Britain’s non-investing, cheap wage bosses


Iain Dalton, Leeds

Recent research by two LSE professors confirms what the Socialist Party has said for a long time. It shows that Britain’s capitalist class have failed in their historic mission to invest and develop the productive forces and have instead squeezed the incomes of workers.

Between the second quarter of 2008 and the third quarter of 2013, wages adjusted for inflation dropped by 8.5% on average. The professors argue that tougher lending restrictions on banks mean they have to retain greater levels of capital relative to loans.

The cost of capital investments has gone up despite low interest rates so companies are substituting cheap labour for investment in machinery and facilities and suffocating productivity growth in the meantime. This trend, they argue, was reinforced by attacks and cuts on benefit claimants, forcing them into low-wage jobs too.

The crisis-prone nature of capitalism in Britain (as elsewhere), means that extracting itself from one problem (over-extension of finance), it kept making profits by squeezing wages.

However, this is again storing problems for the future through cutting working people’s consumption and allowing productivity to fall even further behind its economic rivals.

Only socialists offer a way out of this by removing the profit motive and planning the economy democratically to meet people’s needs.