British perspectives 2022 (continued)
While the invasion of Ukraine by Putin’s regime has been watched in horror by working-class people in Britain as in other countries, Johnson has led the global charge by capitalist politicians to cynically use these events to try and consolidate his position. Before the invasion Johnson’s leadership was hanging by a thread as the Partygate revelations piled up. He has successfully used Ukraine to gain a little breathing space, but none of the problems facing Johnson, his party, or British capitalism have been solved.
Nor, other than the short term distraction they have so far provided, will events in the Ukraine assist Johnson. His crass comparison between the Ukrainian resistance and the vote for Brexit is just one more example of his populist approach, where he is often prepared to disregard the interests of British capitalism, prioritising instead shoring up his own short-term base. In an increasingly fractious world, with a war taking place less than two thousand miles from Britain, the majority of the UK’s capitalist class would clearly rather have a more reliable representative than Johnson. Many would prefer Starmer, who has used the war to once again demonstrate what an eminently safe pair of hands he is for British capitalism.
There is currently a concerted attempt to present the NATO imperialist powers as a united block against Putin’s gangster-capitalist regime, but in reality significant tensions between them remain. While it is still the world’s single strongest power, there are limits to how far declining US imperialism is able to unite the other NATO powers behind it. During the current temporary, ‘papering over the cracks’ period of apparent NATO unity, Johnson’s government has, overall, managed to avoid any major blunders that cause short-term damage to the interests of British capitalism. Nonetheless, Johnson has consciously aligned himself with Estonia, Poland and the other countries who are pushing hardest for increased NATO forces in Eastern Europe.
Johnson’s unreliability as a representative of British capitalism could well come to the fore when it comes to negotiating terms for a cessation of all-out conflict in the Ukraine, where there are likely to be significant differences between the US on the one hand and Germany, as the major EU power, on the other. Strains will also increase within the EU. They are already present as shown by the spat between the French President Macron and the Polish prime minister Morawiecki over Macron’s willingness to talk to Putin, with Macron attacking Morawiecki as “a far-right anti-semite who bans LBGBT people.” The possibility of Trump, or a Trumpite candidate, winning the next US Presidential election in 2024 would further destabilise the world situation.
The war has also increased the problems facing the UK economy. Globally capitalism is facing the prospect of stagflation – slowing growth combined with rising inflation – with 2022 likely to be, as the Financial Times put it, “a fraught period of geopolitical realignments, persistent supply disruptions and financial market volatility, all against the background of surging inflationary pressures and limited room for policy manoeuvre”. As they comment much of this was developing before the invasion of Ukraine, but has been enormously exacerbated by it. For the British economy stagflation is already here. In March consumer prices increased by the highest rate since 1992. By contrast, GDP growth slowed to just 0.1 per cent in February, and real wages, adjusted for inflation, contracted by 1%.
As we dealt with in our January 2022 statement on British Perspectives, Britain is in general among the most vulnerable of the major powers to the coming economic storms. A period of stagnation is likely to be followed not by a phase of growth but by a new recession, perhaps in short order. Thomas Pugh, economist at the consultancy RSM UK, is one of several capitalist economists to predict that, “With growth forecast to average just 0.1% in each of the remaining three quarters of this year, it would not take much of a rise in oil prices or a disruption in supply chains to push the UK into recession”.
It is true that Britain has limited trade with Russia. Less than 4% of Britain’s gas supply is from Russia, with around 50% coming from the North Sea. This has not, of course, prevented domestic prices soaring as high here as in Germany, creating huge profits for the energy companies. Russia also only accounts for only 1.3% of the UK’s goods trade. Nonetheless the global surge in commodity prices affects British capitalism hard. Britain’s goods trade deficit was £156 billion in 2021, higher than any other G7 economy, and an indication of the underlying weakness of British capitalism.
In addition there are specific aspects to the Ukraine crisis which effect British capitalism more than other major powers. Over the last twenty years British capitalism has sucked in huge sums of Russian money. The ‘London Laundromat’ has been the favoured destination for ‘cleaning up’ the cash of oligarchs from Russian and other ex-Soviet countries, including Ukraine. Transparency International has identified £1.5bn worth of UK property — nearly 150 land titles — bought by Russians who have been accused of links to the Kremlin or corruption. Sanctions have hit only a small minority of these assets; two-thirds of them are held by companies based in tax havens, whose owners are disguised. Nor is it just a question of property. Since 2005 the City of London has presided over almost 90 equity and debt capital market deals involving Russian companies, raising around $34 billion.
In March 2018, in the wake of the Skripal poisoning, Jeremy Corbyn called for Britain to “stop servicing Russian crony capitalism” which, he argued, “would have a far greater impact on Russia’s elite than tit-for-tat expulsions”. He was denounced by 19 Blairite MPs, who demonstratively signed a parliamentary motion to give full backing to the approach of Theresa May’s government. But it was not only Corbyn who recognised the role of British capitalism’s relationship with Russian gangster capitalism. As the House of Commons Foreign Affairs select committee put it in 2018: “The ease with which the Russian government was able to raise funds in London . . . raises serious questions about the government’s commitment to combating Russian state aggression.” According to Labour more than £1.9 million has been donated by Russian oligarchs to the Tory Party since Johnson became prime minister. New Labour, now revived by Starmer, was no different, however. The ‘golden visa’ scheme – where £2 million bought UK residency rights with no questions asked – was introduced by them in 2008. As European Trade Commissioner, the arch-New Labour politician Peter Mandelson recommended lifting trade restrictions which hindered the business of the Russian oligarch Deripaska – after spending a holiday on his £80 million yacht!
The sanctions and other measures now introduced, including the suspension from trading on the London stock markets of 36 companies with ties to Russia, are of a limited character. Nonetheless, they – combined with Putin’s pressure on Russian companies to withdraw from Britain – will further accelerate the long decline of the City of London – which has already seen its share of global equity values fall from 8.5% to 3.6% over fifteen years. In the era of increased globalisation of the world economy, British capitalism positioned itself as a relatively-low waged, de-regulated, finance and service sector-dominated economy; more neo-liberal than average in a neo-liberal world, with a strong whiff of ‘rentier’ capitalism. Leading figures in the Tory Party hoped to take that process further creating what they dubbed ‘Singapore on Thames’. That dream is increasingly coming into conflict with reality. We are now in a different era, with growing tensions and barriers between the major world powers, leaving British capitalism with increasingly limited room to manoeuvre.
The Johnson government is therefore emerging from Covid facing increasing political and economic difficulties. Some, like the Northern Irish protocol, which appear to have temporarily receded during the Ukraine crisis, can surge back with a vengeance. The biggest issue has already surged back. Fundamentally, the government’s unpopularity has risen because it is presiding over sharply falling living standards. While the pay of the FTSE 100 CEOs has resurged to pre-pandemic levels, no-one else is going to be ‘levelled-up’; instead they are being driven down. 2022 is predicted to see the steepest fall in living standards since 1956. The government’s attempts to blame the standard of living crisis on events in Ukraine have had a limited effect given that the cost of living was already rising markedly long before the Russian tanks rolled in. One in eight adults already report having gone without heating, water or electricity in the past three months. According to Price Waterhouse Cooper the average UK household will be £900 worse off this year, while the lowest earners could see their incomes fall by as much as £1,300.
