12-02-05, 9:10 am
A report prepared for the International Meeting of Communist and Workers' Parties 'Current Trends In Capitalism: Economic, Social And Political Impact. The Communists' Alternative'
Athens, 18-20 November, 2005
It is the usual practice to open any discussion of contemporary capitalism with statistics on the scale of world financial transactions and the size of transnational companies compared to nation states. This contribution from the Communist Party of Britain will do the reverse and stress the dependence of capital on its own national capitalist state structures even though Britain's capitalist economy is in fact the most transnationalised of all the major capitalist economies.
This contribution will argue:
That monopoly capitalism in Britain is more than ever dependent on the redistribution of surplus by the state
That this transfer is at the expense of all sections of working people, of small producers and the peoples of lands under imperialist domination
That the increasing scale of the transfer needed to sustain monopoly profit has met growing levels of resistance, internally and externally, and is now causing acute political and social contradictions
That capitalist state power in Britain is strengthened, not weakened, by the transfer of democratic governmental powers over capital to transnational institutions such as the European Union.
That, more generally, the growing political challenge to this loss of democratic powers at the level of the nation state has brought a new period of political vulnerability for state monopoly capitalism
That the struggle between the major imperialist states to secure sources of superprofit for their own finance capital, and to reduce the level of their internal political contradictions, is resulting in a new and dangerous period of international conflict one in which Communists have the opportunity and responsibility to lead much broader and politically far-reaching anti-imperialist alliances
State monopoly capitalism in Britain
Britain has the third highest number of companies in the top 500 global companies by capital value after the US and Japan. In total 36. Their composition has much to tell about the nature of British capitalism. Nine, one quarter, are banks. Another nine are privatised utility companies (energy, telecom, transport, services). A further two are pharmaceutical companies and significantly dependent on the National Health Service for their markets. Four are in overseas oil and mineral extraction including the two biggest BP and Shell. Two are tobacco companies also dependent on external supply. The remaining ten control the highly monopolised British retail trade, media and food and drink production. There are no British companies in the top 500 in any branch of engineering, computing, aerospace or chemicals. The nearest such company is British Aerospace, no longer in the top 500, which now derives more of its income from the US Defense Department than from the British Ministry of Defence.
According to the 2005 UN World Investment Report Britain has the highest index of ‘transnationality' of any major economy. In 1981 overseas holdings were equivalent to 29 per cent of GDP. By 1991 they were equivalent to 74 per cent. In 2002 they had reached 160 per cent of GDP. Levels of external ownership have followed roughly in balance.
The biggest investor in Britain is the United States over twice as much as the next biggest, Germany, and three times that of France. When it comes to direct investment (as against shares and bank lending), the US dominance is even bigger: three times that of Germany and four times that of France. Britain's own investments are also concentrated in the US, twice that of any other country though the total invested in all European countries is double that invested in the US. Total British investment in Asia (including China) represents only 5 per cent of its US investment and 3 per cent of its European investment.
The great bulk of British external investment is not in manufacturing but in banking, energy and services. In the case of oil and banking there are very close links with the United States both as a market, a field for investment and also as owner of shares (over a third of shares in BP are US owned).
Britain's own industrial economy is characterised, compared with all other major economies, by low productivity, low research and development and a poorly skilled and casualised labour force with the longest working hours in Europe. Over the past eight years Britain has lost almost 30 per cent of its manufacturing jobs (Germany has lost only 2 per cent) and Britain's trade deficit for goods is proportionately even higher than that of the US. In terms of its remaining strengths in manufactured exports these very largely depend on an externally owned (mainly US) sector in computing and IT producing for the European market. Uniquely among advanced industrial nations 20 per cent of Britain's R&D is overseas funded almost entirely concentrated in this externally owned high productivity sector and to a lesser extent in defence.
How, then, does Britain survive apparently as a highly profitable and growing economy?
There are four main sources:
External investment income of which the biggest share comes from banking and oil and gas (and the biggest single element from the US). In 2005 this is running at 3.5 per cent of GDP and over 16 per cent of total profit income.
An increasing flow of income from the state to private companies in services though direct subsidies, risk-free contracts and control over privatised pension savings [through the 1990s the profit levels for privatised utilities ran at double the level of those in manufacturing]
A credit bubble and sharp increase in household debt. Between 1990 and 2000 household debt averaged 100 per cent of annual household income. In 2005 it is 160 per cent of annual income. The main causes are a collapse in saving and unprecedentedly high housing costs.
The international operations of the City of London which is the main world centre for trading in equities, derivatives and foreign exchange. Two thirds of the banks (and bank capital) are non-British, the bulk American.
All these sources of profit are highly dependent on state control and regulation.
Some derive from foreign policy and military alliances notably the links between US and British oil and gas companies and military contractors. Some depend on privileged access to the US economy based on such alliances. Some depend on financial deregulation by the British state and the creation of privileged conditions for external finance capital, mainly American. Some depend directly on the state. The privatisation of public utilities and occupational pensions over the past twenty years has brought very fast capital accumulation in banking and service companies (now making up half Britain's companies in the global top 500).
It is these banks and service companies that are the biggest exporters of capital and who, along with US companies, are the most aggressive proponents of forcing open banking and public services in the EU and in WTO-dependent countries as well as further privatisation of health, education and social services in Britain itself.
The current dynamics of capitalism on a world scale
In sum, therefore, Britain's economy is very weak. The profitability of British finance capital is highly dependent on British state policies and in turn on the parasitic relationship with the United States.
This leads us to ask about the sustainability of the currently fast economic growth in the US and of its wider dominance over the world economy.
US profit rates were at historically high levels through the 1990s. In 2000-2 profit levels dipped and there was a major correction on the US stock exchange that eliminated a significant element of capital valuation. Today the ratio of profits to capital valuation is back at roughly the same level as the 1990s despite levels of international, governmental and household debt that exceed even those of Britain.
It does, however, appear that the factors that sustained such profitability through the 1990s and early 2000s are currently under significant pressure
The relative costs of subsistence goods, food and energy, were sharply reduced on a world scale through the 1990s with dreadful consequences for producers in many countries. This process appears to have reached its limit and, in the case of energy, to have been sharply reversed.
In the US itself the absolute rate of exploitation seems to have increased through 1990s and 2000s in terms of reduced share for wages and the social wage within total GDP.
In terms of the replacement costs of productive capital there is little information except that US R&D is now allocated quite disproportionately to military use (over 60 per cent currently as against 6 per cent in Germany and 4 per cent in Japan). This is likely to have detrimental effects in the long run.
It is also clear that US policy involves increasingly high-risk strategies:
Bush's implementation of the Project for a New American Century from 2001 requires unilateral, military solutions to the control over external resources, above all over energy supplies. The resulting military interventions have proved very costly in terms of previous alliances and resources
The doubling of the US defence budget since 1999 has been critical for maintaining profit levels and investment but at the cost of very high levels of government debt and borrowing
The maintenance of this debt and of consumer spending in the US is dependent on running up historically unprecedentedly high dollar debts to other countries, especially in Asia. These debts in turn have caused major problems for the management of US interest rates.
Finally it is clear that there is an increasingly desperate search by US finance capital to identify sources of superprofit. This is illustrated by the highly speculative activities of unregulated hedge funds that now manage a significant share of US banking capital. There is also the drive to corporate tax avoidance and therefore any responsibility for the costs of labour reproduction. In both the EU and WTO US and British capital are seeking to use these institutions to radically increase the rate of exploitation in all sector, to reduce levels of taxation on corporate profit and displace social costs onto the labour force, small business and the peoples of subordinate economies.
All this is in turn now reflected in increased political instability most notably in the popular rejection of the EU constitution and the Services Directive and the failure of Bush's attempt to re-impose a `free trade' area on the Americas.
Communist Alternatives
In conclusion, finance capital is more than ever dependent on the state. It is a dependence that has in Britain brought sharply increased levels of inequality, the intensification of work, the loss of trade union and social rights and a drastic erosion of the welfare state. In absolute terms this has been felt most sharply by the elderly, the unemployed and by ethnic minorities (who have double the level of unemployment in Britain). However, in terms of the loss of privileged access to pensions and work benefits, it has also had significant impact on the salaried strata that had often previously supported big business policies.
The result has been a profound democratic crisis. The transfer of key democratic powers to the EU was meant to offset this crisis and thereby strengthen the grip of neo-liberal pro-monopoly policies at the level of the British state. The consequence has, however, been increasingly to identify the EU with the interests of big business and to strengthen the demand for the use of parliament against it.
This crisis could have two outcomes. It could be used to mobilise support for xenophobic, authoritarian and directly racist policies and to create a new right-wing base for monopoly capital. Or it could be used to create a progressive, democratic alliance, led by the organised working class, to win unity against monopoly capital and its neo-liberal policies.
This is the challenge facing the CPB and the Left in Britain.
The CPB launched its Left Wing Programme last year. It is designed to win such broad support. Its main elements are the reversal of the privatisations of the past period, the restoration of trade union rights, the restoration of the key elements of the welfare state, the establishment of an adequate state pension as of right, the winning of gender, ethnic and age equalities, the return of key democratic powers over the economy from the EU to Britain's parliament and the end of Britain's nuclear weapons programme and its occupation of Iraq. It also calls for the restoration of controls over capital movement and the export of jobs.
The Left Wing Programme in not itself a socialist programme. It seeks to unite around a set of immediate objectives. If they were won, they would simply take back government policy to what existed in the 1970s. Yet politically they would also transform the balance of class forces. British monopoly capital is not as it was in the 1970s. Its higher dependence on the state in terms of privatised services, pensions' finance and markets - makes it far more vulnerable. The simple restoration of such limited pro-working class policies would set in motion the need for further change: action to sustain the economy in the interests of the great majority and action for further social, political and economic democratisation.
How far has this fight for a Left Wing Programme proceeded? At this year's trade union conferences, and also at the British Trades Union Congress, all the key elements of the Left Wing Programme were adopted as policy not so much the result of the efforts of our party but because they reflect a much wider trend of anti-neo-liberal opinion.
The task now is threefold:
To ensure that these separate policy positions begin to be understood as a whole as a coherent alternative to neo-liberalism
To develop mass campaigning led by trade unions and trades council generally and not just in isolation and to win a new generation of activists to understand the significance of the Left alternative
To block the further implementation of neo-liberal policies by the current Labour government and for the trade union movement and Left to use their position within the Labour Party to defeat the pro-imperialist leadership.
Some progress has been made. At this year's Labour Party conference the Blair leadership was defeated on its proposals for further privatisation in health and education and on its opposition to the restoration of trade union rights and adequate pensions. A revolt by Labour MPs has inflicted the first ever parliamentary defeat on the government on its anti-terror laws. It is likely that revolts on issues of health and education privatisation and on the renewal of the Trident weapon system will be bigger.
But the most important task has scarcely begun. This is for the trade union movement and the Left jointly to actively mobilise struggle on specific issues, but around general principles, and build wider alliances.
In this process active internationalism will be critical. Contacts with other movements of anti-neo-liberal struggle across the world are needed to transform attitudes and defeat xenophobia and racism. Most important of all, they can help build confidence and optimism: an understanding that the forces of neo-liberalism and monopoly capital can be defeated and that practical alternative exist. But such internationalism must have the right focus. It must be based on an understanding that the international balance of forces can only be changed in the first instance by restoring democracy, defeating pro-imperialist forces within specific countries. Slogans, such as those of the trotskyite Socialist Workers Party in Britain ('no nations, no borders, globalise resistance'), represent a dangerous diversion. For this reason it is currently all the more important to strengthen active cooperation between Communist and Workers Parties and to ensure the international projection of a Communist perspective.
--J Foster, for the Communist Party of Britain 11 November 2005
