|SocialismToday Socialist Party magazine|
Issue 165 February 2013
Britain’s bosses waging war
CAN BRITAIN become more than, in the words of Vince Cable, secretary of state for business, a "large offshore banking centre with a medium sized country attached"? The Con-Dem coalition government promises some small investment plans. A common argument is that much greater state investment would be needed to ‘rebalance’ the economy towards production and away from finance. However, the level of investment is not the only issue, or even the most important one.
Since the late 1970s, the expansion of the financial sector ran alongside the growth in the share of economic proceeds going to profits, and the falling ‘wage-share’ going to workers. This meant inequality grew, as did huge debts for individuals, companies and, eventually, the government. Before the current crisis, the Socialist Party explained that this underlying tendency was recessionary and would drastically worsen the ‘bust’ that inevitably follows any capitalist ‘boom’.
The Tories’ conscious or semi-conscious plan to weaken the organised working class by destroying heavy industry is now well known, thanks to cabinet papers from the 1980s. Their ‘liberation’ of banking and finance from the mid-1980s is also widely known. A new TUC pamphlet – Where Have All The Wages Gone? – has brought together and added other important statistics. It is, in turn, in preparation for another TUC pamphlet this year which will discuss how the ‘wage share’ can be boosted.
Had income growth matched economic growth since 1980, the average worker would be paid £7,000 more per year. This is because the wage-share fell from 59.2% to 54.9%. If average wage levels, and the ratio of profits to wages, from 1980 had been reintroduced in 2010 then workers would have received an average 20% pay rise. One third of this gap is accounted for by the falling wage-share and the rest is due to more inequality within that share.
No other developed economic country, except Australia, has seen such a decline of employees’ share in economic growth. The IMF and other neoliberal institutions and academics credit this to ‘technological change’. The development of new technology, combined with the crisis of the 1970s, did eventually push the British ruling class into the policies pursued by Margaret Thatcher and the employers in the 1980s. This though is not the whole story. Why were the bosses able to do this?
Globalisation combined with new technology enabled the capitalists to move work abroad, or threaten to do so, and thereby drive down wages. Actually relocating production to third-world sweatshops further increased a downward pressure on wages in the west.
But the weakening of the trade unions in the private sector was not inevitable. Huge battles took place against Thatcher’s deindustrialisation strategy in Britain. Similar policies in other countries met with similar resistance. The establishment media and academia – and also, unfortunately, the TUC in Where Have All The Wages Gone? – present deindustrialisation as the inexorable logic of history. But the opposite was the case.
The employers’ offensive was opposed by workers, especially in the great miners’ strike in 1984-85. But the TUC refused to mount a generalised resistance, especially refusing to call a one-day general strike in defence of the miners, and the Neil Kinnock-led Labour Party stabbed organised labour in the back.
The defeat of the miners and other sections of organised workers cleared the way for deindustrialisation, financialisation and unrestrained profiteering. Industry was devastated. The ruling class turned away from production and towards financial speculation to boost their profits. When profits went up, they declared this an economic miracle. The TUC’s pamphlet shows that "the whole of the upward trend in the profit share over the last 30 years is attributable to the increased profitability of the financial sector". No wonder the bankers have such influence! No wonder the majority of the ruling class cannot see a practical route to ‘rebalancing’. For 30 years they have bound themselves by hand and foot, and more importantly by wallet and purse, to the bankers for their profits.
Where Have All The Wages Gone? explains that the falling wage-share is not due to higher taxes. Nor is it due to part-time work, self-employment or unemployment, which the employers use as devices to drive down wages but do not explain why the wage-share has fallen, overall, since 1980. Rather, it is due to the wholesale destruction of industrial jobs and the driving-down of wages in other manual jobs, such as construction and distribution. These have been ‘replaced’, say the establishment’s mouthpieces, by well-paid white-collar jobs.
They haven’t. An explosion of income inequality between a section of very highly-paid managers, bankers and suchlike, and the majority of working people, accounts for the majority of the growth in inequality. The share of profits going to financial corporations has sharply risen. Household investment income, which includes pensions but also the investment income of the super-rich, has also risen. Interestingly, the TUC makes the point that self-employed people have not benefited. In fact, their average incomes fell sharply after the late 1970s.
The capitalists only invest to make a profit. More specifically, how much they invest depends on how much they think they will profit, and they will invest in whatever they think is the most profitable opportunity. While the profit-share rose for 30 years at the expense of wages, investment dropped sharply. ‘Gross fixed capital formation’ fell from around 20% to 15% of GDP between 1980 and 2010. Business investment into research and development, as a percentage of GDP, has fallen in most years since 1986 to about 1.1% in 2010.
The capitalists have systematically boosted profits at the expense of wages, and then refused to invest in the real economy. Instead, they gambled on the financial and stock markets which offered higher and swifter returns. Individual capitalists claimed ludicrous ‘wages’ and bonuses, and handed out more to other capitalists through share buy-backs, etc. This parasitic looting of the real economy has made the current crisis even deeper and longer.
A previous TUC pamphlet, Unfair to Middling (reviewed in Socialism Today No.135, February 2010), discussed ‘rebalancing the economy’ through higher wages and narrower income inequality. That pamphlet suggested that the recession would be less deep if the wage-share had held steady between 2001 and 2008, instead of falling. GDP growth would be 0.1% higher each year since 2001, and 1.5 percentage points higher this year. Debt, asset prices, corporate investment and profits would all be a bit lower, and interest rates slightly higher.
Keynesians would love to see this happen. Quite probably the TUC’s next pamphlet this year will share that sentiment. But how can this be done? It means breaking with the logic of British capitalism and its rulers since 1980.
For this decisive measures are needed, for example, a 50% levy on the British bosses’ stockpile of £750 billion uninvested profits to fund a massive programme of public works, including reversing all the cuts and building one million new council homes. The capitalist class would ferociously resist this. To break their opposition and implement the programme in full would require the socialist public ownership of the top 150 companies, as part of a democratic socialist plan under workers’ control and management.
Will the TUC advocate these kind of ideas? It should! Socialists must continue to argue for it to draw the practical conclusions from the academic presentations of its pamphlets.