Slowing productivity and neoliberal attacks on the public sector are prime causes for industrial slump and a debt crunch - not Brexit uncertainty, writes Vladimir Unkovski-Korica
Recent news headlines have brought little good news on the economic front. Thousands of job losses at Jaguar Land Rover and Ford in recent days were only the latest to hit the press.
We also learned that Debenhams and Marks and Spencer reported sharp falls in sales during the Christmas period as customers stayed at home.
Furthermore, the housing market has been subdued for a year, and the pound has lost a fifth of its value since 2016. Some are even predicting that the pound will be equal to the Euro in 2019.
Economic growth was a sluggish 0.3% and Britain is expected to fall to seventh place in GDP world rankings this year.
Of course, these figures say little about the quality of ordinary people’s lives, though they do reflect the fact that it has got worse.
But what is the explanation for it? Much of the press has put these negative trends down to the result of uncertainty surrounding Brexit.
Brexit uncertainty has surely contributed to business reluctance to invest, but this is not the only or even the primary reason for Britain’s sluggish economic performance.
This must be obvious simply by noting that there is a general downward trend in many advanced economies – often worse than in the UK.
Slumps, crunches and the cuts
Germany is on the verge of recession after figures revealed a major slump in industrial production. Questions are now being asked about the long-term viability of its car manufacturing sector because of struggles to adjust to new emission standards.
France and Italy have also registered negative growth, while the big news for some weeks has been the slowdown in the pace of growth of the Chinese economy.
There are in fact fears the Chinese economy will suffer from the credit bubble that has helped it grow in the last few years, as well as from the US-China trade war.
Since China has seen a major slowdown in car purchases, it becomes clear that much of the crisis in the world’s automobile industry has more global causes than Brexit.
The truth of the matter is that cut-throat competition has gone alongside attempts to squeeze out other competitors in a saturated market: a classic case of the crisis of over-production.
The US-China trade war will only make matters worse with the protectionist barriers raising production costs, making sales difficult and feeding further investor and consumer uncertainty.
Since corporate debt levels have in fact been increasing through 2018, there are increasing fears that a new credit crunch similar to the 2008 crisis will recur in 2019 or 2020.
Underlying this problem is the general drop in profitability, not helped by slow productivity growth. Indeed, Britain is serially among the worst offenders among the most advanced capitalist economies.
Its workforce is significantly less productive than that of France, Germany or the United States, according to the OECD. In the third quarter of 2018, productivity had grown only 0.2 percent in comparison with 2017.
By comparison, that was 2 percent in the period prior to the financial crisis. Growth has been particularly sluggish in the service sector, which now accounts for as much as three quarters of the economy according to recent studies.
Tory policies appear to be at fault for much of this trend. The savage cuts to the public sector and an economic policy supportive of low wage jobs has contributed more than any uncertainty caused by Brexit.
Intervention, and breaking from the neoliberal road
No amount of ideological neoliberal tripe can hide another reality behind these figures. It should be noted that Britain spends less as a percentage of GDP on the public sector than any of its OECD competitors. The problem is not too much state intervention.
Indeed, any attempt to even begin to restructure the British economy in a direction which could increase productivity and welfare would require major state intervention – indeed, an active industrial policy and major policy of nationalisation.
But remaining in the EU would in fact be a serious hindrance to such a policy. EU rules make it nigh impossible to undertake nationalisation policies – partly because of the Thatcherite input of the 1980s in the architecture of the European project.
Rather than continuing down a neoliberal road, Britain should be breaking with it. Of course, global capitalist competition would make any hope of Britain becoming a socialist island paradise impossible.
But starting the process needs to happen somewhere – and it is most likely to happen at the level of a national economy. Such an experiment could only give confidence to leftist movements elsewhere, and open the way for a different kind of globalisation from below.
This is why it is so important for the left to mobilise to demand a general election rather than a so-called “people’s vote”.
There is no road to socialist policies in the EU. But a “people’s Brexit”, delivered by a radical Labour government and sustained by extra-parliamentary mobilisation, may stand the chance of taking a first step in the global movement against neoliberalism.
More articles from this author
- Echoes of October: why the Russian Revolution still matters - video
- To be or not to be? The Scottish election and the fate of Britain
- Independence rallies on eve of Scottish elections, but will Holyrood challenge Westminster?
- Whose unity? Scottish Labour drops candidate after she backs Indyref2
- Scottish Labour lurches to the right
- The SNP bust-up: what does it mean for Scottish independence?
- Fighting job cuts in higher education