It’s not the end of capitalism at all

There has been over the past three years a tremendous amount of guff written about the financial crisis being the end of capitalism. While I can see the attraction, in communications terms, of indulging the idea that these events form part of an epic transformative narrative, unfortunately it is completely untrue.

Let’s focus on Britain for the moment. If you look at capitalism through the lens of Marx, then it’s pretty clear that right now, capital has never been so ascendant over labour. Capital is capturing the returns to growth, and labour is losing them.

The best example of this is the absolute refusal of Britain’s workers to ask for pay rises. The inflationary price-wage spiral has completely failed to fire. The bargaining power of British workers has never been so weak. It’s not just about low levels of unionisation, it seems that the British worker now internalises the idea that their job can be done more cheaply in China, or by an eager foreign worker.

So that means when inflation routinely rests above 3, 4, or 5 per cent, wages fail to keep up, on the latest figures growing by just 1.8 per cent. It even seems to be the case in the public sector. Yes we’ll get massive strikes over pensions at the end of the month. But at the end of all this, it’s pretty clear that millions of workers will ultimately accept paying more, even after a real pay cut, for a palpably worse pension provision.

I first saw this at the Honda factory in Swindon a couple of years ago. Japanese just-in-time delivery stretched to their payscales. Workers accepted a 3 per cent pay cut for workers and 5 per cent for management in the place of compulsory redundancies, to cope with the collapse in world trade after the Lehman collapse. I called it the new “Honda Effect”.

So there is no wage-price spiral. Workers have been tamed, labour is mute.

Something similar is happening with savings. To support the economy nation states, like Britain, print money by the truck load. At least with interest rate cuts, one can see directly how borrowers or companies could benefit. But £275bn quantitative easing is crushing the pensions of current retirees, alongside savings income. And there can be no doubt that it has benefited large corporations and big banks disproportionately.

The euro crisis has got nothing to do with a crisis in capitalism. It is basically political. The single currency could, and would work, if German voters felt comfortable with spending their buoyant tax revenues on supporting the comparably trivial problems in Greece or Ireland. If Germany and Brussels can persuade Rome and Madrid to increase their economic competitiveness, it could even be something of a success. But this is a diplomatic game, not a fundamental problem with the economic system.

I see this on the streets of Athens and even at the Occupy protests I have seen in New York, London and Frankfurt. It’s very tempting to see all this as a global insurrection as TV cameras skip from riot to protest. What I think is remarkable is that protests like this aren’t much much bigger, given the crunching of living standards. Even in China, nominally communist, the soon to start largest migration of humans on the planet, that of migrant workers from rural China to its factories, is testament to the bargaining power of managed state capitalism over its people.

Of course there is one exception to this rule on capital versus labour. The industry where workers capture far more of the returns as wages and bonuses even than shareholders. Three-quarters of workers in this industry are expecting higher or the same bonuses this year than last, even as the economy plunges into slump. As one chief executive told me last year: “Marx would have been proud of the triumph of labour in the banks”. Perhaps football too.

Everywhere else capital is most definitely ascendant.

Right now it’s game, set and match to capitalism.