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What then are we to become?

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According to Boris Johnson, the economic dislocation which appears to be gathering pace across the UK is merely “a period of adjustment after Brexit.” In Johnson’s formulation, those who would turn the clock back are tacitly in favour of the low-pay and poor working conditions which were encouraged when the UK was a member of the European Union.  There is, for example, no shortage of lorry drivers in the UK.  More than 230,000 of us hold valid Heavy Goods vehicle licences.  Unfortunately for those who like turkey for Christmas dinner and petrol at any time, the pay and conditions in the haulage industry are so poor that most prefer to work elsewhere.  Cheap Eastern European drivers living out of their cabs and engaging in cabotage helped to paper over the cracks until the lockdowns began and some 20,000 of them opted to be quarantined at home rather than stay in the UK.

In the anti-Brexit narrative, the shortage of drivers, agricultural workers, natural gas, garden furniture and anything else which turns out to be in short supply, is the unintended consequence of an ill-conceived withdrawal from the EU.  But in Johnson’s formulation, the dislocation is no more than the intended first phase of a transition from the low-paid and low-skilled economy of the past to a new, high-paid and hi-tech “global Britain.”  It is not – his supporters claim – the government’s fault that these shortages are materialising now.  It is the fault of employers who – despite having had five years to prepare for Brexit – have failed to train enough workers and offer them decent enough pay and conditions to retain them in their respective industries.  And having failed to make the transition the easy way, they are now going to have to do it the hard way.  And if that means the cost of higher wages being passed on to consumers… so be it!

Such is the politics of the current moment.  The economic backdrop, however, is far less auspicious.  Although the key to understanding this is that politics follows the real economy rather than leading it.  And whatever version of the future one might hope for, if the material base of the real economy cannot support it then it will not happen.

Those who have never accepted the vote to leave the EU, and who favour an early return, failed largely because they had no understanding of the real economy as experienced across ex-industrial, rundown seaside and small-town rural England and Wales.  While campaigning on the damage Brexit would wreak on the UK economy, not once did they explain how remaining in the EU would reverse the decline in living standards which had begun in the 1980s and had accelerated after the 2008 crash.  Nor, if they persist in tacitly supporting low-pay and poor working conditions, are they likely to win the argument in future.

Those who championed the exit from the EU – including Johnson himself – are even more deluded though.  Because the high-tech, high-wage economy that they seek to create is only possible within a resource and energy-rich, expanding global economy… the very opposite of the economy we must come to terms with.  Global Britain – like Make America great Again – is an easy slogan to sell to a majority who have seen their living standards fall in the last decade.  And the basic proposition behind it – shorn of any grounding in the real world – is straight out of a Keynesian economics textbook: raise wages and prices to encourage investment in technology in order to boost productivity.  As productivity increases, outcompete businesses on a global scale.  Redistribute at least some of the gains from increased productivity to the workers in the form of higher wages… and so the cycle goes on, just like it did in the aftermath of the Second World War:

“The accumulated world industrial output between 1953 and 1973 was comparable in volume to that of the entire century and a half which separated 1953 from 1800.  The recovery of war-damaged economies, the development of new technologies, the continued shift from agriculture to industry, the harnessing of national resources within ‘planned economies,’ and the spread of industrialization to the Third World all helped to effect this dramatic change.  In an even more emphatic way, and for much the same reasons, the volume of world trade also grew spectacularly after 1945…”

For those who view the economy in financial terms, this was the high point of political economy.  State spending – in the form of Marshall Aid – pulled the economies of North America, Western Europe and Japan out of their immediate post-war doldrums and ushered in the greatest economic boom in human history.  The trouble is that the same money-trick has been tried in different circumstances with very different results.  When the fifteenth century Spanish Empire arrived in Central America, for example, the vast quantities of gold and silver they plundered from the indigenous people was expected to usher in a new age of prosperity.  Instead it visited hyperinflation across Europe; the resulting economic dislocation leading to the outbreak of war.  Perhaps because of nuclear weapons and mutually assured destruction, we avoided widespread war in the 1970s.  Nevertheless, the same money-trick was attempted; although this time with fiat currency.  As the Western economies began to falter in the wake of the 1966 recession, states took to money-printing in an attempt to reboot their economies – although this was constrained to some extent by the terms of the Bretton Woods currency system in which states had to peg their currencies to the US dollar.  The constraint was removed in 1971, when Nixon took the dollar off the gold standard, thereby exporting a wave of inflation to Europe.  Further attempts at currency printing had a stagflationary impact when rising wages and prices translated into falling profits and rising unemployment.

In order to boost their version of global Britain, Johnson’s Tories look set to borrow and spend new currency on infrastructure – including their version of a green new deal.  This is undoubtedly good politics, since it will oblige the opposition to agree with the government but argue that it is not doing enough; thereby conceding the point.  But it is wholly unrealistic real economics because the world in general – and Britain in particular – lacks the energy and resources to turn the vision into reality.  It is no more realistic than someone hoping to sprout wings and fly to the moon.

Britain ceased being the world’s leading industrial power by the end of the 1860s.  By the 1880s the USA and Germany were competing for first place, while Britain’s aging industrial infrastructure rendered it ever less competitive.  The accumulated wealth of centuries of colonialism and imperialism cushioned the blow.  But even this was squandered between 1914 and 1945.  In the aftermath of war, as Britain made the transition from a coal-powered to an oil-powered economy, a handful of new industries such as aviation and petrochemicals kept Britain prosperous.  But gradually these too were outcompeted by industries in emerging economies like Japan and South Korea.

The mythology of Britain holds that the Thatcher government’s program of sound money, deregulation and privatisation reinvigorated the UK economy; ushering in the boom years of the 1990s and early 2000s.  In reality, Britain had more in common with Venezuela:

“Where Chavez had sought to wrestle some of his country’s wealth away from the ruling elite in an attempt to provide such basic services as public health, education and transport; the governments of Margaret Thatcher and Tony Blair openly removed wealth from the poor in order to hand it (with various degrees of corruption) to Britain’s already bloated elite.  Bourgeois triumphalism indeed!  But the source of the wealth transfer was the same.  As [Ian] Jack explained: ‘Social peace had been bought by tax cuts and welfare benefits, and these had been largely enabled by government income from North Sea oil that by the mid-1980s was delivering the Treasury 10% of its revenues.’”

The revenues from the North Sea had also underwritten the global money laundering network based in the City of London.  Boosting the exchange value of the pound by pumping more oil per day than Kuwait, allowed the City spivs to make fortunes while turning small provincial banks into unsustainable global behemoths.  And a small fraction of that wealth was allowed to trickle into the pockets of Britain’s ex-industrial workforce.  As the Guardian’s Ian Jack reported eight years ago:

“I had the idea… when I was walking through a London square around the time of the City’s deregulatory ‘Big Bang’ and Peregrine Worsthorne coining the phrase ‘bourgeois triumphalism’ to describe the brash behaviour of the newly enriched: the boys who wore red braces and swore long and loud in restaurants. Champagne was becoming an unexceptional drink. The miners had been beaten. A little terraced house in an ordinary bit of London would buy 7.5 similar houses in Bradford. In the seven years since 1979, jobs in manufacturing had declined from about seven million to around five million, and more than nine in every 10 of all jobs lost were located north of the diagonal between the Bristol channel and the Wash . And yet it was also true that more people owned more things – tumble dryers and deep freezers – than ever before, and that the average household’s disposable income was more than 10% higher than it had been in the last days of Jim Callaghan’s government.”

Beyond the oil rigs and the City trading rooms, Britain had become a nation of consumers.  Retail and hospitality became the locus of employment for the majority in a growing precariat, while those who benefited from the ill-gotten gains of the City – mostly home owners who could borrow against the rising price of their houses – enjoyed cheap consumer goods and services from a burgeoning array of High Street outlets… and then in 1999, the North Sea peaked.  The decline was spectacular:

By 2013, production was down to the level when Thatcher came to power.  But Britain’s problems didn’t end there.  In 2004, Britain became a net importer of oil, and in 2005 gas too.  But by then, Britain’s export industries had been sacrificed on the altar of neoliberalism.  Other than money laundering – which requires oil and gas revenues to maintain the value of the pound – it was far from clear how the UK was going to fund its consumption in the years ahead.

The answer, in the years after the 2008 crash, was that Britain would begin the process of de-consumption.  While the cost of essentials like food and energy rose rapidly after 2008, the median wage fell.  The precariat in the bottom half of the income ladder not only saw their real incomes fall between the Crash and the Covid, but were spending ever more of their declining incomes on essentials.  The aggregate result was a growing “retail apocalypse” which saw thousands of outlets crash and burn even before governments decided that locking down their economies was a good idea.  And despite government and establishment media claims that the post-pandemic economy is growing once more, this is not how it looks on the ground as high-profile chain stores continue to fold and even some online retailers have begun to feel the pain.

The underlying problem is that, with oil and gas production in terminal decline, the UKs money laundering activities are threatened by a fall in the value of the pound.  But other than selling off what remains of the public sector and allowing foreign plutocrats to buy up over-priced property in the few remaining desirable districts of our declining cities, it is difficult to see where the export income to pay for it all is going to come from.

Activists and government ministers wax lyrical about the jobs they intend to create via some version of a green new deal; printing or borrowing new currency into existence in the hope that it will trigger 1953-1973 style growth rather than 1970s style stagflation.  But they conveniently forget that Britain does not itself do green energy.  The technology – primarily solar panels and wind turbines – is manufactured on the other side of the planet before being transported here on oil-guzzling ships and trucks.  They are constructed and maintained by specialist workers employed by international firms like Orsted and Shell.  And unlike fossil fuels, there is no call for sun rigs and wind mines; so that once construction is complete most of the jobs will be redundant.  And again, after we have crippled the UK economy with intermittent electricity generation, what exactly was it that we were going to export in order to pay for it all?

In 2019 – the last sane year for economic measurement – the UK exported $446bn of goods but imported $664bn.  In an earlier period, the shortfall would have been more than made up by the export of so-called “services.”  By 2019 however, UK exports of $202m were outweighed by imports of $309m.  Worryingly, a large part of the goods the UK exports – such as cars, packaged medicaments, gold and oil – are in fact re-exports of imported goods.  If, for example, a UK factory merely applies paint to a car it imported from Asia, it is not really exporting cars, it is exporting paint.

The disruption of global supply chains and the large increase in the price of shipping caused by the various lockdowns and restrictions in response to the pandemic mean that much of the UK’s import and re-export activity has been compromised and is unlikely to recover in the short-term.  Moreover, the rapidly increasing price of energy with which to power these activities may well result in bankruptcies before the global economy has time to recover.

On the bright side, the UK is the world’s leading exporter of “hard liquor” – demand for which may very well increase as the global population comes to terms with a growing energy and resource depletion crisis.  Although, as with Saudi Arabia’s oil and Russian gas, the UK’s rising domestic demand for alcoholic spirits may well consume all of its current export capacity in fairly short order as drinking oneself to death may be preferable to hypothermia or starvation.

The fantasy shared by Britain’s political parties, bright green activists and corporate leaders is a kind of Star Trek future in which renewable energy and widespread computerisation underpin a Great Reset-type digital utopia.  The majority of people, lied to by establishment media, stand transfixed by this chimera even as the real economy collapses around them and as more and more of them see their prosperity fall.  And the sad reality is that what was once “the workshop of the world” is no longer capable of making much of anything.  The UK’s mines were depleted decades ago.  Its vast fossil fuel sources have been burned.  Its factories packed up and shipped off to the Far East.  And its agriculture is only capable of feeding some 60 percent of its growing population.

A massive collapse in consumption is inevitable.  So too is a re-localisation of the few things that the UK can still do domestically.  And in the absence of sufficient energy, demand for human and animal labour is likely to increase.  Nevertheless, the future that awaits us looks far more like Britain in the 1820s – largely rural-agrarian but with a residue of industrial activity – than the sci-fi fairy stories which underpin an entirely unrealistic green brave new world.

As you made it to the end…

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