Big business is awash with money despite the recession. One study estimates the total profits for major companies in the advanced industrial world stand at $3,000 billion this year.
This is just a shade (7 percent) below where things stood before the collapse of Lehman Brothers—the event that triggered the global financial crisis in late 2008.
How has this happened? Big corporations have used the recession to attack our side to cut their costs.
The have sacked workers, cut some staffs’ pay and squeezed more work from them to boost profits. But this does not mean that all is well for the capitalist system.
Capitalism is driven not just by profits but by reinvesting them to expand businesses.
This is simply not happening. Investment is at its lowest level in decades. As the Financial Times puts it, “These [corporate] earnings are constipated. They remain stuck inside companies, with little obvious impact on the world around them.”
Companies are holding onto their cash because they can’t see profitable investment opportunities. They are haunted by the fear that the system is far from out of its crisis.
This all makes a mockery of two claims. First, George Osborne’s boast that the economic recovery is on track thanks to his austerity programme. There is no sign of a private sector investment boom that would offset the slashing of public spending.
Second, the huge cash mountains being accumulated by big business show there is no justification for austerity.
The money to deal with the spending deficit, and much more, could be found in the wealth not being used by the bosses.