial democracy.

        Anyone in Britain knows that Corbyn is sincerely and bitterly opposed to all Nuclear weapons, a vote for Corbyn was at worst an indication that opposition to Nuclear weapons is no big deal, something that will make any bourgeois lackey sweat! I would also argue that Corbyn is opposed to imperialism.

        Success for Corbyn has the potential to create a much longer and deep seated progressive change than Lenin or Allende managed.

        Yes he didn’t win but given the obstacles that were in his way this result is incredible and already the Tories look to be in turmoil.

        No one should underestimate what a profound moment it would be if Corbyn were to ultimately win. If comrades are blind to this our enemy are not.

      • sartesian Says:

        “Anyone in Britain knows that Corbyn is sincerely and bitterly opposed to all Nuclear weapons, a vote for Corbyn was at worst an indication that opposition to Nuclear weapons is no big deal, something that will make any bourgeois lackey sweat! I would also argue that Corbyn is opposed to imperialism.”

        The point being that it does not matter what Corbyn is personally “sincerely” and “bitterly” opposed to. It does not matter if his personal beliefs are the reason people voted for him.

        What matters is that Corbyn is part of the institutions of bourgeois rule; that his personal beliefs are in fact irrelevant to the institutional power of the bourgeoisie, because Corbyn is loyal to those institutions.

        “Success for Corbyn has the potential to create a much longer and deep seated progressive change than Lenin or Allende managed.”

        Really? Exactly of what does that “progressive” change consist? Brand new Trident submarines; continued allegiance to NATO?

        And besides the “what”– tell us the “how”? When the bourgeoisie went on strike in Chile in 1973, it took the cordones operating independently and in many cases in opposition to the UP government, to break the lock out.

        Now the UP set up the cordones, much to their own chagrin (more that of the CP than the left of the Socialists) when the cordones acted outside the approved limits.

        So how is Corbyn going to “create” a much longer and deep seated progressive change, without organs of dual power arising to thwart the bourgeoisie? Or perhaps there is evidence that Corbyn and the Labour Party are really work towards the overthrow of the monarchy, the parliament, and the bourgeois state?

        Let’s be absolutely clear– Allende announced from the getgo that the victory of the UP was a revolution, even if the UP was absolutely incapable of deliverly, and Lenin… well, sorry to offend British sensibility, but the Russian Revolution even its isolation, decay, debilitation, and defeat produced change so progressive it was the nightmare, not only of the bourgeoisie, but also the Labour Party.

        All that’s need to seal this deal is the kiss of death/endorsement from Varafoukis, or Macron.

        I think it’s wonderful when those who proclaim how labor in advanced countries benefits from imperialism, how “social welfare” represents a transfer from the oppressed to the oppressor, whip around to endorse those who simultaneously pledge allegiance to the structures of imperialism and promise “social welfare.”

        Put a face on it, you admonish others. Sure thing. Put a face on it, and don’t ignore what it looks like.

      • Edgar Says:

        You simply look at all the negatives and run with it. How the hell that attitude is meant to achieve anything is beyond me! I guess you would call it ruthless criticism, but I woulddn’t!

        “The point being that it does not matter what Corbyn is personally “sincerely” and “bitterly” opposed to. “

        Tell that to the bourgeois press please!!

        “What matters is that Corbyn is part of the institutions of bourgeois rule;”

        No it is a signal that we are growing stronger, Engels used party strength as a metric to judge the movement against. A victory for Corbyn not only raises morale it shows we are getting strong. And represents that a different set of values are winning out in the UK, and who knows what the knock on affect will be.

        “that his personal beliefs are in fact irrelevant to the institutional power of the bourgeoisie, because Corbyn is loyal to those institutions.”

        He is on the record as being against the Monarchy, House of Lords and NATO. Not a bad starting point of opposition. More importantly he is opposed to the base the whole british state is built upon, namely the capitalist organisation of society.

        “Really? Exactly of what does that “progressive” change consist?”

        Worker ownership and control, respect for human rights, equality, demilitarised world etc etc

        “And besides the “what”– tell us the “how”?”

        Well as much as any party can actually do to bring about lasting change, legislation that is favourable to the establishment of worker co-ops, bringing crucial sectors like banking, transport and energy into public control. More importantly by empowering individuals and raising consciousness. The revolution will never be a one man project of course but one man has the power to empower millions.

        It would be much more difficult in this era of mass communication for a Chile to happen in the UK, I am not saying it can’t happen but would be very difficult. And of course another big aspect of Corbyn is reaching out internationally to progressive movements. A left government in the UK should not be underestimated, and is more important than one in Greece or Chile, no disrespect intended.

        Corbyn is much more aware of the role of imperialism in the world than any other leader in British political history, or more accurately, views it from an anti imperialist angle. How you get the idea that Corbyn is pro imperialist is totally beyond me. Are all US radicals so ignorant of british politics?

      • sartesian Says:

        “He is on the record as being against the Monarchy, House of Lords and NATO. ”

        He is on record, according to the manifesto, as being in favor of NATO, Trident submarines, and nuclear strikes. His “opposition” to the monarchy and the house of lords is probably made by the same stuff.

        “Worker ownership and control, respect for human rights, equality, demilitarised world etc etc”

        Swell, does that mean withdrawing from NATO? Not funding Trident submarines? Guess not. Equality? Does that mean opposing immigration restrictions? We’ll see, won’t we?

        “Well as much as any party can actually do to bring about lasting change, legislation that is favourable…”

        Well, there goes “progressive change” that will be “deeper” and “longer lasting” than anything Lenin ever did. Legislation. You think legislation won’t be reversed? You think the bourgeoisie aren’t going to mobilize– when, in fact, they’ve already been mobilized, and know better than you, how to braid the ropes with which social democrats hang, not themselves, but the working class.

        “It would be much more difficult in this era of mass communication for a Chile to happen in the UK, I am not saying it can’t happen but would be very difficult.”

        That goes both ways, comrade. So so much for progressive change that is deeper than anything Allende ever envisioned. Tougher for a Pinochet to emerge in the UK? Only because it’s that much tougher for an Allende to emerge. And Corbyn is no Allende.

        As for the rest of what you say…. we’ll see, won’t we. Like we saw with every other cheerleading for “progressive” change.

  10. thesuninnclun Says:

    Just suppose the Open Turns hadn’t happened and the tendency had remained united and committed to the tactic of entryism, would Momentum exists and wouldn’t they have been in a far better position inside the Labour Party. Instead we have two little sects with little influence, proving once and for all that when the masses begin to move they first move into the traditional organisations of the WC and “the ultra Left sects are swept aside.”

  11. Frank Hayes Says:

    Thank you Michael for a timely and thoughtful reflection. I agree with your analysis and find it a helpful contribution in my own efforts to develop as true a conception of the content of these momentous changes as I can create.

    If I may contribute to the discussion emerging in the Comment section, in my view, it is an error to regard any particular aspect of the whole Corbyn phenomenon as a fixed thing in isolation from all the other aspects of this process – or from the political context in which they have arisen. Similarly, taking the moments of previous revolutionary political processes (including their pre-revolutionary phases) as stages which must now be necessarily repeated under these current new, and very different conditions is a mechanistic approach and unhelpful to Marxist concept formation and/or to any authentic understanding of what is happening.

    This is formal thinking and as such, is incapable of grasping in human thought, the contradictory and dialectical movement of the immense social, political, economic and ecological changes under way, all of which are mutually conditioning and interacting each other.

    Regardless of my own subjective conceptions of Jeremy Corbyn, or of the mass movement emerging around him inspired by his commitment to political change, there is a material complex objective process under way, and the task, in my view, is to give this real social motion a conscious revolutionary content as it develops further in unexpected ways – and in due course undoubtedly takes US ALL by surprise – and not just the present reactionary power elite.

    Many lessons may be drawn from the stories of the recent Left Social Democratic movements referred to above, but what each (Syriza etc.) has lacked (including the Chilean tragedy) is a thoroughgoing scientific socialist revolutionary (creative dialectical) grasp of the contradictory motion through which all these processes necessarily develop. Instead of imposing individualist mental (ideological) subjective schema on reality, we must use our scientific conceptions creatively, and leave aside the dogmatic and failed approaches which limited the effectiveness of political work in these cases.

    The same law-governed methods of cognitive practice which have allowed us understand economic motion will also guide us as we work together to resolve these ultimate contradictions of capitalist economic dysfunction. And there can be no doubt that the bourgeois order has achieved a moment of ultimate contradiction.

    But we must learn how to work together with mutual respect and scientific authenticity, to combine our mental and physical energies and create the pathway to class emancipation.

    That collective innovation is what will really frighten the ignorant and increasingly ridiculous bourgeois corporate power elite. Because that material force is what can and will remove their greedy hands from control over the socially produced material human world, built by us all for the survival of us all.

    So let us work together objectively with critical and scientific detatchment as together, we build the new knowledge with which we will construct a new and truly human world.

  12. sartesian Says:

    “Many lessons may be drawn from the stories of the recent Left Social Democratic movements referred to above, but what each (Syriza etc.) has lacked (including the Chilean tragedy) is a thoroughgoing scientific socialist revolutionary (creative dialectical) grasp of the contradictory motion through which all these processes necessarily develop. Instead of imposing individualist mental (ideological) subjective schema on reality, we must use our scientific conceptions creatively, and leave aside the dogmatic and failed approaches which limited the effectiveness of political work in these cases.”

    Have to disagree with this, first because you simply cannot lump the UP electoral victories in 1970/3 and the social program the UP attempted to install (which claimed to be socialist, and claimed to introduce socialism through a revolutionary process), with the electoral victory of Syriza, which never suggested it was anything but capitalist, and never pretended to be even close to revolutionary. Moreover, the processes that brought the UP to power were quite distinct from those that brought Syriza to power.

    Secondly, attributing the failure of the Chilean revolution to a lack of thoroughgoing scientific socialist revolutionary “grasp” or “recognition” is simply not accurate. That makes failure a problem of knowledge, as if somehow, the knowledge of what was required and what might happen was missing in the struggle. Not so. The workers knew what to do in the cordones. And Allende and the CP knew that those workers represented a threat to their “scientific socialist revolutionary grasp.” It’s class struggle with the various parties aligning with or against, not “revolutionary knowledge,” but actual revolutionary struggle. We know where Allende and the CPC lined up, and where it got everybody.

    What I am pointing out is that the lack of critical analysis that led to the endorsement of the UP, is the same lack of critical analysis that endorsed or “welcomed” Syriza, is the same lack of critical analysis that is now being applied to Corbyn– which is to say the inability to grasp capitalism as a social institution that is not amenable to “deep seated” “progressive” change through legislative acts while at the same time, avoiding all the messy bits about class struggles. If some want to endorse Corbyn because the believe that there is no class on “our side” capable of waging that struggle, and this, Corbyn, offers the best alternative, then let’s make that explicit.

    “The ideological subjective schema being imposed on reality” comes all dressed up in the vocabulary of “scientific socialism” and “creative dialectical grasp of contradictory motion.”

    With all seriousness and due respect, Marxism is not an epistemology. “Dialectic” such as it was/is had nothing in common with epistemology even in Hegel’s exposition, much less Marx’s.Marxist analysis is not a cognitive practice.

    It is the exploration of the conflicts immanent to capital, that is to say, to relations of classes, and the forces, or lack thereof, propelling the resolution of those conflicts through the overthrow of those relations, or short version: the real movement of history..

  13. Mike Calvert Says:

    Dear Michael

    I would like to discuss using a part of your article in a newsletter I publish
    Is there an email address I can write to you at please?

    Regards

    Mike Calvert

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