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Why the US-UK economic model fails the test on almost all counts

Whilst the City of London, the Stock Exchange and super-rich investors strive continually to assure us that growth is returning and that we can all soon return to business-as-usual as though the biggest financial crash for a century was just an unfortuante blip rather than integral to the core system, they never ask the really key question: do we actually want to go back to that system even if we could (which we can’t)?

After the privations of the last decade and probably of the decade to come, the great majority of the 99% would undoubtedly say No. But, they would also probably say, is there a serious alternative which is not just utopian? Well, actually, there is and it’s operating rather well and certainly much better than US-UK on almost every count.

Under the market fundamentalism of the last 3 decades economic growth in the US-UK has been half of what it was in the previous 3 decades. Most in the Eurozone have done better, and Germany in particular had had consistently higher growth. In manufacturing, which should be the lifeblood of any advanced economy, the US-UK have scored badlywith their industries hollowed out both by international competition and political neglect, while Germany has established a world-class reputation for quality engineering and has an exports record second only to China.

How have they done it? They have consistently worked at producing a strong manufacturing base – our is now only half the size of theirs – and have developed a strong and sound relationship between middle-sized banks and production companies where both partners are committed to the longer term.

By contrast, US-UK have indulged in excessive size particularly in finance, have been far more concerned with mergers and takeovers which has inhibited competition, and have put our industrial companies under unrelenting pressure by the short-term churning of shares in the City of London. As a result Britain now has a deficit in traded goods of £106bn last year, 7% of our entire GDP, while Germany for many years has had a robust surplus.

The US-UK is obsessed with suppressing the trade unions to maximise managerial prerogative and minimise wages by every means possible. The EU social market model has a much more balanced view of the positive role to be played by both sides. Germany in particular has a co-determination system – ironically introduced by the Allies at the end of the Second World War – under which both sides forego their ultimate weapons (strikes and lockout or close-down) in exchange for genuine consultation and shared participation in key decisions.

Given those respective records, which system would you choose?

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