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March 25, 2012



As a comparator - how is investment going in the USA? And the Netherlands?

(USA is not Eurosclerotic, Netherlands is land-constrained...)

The big problem with this post is that when you load up the paper and look at the tables of investment rates, it doesn't fit the theory.

Investment rates didn't slow in the late 60s and into the 70s in the UK or USA.

It did in some other places, but those places had a different political timeline.

So it's hard to see how you can link "business fixed investment" to the economic story, as the economic story is a roller-coaster and BFI just isn;t...

Luis Enrique

I like the idea of a sweeping story that explains big trends like this ... but I have my doubts.

Maybe I just don't understand it. Take this bit: "But this promoted investment because low profit margins were accompanied by high (expected) aggregate demand and high profit rates;"

so returns on investment were high because although margins were low, the top line was growing. But what caused that growth? You write "but this promoted investment" - how do "Social-democratic efforts to main full employment [that] squeeze profit margins." cause growth?

If these forces cause growth and increase returns on investment, why aren't today's investors in favour of them? There must be some coordination failure or just lack of rationality (a failure to understand that higher margins actually mean lower returns, somehow).

and what were firms investing in during the 1950s and 60s? Heaving industry? But the decline of UK heavy industry has more to do with globalization and the shift to a services economy than the absence of social democratic forces, unless they boil down to protectionism. So would protectionism boost UK investment? And at what cost ... would it be desirable?

If we could achieve growth via "Social-democratic efforts to main full employment" in the past, why can't we today?


«The solution - which Thatcherism and neoliberalism stumbled upon in the 80s - was union-busting, welfare-eroding government. In creating mass unemployment, profit margins were restored and with them investment and growth.»

What if neoliberalism had very little effect on overall growth and was mostly a redistribution policy instead, the the growth effect was due to a simple commodities boom?

Because between 1981 and 2006 (the 25 golden years) the most obvious change was that the UK was a net oil exporter, and the UK state got a lot of free money as oil royalties and excise taxes.

It is comical to attribute determinant influence to managerialist choices between "stagnationist" and "exhilarationist" policies while ignoring this graph:


That graph seems to suggest that there was no neoliberal Thatcher Boom, or no neolabour Blair Boom, just two massive oil booms, accompanied by redistributive "trickle up" policies to ensure that most of the benefits would go to property owners.

james higham

If a reforming social-democratic government introduces labour legislation, a generous minimum wage, progressive welfare measures, that also is managing the common affairs of the bourgeoisie, since a happier and healthier labour force will make capitalist firms function better.

No, both can't be true. The first is not because it's not conservative and the second because it is a euphemism for Statist, enslaving party.

Then it becomes clear.

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