.... were not for the high value of the pound lowering import prices. By the end of 2002 monthly trade deficits had reached record levels of £3.5 billion and exports to Europe were falling by more than 9 percent on a quarterty basis. Secondly, the manufacturing nies, just as in the USA.
For British capitalism the situation looks uncomfortably like that at the time of the Lawson boom in the late 1980s. A runaway housing market is coupled with a record trade deficit and increasing debt levels.
The main advantage for New Labour is
Currently, a crucial weakness remains the slow growth of productivity. While the UK is no longer falling further behind European and Japanese levels it is not narrowing the gap either, while US productivity is growing faster than Britain. growing debt
And such problems have also meant that British companies have become increasingly unprepared to fund workers' benefits such as pensions, opening up a potential threat to the stability of the system in the future. er in complex ways. For example, the house price boom is sustained partly by investors removing funds from the stock market and putting them into property and also by people buying houses as an investment in lieu of pensions, given the
But in turn, rising house prices are leading to an increase in the consumption boom. Since 1997 the increase in mortgage equity withdrawal - the amount by which borrowing exceeds investment in the housing market - has made up 25 percent of the increase in GDP. In other words a quarter of UK economic growth is funded by borrowing on the back of rising house prices. In the second quarter of 2002 mortgage equity withdrawal was almost 6 percent of post
The multiple imbalances of the British economy show the failure of New Labour to solve the inherent problems of British capitalism over the last five and a half years. During most of this period they have had the advantage of the US economic boom and some growth in Europe based on the low value of the Euro.
But it appears increasingly unlikely that the rates of American economic growth seen in the late 1990s can be sustained and falls in the value of the dollar in 2002 have helped push Europe and Japan into slow growth or stagnation.
It seems probable that the underlying weaknesses of British capital will soon start to disrupt the macroeconomic stability which Gordon Brown and Eddie George have used to underpin the Blairite project Socialists will have plenty of opportunities to highlight the real injustices of capitalism and to argue for an alternative.
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