Chris Harman

In Perspective

Blair facts and Brown noses

(May 2007)

From Socialist Review, May 2007.
Copyright © Socialist Review.
Copied with thanks from the Socialist Review Website.
Marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

“The longest period of uninterrupted growth in the industrial history of our country.” So claimed Gordon Brown in his budget speech. This supposedly miraculous economic record is one thing on which the Blairite and Brownite factions of New Labour agree. Except it simply is not true

There was a far longer period of uninterrupted growth, lasting 25 years, from 1948 to 1973. It was also at a faster rate than we have known under New Labour. The Cambridge Economic History of Modern Britain reported that “from 1949 to 1973, the UK economy grew at an average rate of 3.0 percent per annum.” Growth has only been at an average of 2.3 percent since 2000, according to National Institute Economic Review (NIER) figures.

Productivity, in terms of average output per hour worked, grew by 2.86 percent during 1950-75, but by only 2.2 percent from 1995 to 2004, according to NIER, and a mere 1.7 percent last year. From having the second highest figure in Europe in 1950 (after Switzerland) today Britain is well behind France, Denmark, Austria, the Netherlands, Belgium and Norway.

More important to people’s lives than economic growth and productivity is how much of the increased output feeds into living standards. These standards doubled in the 1950s and early 1960s, which is why economists often refer to the period as “the golden age of capitalism”.

The situation under New Labour has been very different. Average household income, after adjusting for inflation, has risen by only 0.35 percent per year since 2001-2, and is actually falling slightly at the moment, according to the Financial Times’ Expenditure and Food Survey.

But average income alone can conceal more than it reveals, since rich and poor are lumped together. One undeniable continuing trend has been a rise in inequality.

Income inequality rose enormously under Margaret Thatcher and John Major – more than in any other advanced industrial country. Today it is even greater.

The incomes of the top 1 percent of people have nearly doubled in real terms under Gordon Brown. Slow average growth of income with increased inequality equals increased poverty.

In 1979 about 5 percent of people lived in poverty (measured as less than half the national “median” income). Today the figure stands at about 9 percent. This is the same proportion as in the last two years of John Major. They have to survive on less than £180 a week before tax and housing costs, with half getting less than £144 a week.

Over the last year poverty has started growing – 30 percent of children, a quarter of parents of working age, and more than one in six non-parents live in relative poverty. That’s 12.7 million people, or a fifth of the population. For all the Blair-Brown talk of a wonderful economy, child poverty fell by just one eighth between 1997 and 2005 and began to rise again last year.

When politicians say poverty can’t be solved by throwing money at it they are deliberately ignoring the reality that “throwing” one thirteenth of the money of the top 10 percent of households would double the incomes of the lowest 10 percent.

Nothing disproves Gordon Brown’s boast more than the unemployment figures. They began to fall under the Major government of the early 1990s with economic recovery from the crisis of the early 1990s, and the fall continued under Brown until about a year ago.

But the lowest point was still higher than in 1979, when a powerful Tory election poster showed a dole queue with the caption, “Labour isn’t working”. In the last year unemployment has started rising again, with an average of 2,700 people being made redundant every working day.

The economy has so far avoided a repetition of the terrible economic crises of the early 1980s and early 1990s. But this is not a result of Brown’s supposed economic skills, nor is it something likely to continue indefinitely.

The Tory government of the 1980s threw away most of the tools with which capitalist governments had claimed they could control the ups and downs of the system-things like exchange and credit controls. But they kept one power – control over interest rates. The first thing Brown did in 1997 was to hand that power over to an unelected committee of the Bank of England.

His only economic strategy – dressed up in pretentious language as a “neoclassical endogenous growth theory” – has been to try to remove as many obstacles as possible for big business to make profit.

So it is hardly surprising that the destruction of manufacturing jobs has continued at the same pace as under the Tories. There were 4.5 million jobs in manufacturing in 1996. Today this is down to around 3 million, the lowest figure since records began in 1841.

What stopped employment levels falling until a year ago was a massive and unexpected growth of jobs in the finance and business services sectors, which now employ over twice as many people as manufacturing, accounting for one in five of all jobs in Britain.

The City of London has beaten New York and Frankfurt to emerge, as one study put it, as “the world’s biggest hedge fund”.

It has not been some magic of Brown’s policies that has brought about this development, but the chaotic, unplanned development of capitalism and the lucky accident that London is ideally based geographically to act as the biggest base for the crazy growth of international financial gambling.

Brown as chancellor has had the same luck as someone with a winning streak at the roulette table. But winning streaks do not go on for ever under capitalism.

Last updated on 27 December 2009