Monday, 8 April 2013
The failure of British capitalism
Britain used to be the powerhouse of the world producing and making many things the world needed or at least what they thought they needed. Once described as the workshop of the world the current economic situation in Britain looks very bleak for this once great economic power in 2013. Besieged on all sides, the coalition government in Britain is thrashing around in a desperate search to break the logjam. George Osborne went to Beijing, cap in hand, desperately pleading for the Chinese regime to invest its largess - its huge reserves - in Britain's crumbling infrastructure! What an incredible historical turn around! Gunboats were deployed by Osborne's predecessors in the Yangtze River 'incident' during the Chinese revolution, when the British navy was hailed as heroes because they managed to escape! Now, the representative of enfeebled British capitalism calls for help from this quarter. It is just one manifestation of the astonishing decline of a power which once held the destinies of a quarter of humankind in its hands. The field of foreign policy illustrates the profound change in the position of British capitalism both at home and abroad. We are constantly told that recovery is just around the corner from the media including the biggest establishment of capitalist media Britain has ever had the BBC that the green shoots of recovery are just around the corner. Hardly a day passes, however, without a slew of evidence in the news to the contrary. The National Institute of Economic and Social Research predicted the economy shrank by 0.3% in the last three months of 2012. That followed 'growth' of 0.9% in 2011. Predictions for a triple-dip recession abound. British capitalism whilst not immune to the hurricane of economic storms on the continent in the Euro zone is still itself in a deep slump ever since manufacturing was sold off by Margret Thatcher we in Britain have not produced much in the way of value. Our economy is limited to service and retail sector with allot of our economy now focused on finance. A conscious turn by the capitalists away from industrial capitalism back to financial capitalism in the hope to gamble more and make more profit on the stock exchange has come back to bite British investors now. Tory ministers still cling to the idea that the private sector will save the day. They cannot understand why it doesn't. The £750 billion sitting in the accounts of big business dwarfs the proposed new lending. It is not for want of cash that private sector activity has not increased. More fundamental is the profit-driven nature of investment for big business, currently a risky venture in the economic turmoil engulfing the world. But for the capitalist politicians Cameron and Osborne, something else must be to blame - the banks, the euro zone - for the failure of their shibboleth to materialize. They have been forced to concede some ground to the reality of the contradictions of capitalism, now, instead of the private sector "rushing in" as the public sector is cut back, it has to be coaxed, coddled and bribed. One of British capitalisms ways it’s tried to jump start its flagging economy has been to devalue its currency which many Euro zone countries are unable to do due to the single currency. The pound has suffered a precipitous fall over the last few years - 30% against the euro and 27% against the US dollar. This reflects low interest rates and the dismal prospects of the British economy. Under certain conditions, devaluation of the pound could boost the economy by making British exports cheaper. However, the worldwide recession, which has hit the US, Japan, Europe and most of the rest of the world, means that there is little scope for boosting British exports. At the same time, a weaker pound will make imports more expensive. This will have a significant impact in relation to energy prices, which will feed through to household gas and electricity bills. So all in all the prospects for this once great powerhouse of the world look bleak and for me there doesn’t appear to be much in the way of a recovery in sight. We may see periods of temporary growth and blips but the overall trend is for continued stagnation and deepening of the crisis.