Consciousness of Sheep
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Globally, we have passed the point where understanding the difference between the two economies is crucial to the survival of some semblance of civilisation. Unfortunately, those with the power of decision still operate according to embedded beliefs about the financial economy and with little grasp of the material economy which underpins it. Nowhere is this more apparent than here in the UK, where sprinkling newly borrowed currency is regarded as the solution to all ills… real and imagined.
As an example, at 12.30pm tomorrow our beleaguered Chancellor will make an announcement of the government’s spending commitments for the remainder of the parliament, with many of the announced projects running into the 2030s and beyond… such as the £14bn funding of the long-trailed Sizewell C nuclear power plant.
No doubt the currency can be spirited into existence. After all, as the MMT crowd keep claiming, a sovereign state may issue – or borrow – as much of its own currency as it pleases… it just needs to collect it back in tax to avoid inflation (what could possibly go wrong?) Even here, in the giddy heights of the financial economy though, things are already unravelling, as consumer spending and job vacancies have plummeted while unemployment is already creeping up, even before the effects of April’s massive tax raid has arrived in the data. Politically chastened by their big decline in the polls and unexpected by-election and local election losses following unpopular spending cuts to pensioners and disabled people, the government has reached for mechanisms to spend more and cut less. In practice, this merely means changing their own borrowing rules so that they can spend more today in the hope that the growth fairy will turn up sometime in the next few years to repay at least some of the debt.
There is, of course, a more likely outcome resulting from business failures, rising unemployment and economic inactivity, and a collapse in the tax receipts that the government needs to keep foreign investors providing them with loans… and especially dollar-denominated loans. That is, rather than stimulating growth, the government may soon find itself presiding over the worst depression since the early-1980s. Not least because, here in the real world, it is doubtful that the government can deliver.
Take that Sizewell C nuclear power station as an example. First mooted in 2009, successive governments have refused to sanction it… and with good reason. Not least because – and nothing to do with climate change – that part of the east coast of England has gradually been falling into the North Sea because of coastal erosion. Far better to locate any new nuclear power stations in the west of the country (the whole of the island of Great Britain has been falling in the east and rising in the west since the last ice age) where long-term sea defences would not be needed. But even if the proposed plant wasn’t at risk of sliding into the sea before the end of its expected life, Britain’s track record on building nuclear power stations – having once been the world leader – is dire. The neighbouring Sizewell B being the last completed nuclear plant to be completed in 1987, while the 3.2GW Hinkley Point C plant is woefully delayed and over budget despite having been approved 15 years ago (elsewhere in the world, typical construction takes some 4-7 years, with Japan’s 1.1GW Ohi 3 taking just 3.5 years to build.
With the best will in the world, Britain cannot hope to get anywhere near these construction times simply because, since the economic vandalism of the 1980s, the country lacks the ability to supply the specialist components, the construction equipment or the skilled workforce required – something that gives the lie to Ed “mad dog” Miliband’s claim that the Sizewell C project will generate 10,000 new jobs… unless he means 10,000 jobs in France, Japan and China, where most of the components will be made and from where most of the high-skilled engineers will be imported. If the neighbouring Sizewell B is any guide, the project will generate just 770 permanent jobs – 520 directly employed, including specialist French technicians, with another 250 contract workers.
Certainly, the UK would be able to use the construction phase to provide apprenticeships to skill up its domestic workforce – although this would be more effective if the government were to follow France in committing to nuclear as its main low-emissions approach to electricity generation, rather than each proposed nuclear power station being a highly-opposed white elephant that takes half a century from drawing board, via planning approval to finally proving its first Kwh of electricity. It would be more effective still if the UK government were to invest in the manufacturing capacity to build the components directly rather than having to turn to other countries – not all of which are necessarily friendly – for supplies… but again, this is far easier said than done.
It is also a particular issue when we dig beneath the recent political froth around the UK government’s attempt to rekindle the Cold War. Indeed, the Starmer proposal to build 12 new nuclear powered (but probably not nuclear armed) submarines is even more fanciful, since construction suffers the same absence of materials and skilled workers as nuclear power… with the added problem of competition as the rest of the EU seeks to upgrade its military following the squandering of its previous capacity in Ukraine. Whereas prior to Thatcher, the UK had a network of Royal Ordnance Factories which trained some of the most qualified and skilled military engineers on the planet, only a handful of private plants owned by BA-systems continue today, training far fewer skilled workers. As Joe Duggan at The I Paper discovered:
“The Strategic Defence Review (SDR) includes a commitment to build up to 12 new attack submarines, six new munitions factories and 7,000 domestically built long-range weapons.
“But post-Brexit immigration rules and a lack of investment in skills training have contributed to a shortfall in the number of skilled welders the UK needs to meet those pledges, according to industry sources.
“Andrew Kinniburgh, director general of defence manufacturers’ lobby group Make UK Defence, said there are an estimated 5,000 welding vacancies in the defence industry. There are another 5,000 welder vacancies in non-military roles in the civil nuclear industry, he said.”
Welders in this instance, are likely a proxy for a whole host of gaps in Britain’s capacity to construct the new weapons systems the government claims it needs. Steel too – especially the high grade steel essential to submarine hulls – will be a serious limiting factor since, according to the industry trade body Steel UK, the now defunct TATA steelworks in Port Talbot was the main supplier of plate steel for ship and submarine building. Liberty Steel can supply specialist steel for submarine internals but says only that it has some capacity to supply the reinforced steel needed for submarine hulls. Sheffield Forgemasters provides castings for submarine devices but not for the hulls themselves. The remaining suppliers – including the recently bailed-out and Chinese-owned British Steel – provide less specialised steel for use in construction of defence infrastructure rather than in weapons systems themselves.
Ironically, the two countries cast in the role of new Cold War adversaries, China and Russia, took a far more pragmatic approach to their respective militaries after the USA emerged as the temporary hegemon in the 1990s. Where western arms contracts have been boondoggles providing corporate welfare to shareholders along with jobs in politically contested constituencies, in exchange for overly high-tech systems, China and (especially) Russia went with the most cost-effective systems their economies could build – which is why trillions of dollars’ worth of hi-tech NATO equipment failed to dent the Russian army, still less undermine its economy and bring about regime change, in the spring of 2022, even as a barrage of hypersonic missiles sent western military strategists back to the drawing board.
More hubristically, the Starmer government may be about to repeat the same fundamental error committed by Stalin in the aftermath of the Second World War. Where the USA accepted the economic hit that came with converting its wartime arms industry back to civilian use – and eventually reaped the boom of the 1950s – the Soviet Union failed to convert the proverbial swords into ploughshares. It might not even have been possible. So many factories had been configured to war production that conversion was impossible without leaving millions of demobilised troops unemployed. And so, from the Soviet point of view, the Cold War allowed them to avoid the development of a complex civilian economy… which worked until it didn’t, and what seemed to western observers to be a solid authoritarian empire crumbled into dust in a matter of months in the late-1980s and early-1990s. By 1992, Russian people had resorted to barter and vodka, with male life expectancy falling below 50-years-old… not something Europe ought to be rushing to copy.
Not least because the infrastructure that is already in place is slowly falling apart. And again, the UK is leading the charge. Although until recently, most of the problems have fallen on the mass of the precariat living beyond the walls of Versailles-on-Thames, even this seems to be changing, with the political class itself beginning to face the corrosion of the existing system. For example, London’s Oxford Street – once the heart of the largest retail district in Europe – died during the lockdowns, with many stores empty and many others mere fronts for money laundering. Even the high end retailers in nearby Bond Street have upped and left… such is neoliberalism’s march through a retail sector which, in the 1990s, mopped up the unemployment caused by the destruction of the UK’s manufacturing base in the previous decade. This aside, London is still having it easy compared to the decimated High Streets across the towns and cities beyond the capital, where the boarded-up shops, derelict buildings, overflowing bins, and potholed roads speak to something far worse than the precariarity which emerged after the 2008 crash. For many ordinary Britons in 2025, even the 2010 means of eking out a living through a combination of temporary, part-time, gig and zero hours work is no longer viable. The work has dried up even as the cost of unavoidables like rent, energy, food and water have eaten up what income can still be earned.
The problems run deeper, of course. In large parts of the UK, getting an appointment with an overburdened NHS doctor involves a wait of several weeks. And NHS dentists are rarer than hens’ teeth. Schools are oversubscribed, with many children having to travel across cities to get a place. Social housing is in short supply, while the prospect of buying a house is out of reach for most. Rail travel is a joke, with local services delayed and overcrowded (when they show up at all) while it is cheaper to fly abroad and back than it is to travel by train between cities… and lets not get started on a privatised water industry that has failed to invest in a single reservoir and whose main achievement is to fill our rivers and inshore waters with human faeces.
Such things fail the “royal ribbon test,” with politicians always favouring new projects than the less attention-grabbing maintenance and repair of the systems that already exist. Even the proposed – but equally unachievable – construction of 300,000 new houses might be revised and scaled-down to something more realistic if only more of the available funds were dedicated to renovating the mass of empty housing outside London and the Southeast.
No doubt, tomorrow Rachel Reeves will announce enough bread and circuses to ward off criticism of the government for a few days. But it is notable that ever since the crash in 2008, the majority of the public no longer buy the hype (remember George Osborne’s “pasty tax?”) In recent years, government budgets, spring statements and spending reviews have tended to unravel within hours, forcing ministers to U-turn while trying to pretend that they haven’t U-turned.
This was bad enough during the 14 years of Tory government, when successive Chancellors sought (and failed) to resolve Britain’s economic decline through a series of austerity cuts which were never deep enough to do anything more than make people angry – something that tipped the scales in favour of leaving the EU in 2016. But at least the austerity programs didn’t put the financial and material economies into direct conflict. The impact of material shortages – particularly following two years of lockdown – felt just like more of the same. But the current Labour government seems to be moving toward an earlier Keynsian-ish approach to generating economic growth through government spending on infrastructure projects… an approach that only appeared to work in the boom years 1953-73 because of the vast, untapped stores of energy and mineral resources available to the western states to (as it were) mop-up all of the additional currency. In the current, depleted, conditions, not only will the projects fail for lack of energy, materials, equipment and skilled workers, but the additional spending keeping the inflation rate higher than it might otherwise be, even as the lack of growth deters further foreign investment.
All of which means that for most of us, when Rachel Reeves stands up to make her speech to parliament, she will sound much like the late Stanley Unwin.
As you made it to the end…
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