We are in the middle of an investment strike, with UK companies sitting on hundreds of billions that could be the key to recovery
You know how it goes in a recession: the rivers stop flowing, the factories collapse, the banks crumble and the crops dry up. Or, to put it in another more accurate way, none of that happens. Everything we need to feed, house and clothe everyone is still there. The crisis is a failure of the way we organise society.
If the past five years has taught us anything, moreover, there is no socially neutral way to resolve such a crisis. One of the scandals of this depression has been the way the rich have made a killing while austerity promises to penalise the poor. Last week, the Guardian reported that the hundred richest Britons are hoarding billions in offshore tax havens. UK Uncut has long argued that simply closing tax loopholes that allow the rich to keep more of their cash would supply the revenue supposedly saved through cuts.
There is an element of truth in this. It is clear that the government has chosen a way out of the crisis, justified by the pretext of paying off debt, whose effect will be to transfer wealth and power to the wealthy and powerful.
Yet far more scandalous, in a way, is the little known fact that Britain’s companies are sitting on £318bn in cash, because they don’t see a profitable investment opportunity. That has been the case for several years. The government has been relying on the idea of a private sector-led recovery. Expand and invest, Nick Clegg has urged, while George Osborne has begged businesses to help the government “fight the forces of stagnation”. Yet each year, the statisticians come back with the same dismal story: businesses refuse to expand and invest.
This is an investment strike. And it is worse than tax loopholes because investment capital is more important for employment and wellbeing than the luxury consumption of the rich, which is protected by tax evasion. It is a characteristic waste of resources under capitalism: because if it doesn’t make a profit, it’s not worth doing.
There is also, despite years of quantitative easing intended to make it easier for companies to borrow, a continued stagnation in lending. The latest Bank of England report on “Trends in Lending” for April 2013, explains:
“The annual rate of growth in the stock of lending to UK businesses was negative in the three months to February. The stock of lending to both small and medium-sized enterprises and large businesses also contracted over this period.”
This is partly because the demand for credit in many sectors, including real estate, is stagnant or decreasing. This is the problem for the government: there can be no sustained private sector-led recovery if businesses are holding on to the cash they do have, and refusing to borrow, because they have no confidence that they can hope to make a profit.
Eventually, the government must assume, growth will resume at something like its previous pace. A bubble in some sector will lead to a frantic surge in investment and soaring stock market values. Money will loosen up, homeowners will feel wealthier and there will be a moderately inflationary budget in time for the next election.
Yet, for those who are alarmed by the idea of waiting for business to pick up while a “lost generation” is deprived of employment and education, of soaring child poverty, and perpetually high unemployment, with the only proffered solution thus far being to tighten market discipline, there must be another answer.
And the answer is simple: a “recovery” led by and for the public. If companies sit on hundreds of billions in profits, we should tax them, and put them to use. Those are the real hidden billions we should be looking for. And we should go further. If the banks don’t work for us, they should be compelled to: we should nationalise them and turn them into public utilities. If companies don’t invest in the infrastructure, transport, green economy and services we need, we should nationalise them and support high-wage jobs. Rather than the whip of the market being used to reduce wages and living standards, the whip of democracy should be used to drive them up.
The “private sector-led recovery” has been highly successful at increasing the wealth of the richest. But otherwise it has delivered only stagnation and social injustice. It is time to take the billions and invest them in a public sector recovery.