Central to the problems that will face Labour in office will be the weakness of British capitalism, against a background of a crisis-ridden global system.
Ultimately, this is what lies at the root of the Tories multiple crises, and Labour will face a worse situation.
The world economy has suffered a series of shocks: the pandemic, the Ukraine war and now the Israel/Gaza war.
The latter, particularly if it escalates, could be the trigger for the next global recession.
The Middle East remains by far the world’s most important energy producer, producing one third of the world’s oil in 2022.
If Iran were to block the Strait of Hormuz, for example, through which 20% of the world’s oil supply passes, it would be a nightmare for capitalism globally.
However, the current war is not the root cause of capitalism’s problems.
Growth was already slowing across all the major economic blocs before it began.
In the US, Europe and Japan levels of capital investment remain at a low level.
The capitalists worldwide are increasingly not carrying out their historic mission of investing in the development of the productive forces.
This is an ailing system.
The lease of life – based on increased exploitation of the working class – capitalism received in the aftermath of the collapse of Stalinism is definitively over.
Previously, the Stalinist regimes – which were brutal dictatorships that bore no resemblance to genuine socialism, but were based on planned economies, albeit grossly distorted – had acted as a counterweight to US imperialism.
After they were gone, Western capitalism, with US imperialism dominant, restored profits by stepping up their offensive against the world’s working class, aided by the weakening of workers’ consciousness and organisation in the post-Stalinist period, combined with the 1.2 billion additional workers added to the world capitalist economy with China, in particular, acting as a cheap assembly plant for Western capitalism.
This was the real character of globalisation during this period.
Future historians will probably decide that the 2007-08 Great Recession was the definitive end of that period, which also marked the death knell of Labour’s last stint in government.
However, US imperialism was then able, and prepared, to act as the world’s banker of last resort, which enabled the Chinese economy to keep growing, and limited the depth of the world recession.
But the means that were used to ameliorate its effects – including ultra-low interest rates and large-scale Quantitative Easing – have exacerbated the enormous problems facing capitalism worldwide today.
Further huge state debts were racked up during the pandemic.
Globally, debts today are at record levels across the board – corporate, government and personal.
The putative value of all global assets is now more than 600% of global GDP.
Never has the gap between the real economy and the financial bubbles been so big.
The surge in inflation and the resulting rise in interest rates has made these gigantic debts increasingly expensive and much harder for capitalism to manage.
The major central banks are attempting to reverse QE via Quantitative Tightening, but are having to proceed with extreme caution, for fear of triggering new financial crises.
In fact, new financial shocks, like the bank collapses earlier last spring, are inevitable, potentially with worse consequences.
While inflation in Britain and most countries has fallen from its peak, there is going to be no return to the previous era of ‘cheap money’, seemingly without consequences, which was only possible on the basis of a world situation that has now vanished forever.
And even in the era of ‘cheap money’ investment levels globally – and especially in Britain – remained at low levels.
Now, with corporations burdened by increasingly expensive debt, there is no prospect whatsoever of a new period of sustained economic growth.
Of course, capitalism will not collapse, it will need to be overthrown.
As the inevitable new crises erupt, there will be attempts at international cooperation between the different major powers to try and limit the damage.
Nonetheless, their weaponry for fire-fighting – pumping money into the economy and lowering interest rates – are both much more difficult and more ineffective today than during the Great Recession.
More fundamentally, the scale of cooperation that took place in the aftermath of 2008, and particularly the role China played in limiting the global crisis, will not be repeated.
The Chinese regime is no longer willing – and would risk its rule if it did so – to play the role of an assembly plant for Western capitalism, and instead is an increasingly powerful rival.
US imperialism is therefore desperate to stop its further development, hence the increased tariffs and other protectionist measures by the US, to which China is retaliating.
Whereas China played a role in limiting the depth of the Great Recession globally, the increased tensions between China and the US, and potentially also China’s own internal crises, are set to be central factors fuelling the next downturn.
