Sometimes the witlessness of the Guardian surpasses all understanding. Last Saturday it carried an article explaining why, after the Office for National Statistics announced that Britain’s economy grew by 0.6 percent in the second quarter of 2013, “The future looks bright for Osborne”.
In the print edition this article nudges close to a two-page spread devoted to the exciting subject of “How the world welcomed a prince”.
Both show how even the supposedly progressive media collude in the carefully managed manipulation that saw chancellor George Osborne sent for photo-ops at building sites and factories to coincide with the publication of the growth figures. All were faithfully but “ironically” reproduced in the Guardian.
Sanity was saved by a comment piece by the South Korean Keynesian economist Ha-Joon Chang.
He pointed out, “Including the last quarter, the UK economy has grown by just 2.1 percent during the 12 quarters since the current government came to power.
“This compares very poorly with the 2 percent growth that the economy had managed in just four quarters between the third quarter of 2009 and the second quarter of 2010.
“It gets worse. During the past five years, the UK’s population has grown by 3 percent. This means that, on a per capita basis, the country’s income is 6.3 percent, not just 3.3 percent, less today than it was five years go.
“This performance is far worse than what Japan managed during its infamous ‘lost decade’ of the 90s. At the end of that period, Japan had a per capita income 10 percent higher than at the start.”
Chang points to one of the striking features of the “recovery” from the Great Recession of 2008-9. Usually the output lost in a recession is made up for by a burst of rapid growth before the economy returns to its normal growth rate. But this hasn’t happened since 2009.
Britain is an extreme case of the problem, which means that many advanced capitalist economies are struggling with a large and permanent loss of growth.
This phenomenon is related to another, about which the Financial Times was puzzling last week. Although the recession allowed firms sharply to increase profits by squeezing workers harder, they haven’t used this extra cash to increase the rate of investment. Since it is investment—what Karl Marx called capital accumulation—that drives capitalist economies, low investment means sluggish growth
The solution to this puzzle lies in the rate of profit. Profits have risen relative to wages. But capitalists invest in response to the rate of profit, which measures profits compared to investment. And the rate of profit remains relatively depressed across the advanced capitalist world.
The Marxist blogger Michael Roberts wrote recently, “In Q1-2013, non-financial corporations’ net return on capital stock… was 12 percent, slightly higher than the level of the last four years since the trough of the slump.
“Manufacturing companies continued to achieve a much lower return at 8 percent on average. So UK corporate profitability has improved a little from the slump, but it is still 20 percent below where it was at its peak in early 2008 and that was below its 1997 peak.”
Not only are firms not investing but ordinary households aren’t spending because of a ferocious squeeze on real wages. To get growth going, the coalition has relied on what Chang describes as “the asset bubbles that have developed in the stock market and the property market, fuelled by cheap credit (sounds familiar?)”.
Osborne’s Help to Buy scheme, which guarantees the mortgages of buyers of newly built houses, has attracted widespread criticism that it will generate a new housing bubble. One economist told the Guardian, “Much of the turnaround in the growth outlook has coincided with signs of a marked improvement in the housing market, coupled with better than expected construction data. Both are thanks to the government’s Help to Buy scheme.”
So far from “mending” the economy, the coalition has kept Britain locked into the cycles of financial speculation that precipitated the crisis in 2007-8.