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The crisis remains an investment crisis

investment, pic by 123rf.comPrior to the recent G20 meeting leading international economic bodies such as the IMF and the OECD made tentative calls for increased investment, although this was often confused with increased spending. This is a belated or partial recognition of the real source of the crisis in the advanced industrialised countries. In terms of actual changes to policy it seems to have made no impact at the G20 whatsoever.

As the world economy is once more slowing and there are again a series of spurious explanations offered for this, it is worth revisiting the actual causes of the ongoing crisis which first became widely apparent in 2007. In this piece the advanced industrialised countries as a whole will be the reference point, using aggregate data for the OECD. But each individual economy within the OECD simply provides its own unique combination of these common factors, including Britain.

If one word can summarise the entire crisis in the advanced industrialised countries it is: Investment. The fall in Investment preceded the fall in GDP. It was also the largest component of the fall in GDP and it is the sole component which has failed to recover.

These points are illustrated in Fig.1 below, which shows real GDP, Final Consumption and Investment (Gross Fixed capital Formation, GFCF) for the OECD as a whole, using US$ Purchasing Power Parities.


Investment (GFCF) first fell in the OECD in 2008. Both GDP and Final Consumption Expenditure continued to increase and only fell for the first time in 2009. Falling Investment caused the crisis. On a full-year basis the total decline in Investment was 13% from its pre-recession high to the low-point of the recession in 2009. By comparison GDP fell by 3.5% and Consumption fell by 0.3%. The fall in Investment was far greater in proportional terms than GDP or Consumption.

Even though Investment is a far smaller proportion of GDP than Consumption in the OECD, its decline in monetary terms was far greater. From the pre-recession peak to the low-point of the recession Investment fell by US$1.3 trillion (in PPP terms). Consumption fell by US$ 0.03 trillion, or US$30bn, and barely constitutes a blip in the chart above. The fall in Investment was the largest component of the crisis.

Since the trough of the recession in 2009 real GDP has recovered by US$3.95 trillion. In 2014 GDP was US.55 trillion larger than its peak in 2008. Consumption is stronger. It has increased by US$2.17 trillion since 2009 and is now US$2.26 trillion above its pre-recession peak. By contrast Investment has recovered by only US.94 trillion from 2009 to 2014 and it remains US.37 trillion below its 2007 peak, or US$366 billion. The economic crisis in the OECD remains an investment crisis.

Consumption requires Investment
Economics should be the study and practise of achieving the greatest sustainable material well-being of the whole of society. For most of humanity this still revolves around the struggle for food, shelter and clothing. In the advanced industrialised countries, the required quality of those necessities has increased alongside the desire for good health services, education, welfare, access to recreation and leisure, and so on. Unfortunately, for material reasons a great deal of confusion surrounds that goal and the methods to achieve it.

The (inverted Say’s Law) argument that increased Consumption will lead to increased Investment has evidently not materialised in the current crisis. As noted above, Consumption has increased but Investment has not. This was also the case in the Long Depression at the end of the 19th century as well as in the Great Depression of the 1930s. In both cases Investment continued to stagnate or fall despite a rise in Consumption. Currently we are in a phase of what Marx called the hoarding of capital. Keynes used the terms liquidity preference.

The reason is simple. The advanced industrialised countries are capitalist economies. Capitalism does not exist to satisfy human needs, or the desire for material well-being. It is not driven by ‘demand’. It is driven by profit. Under circumstances where Consumption has recovered, but profitability, or anticipated profitability has not, then Investment will not increase. This characterises the current situation in the OECD economies.

All Consumption of any good or service must be preceded by its production. Any attempt to increase Consumption without increased production simply leads to the creation of debt, a claim on future production. It is unsustainable. The current downturn in the British economy arises because household debt and overseas indebtedness have both increased to unsustainable levels.

There are two principal methods of increasing production. One is to just get more people into work and/or make them work longer hours for less, or some combination of the two. The other is to increase the productivity of labour through increased Investment, either in the amount or quality of the means of production or through the increased skills of the workforce. The former cannot lead to rising living standards as it relies on working longer for less, and is the path Britain has chosen over the past period. The second method, the increased productivity of labour requires Investment.

Therefore, in order to raise living standards and to sustainably improve both the quality and quantity of goods and services generally available (including housing, health care, education, welfare and so on), it is necessary to increase Investment. Increased Consumption first requires increased Investment.

Levels, ratios and proportions
The Consumption of goods and services is a measure of the material well-being of the population. Yet, there are two main uses of all output, it can either be consumed or invested. So, if it were possible to sustainably increase the level of Consumption by reducing the proportion of the economy directed to Investment and increasing the proportion devoted to Consumption, then the level of Investment should be reduced to a minimum or even zero. In reality, the opposite is the case. The greater the proportion of the economy devoted to Investment, the faster the rise in sustainable Consumption.

Taking just the OECD data cited above, in the period from 2007 to 2014 investment as a proportion of GDP fell to 20.5% from 22.5% in the period 2000 to 2007. Consequently the proportion of GDP devoted to Consumption rose. Yet the level of Consumption increased by a cumulative 18.6% in the earlier period and has increased by just 6.4% in the same 7-period since the recession. The level of Consumption rose more rapidly when it was a smaller proportion of GDP.

This seems to be paradox, in that a falling proportion of Consumption in GDP leads to its faster growth rate. It is extremely important, since the population naturally does not care what proportion of the economy it is consuming, only that its material well-being is rising. But there is no paradox if it is understood that there is no such thing as a Consumption-led economy. On the other hand, as Investment increases the means of production, then the economy as whole can expand with rising Investment. From this expansion of GDP it is possible to increase the level of Consumption.

This is why the economic policy framework outlined by Jeremy Corbyn and John McDonnell recently is so important, because it is correct. There is a clear emphasis on borrowing for investment, and that the current or day-to-day budget will be in balance over the business cycle. The National Investment Bank will be the principal vehicle for the investment. This amounts to the public sector having a greater role in the investment function, thereby leading to stronger growth. It is primarily from this source of rising activity that the current budget will be brought into balance as tax revenues increase and social welfare outlays related to poverty and underemployment decline. Over time the entire austerity could be reversed and living standards raised.

It is George Osborne’s refusal to invest, indeed his ridiculous ban on productive investment that will deepen the crisis. The new framework from the labour leadership begins to offer a way out of perpetual crisis and austerity.

This article first appeared at Socialist Economic Bulletin

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  1. David Ellis says:

    Naturally the crisis is one of investment because we have global over production on a mammoth scale which is made worse by austerity and of course by stimulus. Capitalism has in fact come to its end. US globalization was as far as it could go and now that is unraveling at an alarming rate. No other political-economic arrangements that could give capitalism a new lease of life are available and if they were the amount of violence needed to establish them would make that which eventually saw America assume the leadership of capitalist imperialism from Europe (two world wars and a Great Depression) look like a lovers’ tiff and the new era they would usher in would be brief indeed. But there are none so what we are looking at is either the unraveling of globalization and a New Dark Ages from which there will be no escape for mankind or world proletarian revolution that can transcend capitalist globalization and start human kind on the next leg of its journey. No mode of production ever disappears from history until it has completely exhausted it potential. That point has arrived for capitalism. It is as it was prophesied it would be a straight case of socialism or barbarism.

    1. John Penney says:

      Utterly ridiculous , overheated, ultraleft phrasemongering, David – as usual.

      Capitalism has not “come to its end” you silly man. It is currently trapped in one of its periodic long wave crisis – of profitability – not “overproduction”.

      There are a number of ways capitalism can escape from such a crisis, or maintain itself for a considerable period pending a new wave of post 1945-like growth – as just such an apparently “unsolvable ” crisis faced capitalism on this level of severity in the 1930’s.

      In a systemic crisis of global profitability Capitalism can “hold the fort” for its existing property and production relations and wealth ownership for a considerable period , by handing over key states to fascist dictatorships or military juntas. This is certainly barbarism – but it isn’t in itself the “end of capitalism”


      Bourgeois Democratic States can, and the US did in part in the 1930’s in the comprehensive Roosevelt “New Deal” programmes , choose to adopt a wide-ranging mixed economy “statist” approach – with major intervention in the economic sphere by the state – particularly to carry out precisely the vital productive, productivity increasing” investment that, as Michael’s excellent article explains, private enterprise, neoliberal capitalism, is quite incapable of carrying out in the current phase of the capitalist development cycle.

      The New Deal did not of course decisively lift either US or global capitalism out of the Great Recession – only rearmament, the mass destruction of capital in WW2, and the development of new technologies and techniques , and open global market access under the new US/Dollar hegemony did that. The New Deal did however, significantly tackle the worst under-investment and related underconsumptionist features of capitalist deep depressions. The New Deal helped the US economy to weather the worst features of the Great Depression – and to emerge as the world capitalist hegemon after 1945.

      Comprehensive State-led , interventionist, economic restructuring does not in itself “solve “the systemic capitalist crisis at this mature/decrepit phase of its cycle – ie, a crisis of profitability (not “underconsumption” OR “overproduction” – both merely symptoms of the malaise of the “falling rate of profit” system-wide). It can however buy considerable time for both more fundamental political advance by the socialist governments who are alone capable of pursuing such a policy, for the working class majority – requiring a comprehensive attack on the property rights, and wealth, of the superrich capitalist class in general, and their currently completely out of control parasitic financial sector in particular.

      What happens next will depend on the balance of forces – a mixed economy under major state direction can develop to a democratic socialist state – a Stalinist tyranny – or as happened eventually after 1945 – restored capitalism (with a huge input from state financed investment and initial close control of the banking sectors)
      riding a new long term growth wave – based on many of the technologies advanced via WW2 arms development (automation, plastics, computers, open global markets, etc). The capitalist class then managed , with the collaboration of their social democratic allies to gradually dismantle the wartime originating statist limitations on their untrammelled power to exploit – producing the neoliberal chaos we have today.

      The point is that there is no “inevitable end of capitalism” implicit in the current profound global capitalist crisis. Many routes forward are possible – from fascism ,to Stalinism, to a progressive democratic “transitional” socialist planned mixed economy statism.

      The one option that definitely isn’t on offer is the juvenile ultraleft fantasy of an all out cathartic “full -cream” socialist revolution on the historically aberrant 1917 October evolution model. The total destruction evident in Syria today shows what happens when a population rises up against a state equipped with today’s modern weaponry, and able to draw upon the support of significant sections of its citizenry.

      Give the schoolboy toy Bolshevism a rest , David. Capitalism is indeed in crisis . But it aint going to collapse any day soon, or later. The job of serious socialists is to offer a believable progressive developmental route out of the worst, chaotic, debilitating, aspects of this global and UK crisis – building the arguments and mass support for socialism along the route of this long political march.

      1. David Ellis says:

        Shut up you numpty. Just another chiseling opportunist posing as a socialist.

        By the way you gotta love the old dialectic. The seemingly opposed approaches of austerity and stimulus have the identical effect of exacerbating the crisis of over-production which is itself a product of the declining rate of profit. Capitalism cannot grow any further in the current political economic arrangements and no other possible arrangement is available to it. It is stagnant and bankrupt and without growth capitalism is a dead economic system. Even a tiny amount of global growth requires vast amounts of capital which requires huge concentrations of capital which snuffs out economic activity. So even an idiot can see its finished. Yes capitalism is a corpse. No growth means no churn, no social mobility, means the development of class consciousness among the masses and the end of divide and rule and its replacement with naked violence.

      2. David Ellis says:

        `The total destruction evident in Syria today shows what happens when a population rises up against a state equipped with today’s modern weaponry, and able to draw upon the support of significant sections of its citizenry.’

        It is disgusting that somebody like you is even legally allowed to call themselves a socialist. Syria shows what happens when the only `socialists’ around are a load of neo-Stalinist Putin-loving Assad-supporting mis-leaders, opportunists and traitors like yourself.

        1. John Penney says:

          You are seriously unhinged, David . Please get professional help… Soon ! Or at least stop these endless Dave Spart mad posts.

          1. David Ellis says:

            Get lost troll. Stalk someone else with your reactionary crap.

          2. John Penney says:

            Up your meds dosage , David – the paranoia is becoming embarrassing.

          3. David Ellis says:

            More trolling.

          4. C MacMackin says:

            John, don’t feed the trolls; it only encourages them. I know how hard the urge is to resist, but it’s better all round if you do. David, since you consider John a troll, the same advice applies to you.

          5. C MacMackin says:

            And I realize now I probably just stirred the pot up even more with that comment…

        2. J.P. Craig-Weston says:

          I’ve always enjoyed this one and it’s, (Cryptonomicon,) also a damn good read and probably a better way to spend you’re time than spatting with self important cretins like Penney;

          “Arguing with anonymous strangers on the Internet is a sucker’s game because they almost always turn out to be—or to be indistinguishable from—self-righteous sixteen-year-olds possessing infinite amounts of free time.”
          ― Neal Stephenson, Cryptonomicon

          1. J.P. Craig-Weston says:

            I also quite enjoyed the article.

  2. Laurie Rhodes says:

    Large elements of the Roosevelt’s New Deal were challenged as unconstitutional and thrown out by the Supreme Court. Prior to judicial intervention, pump-priming had extremely positive effects on the economy. The New Deal (specifically the National Recovery Administration) was primarily about returning Americans to work and lifting wages.

    The Supreme Court intervention in 1935 and Roosevelt’s move to balance the budget in 1936 derailed the economy to the point that historians credit the military production of WW2 as responsible for lifting the nation from the Depression. That’s not refuting the benefits of Keynesian as there are other countries that adopted the prescription early that had very successful results.

    New Zealand had a 14 year Labour government from 1935 onward. Sadly, there isn’t a lot written about it. The country was largely out of the Depression by the end of 1938 and had been transformed by a programme of public works, social security, healthcare and education investment and deliberate lifting of wages. It had nothing to do with the war. The country had to deal with economic sabotage from the “global market” (which was Britain at the time). New Zealand’s model was largely adopted by other Labour parties globally after the war. Instead of clinging to the Laissez Faire arguments of recovery through Free Trade, recovery was due to rejecting free markets and meeting internal demand through state investment.

    I don’t accept that the ongoing economic crisis can be summarised with the word “investment” at all – that’s too simplistic. If we were talking about the Depression – which was the result of the last global period of free market / free trade hegemony, few would suggest the fundamental cause was lack of investment. Investment was foolhardy as global demand flat-lined, real wages fell and profits evaporated. The economy switched from being based on production to speculation with “investment” a gamble of capital appreciation. Surely this is exactly what we have now. Investment is more commonly associated with buying a rental property than trying to establish any form of production.

    What the article doesn’t show is the constant fall in the role of production in Britain’s economy. Manufacturing accounts for only 10% of current GDP, half of it’ importance in 1995 and a third of where it was in 1970. Globalisation has left the nation heavily dependent on imports. Since the GFC Britain’s level of debt in relation to GDP has doubled as a result of providing cheap credit, supposedly to stimulate investment. As long as the UK is dependent on importing consumables, any increase in the material wealth of the population is met with an immediate outflow of capital across the nation’s borders. The ability of Government to invest in production and infrastructure is very important but without reducing the flow of wealth out of the economy it becomes a ticking time bomb. Keynesianism is dependent on managing imports and exchange reserves which allowed government to invest in the economy. Without addressing the outflow of capital, the ability of government to sustain investment is extremely limited.

    1. David Ellis says:

      Even the Chinese cannot sustain investment.

    2. John Penney says:

      Good points, Laurie – especially about the 1935 New Zealand governments radical Keynsian economic programme – of which I was entirely unaware I have to admit.

      You are though I’m afraid entirely wrong to suggest that the US New Deal was “derailed” after 1935. In matter of , well documented, very widely recorded, fact – 1935, despite the Supreme Court and a rising tide of capitalist resistance, actually marks the start of the really dramatic , state interventionist, second phase of the New Deal , which 1935 to 1938 (after which global rearmament started to “solve” the capitalist system’s inability to decisively climb out of world recession), was marked by extraordinarily large scale state–led interventionist measures to stimulate the US economy, eg, the Works Progress Administration (WPA) relief programme employing more than 8.5 million workers to build 650,000 miles of roads, 125,000 public buildings, as well as bridges, dams, parks , etc , – 34,599 projects in total. It was in the half-hearted FIRST phase of the New Deal that Roosevelt tried to maintain restrictive and therefore self-defeating, orthodox fiscal policy.

      Good points about the current UK economy too.

      Today, of course, with the ability of the UK government to borrow on the Money Markets for almost nothing – and also increase the UK money supply via “People’s Quantitative Easing” through a National Investment Bank with negligible impact of inflation, an interventionist state-led infrastructure programme could build and refurbish millions of social housing projects, create a state of the art broadband infrastructure, rebuild our now disastrously undercapacity power generation capacity – and a host of other social useful, productivity enhancing major projects.

      Only the malign ideologues of neoliberalism (including the Blairites in the PLP), and their mirror image, the daft Dave Spart -ist ultralefts like David Ellis, and the CPGB sects believe that if “the market” doesn’t want to carry out infrastructure development, it just can’t happen. As you rightly point out , citing the New Zealand instance in the 1930’s – Keynsian State-led intervention can indeed make a big positive difference for the citizens benefitting from a major infrastructure and targeted training and welfare support programme.

      1. David Ellis says:

        The mirror image of a neo-liberal ideologue is a deluded Keynesian not a Marxist economist. Left opportunist to the core. Even when your ultra leftism led you to form an electroral bloc with a bunch of useless centrists in Left Unity against the Labour Party that ultra-leftism was only ever a cover for your rancid opportunism. You spent the whole time in Left Unity opposing a principled programme like some Blairite bitch arguing for an accommodation with capitalism. Now that you are back in the Labour Party you are rapidly working your way to the right of that party where you genuinely belong.

        1. David Ellis says:

          Probably the greatest example of Keynesianism was Hitler’s Germany. War is also always a very good example.

      2. Laurie Rhodes says:

        Roosevelt signed into law large cuts to the Public Works Administration and Works Progress Administration budgets beginning in 1937. The United States entered recession from the end of 1937 through 1938. Unemployment increased from 14.3% to 19%, industrial production and consumer spending fell markedly. In response to the new crisis, budget cuts were reversed with $3.75 billion appropriation for new public works projects beginning in 1938. The United States did not began its own massive increase in military spending until 1940.

        The “New Deal” was a phrase coined by Roosevelt in the 1933 election and a play on the beloved “Square Deal” of Theodore Roosevelt’s administration 30 years earlier. How you define what the New Deal actually was is central to determining if it was derailed or not. That said, the National Industrial Recovery Act with its aims of fixing wages, prices, fair trade and enshrining the role of unions had been a key element of the New Deal prior to being struck down by the Supreme Court in 1935.

        At the time, Roosevelts economic programme was called “Experimentalism” and Keynes’ General Theory wasn’t published until 1936 so it would be unfair to strictly define it as just a Keynesian period. The recession of 1937 was clearly due to the federal spending cuts of that time. I would argue that the rejection of the NRA when viewed in combination with economic retrenchment in 1937 marks a very real derailment of what the New Deal began as.

        Although, all in all John, I’m largely in agreement with what you say but feel the importance of the National Industrial Recovery Act to the New Deal is largely overlooked.

    3. J.P. Craig-Weston says:

      I really wish that I understood some of this better than I probably do; but your post make much sense and corresponds with what I know of modern history and, “The economy switched from being based on production to speculation with “investment” a gamble of capital appreciation. Surely this is exactly what we have now. Investment is more commonly associated with buying a rental property than trying to establish any form of production,” for my money that probably hits the nail squarely on the head but also raises some of the issues, diminishing returns on capital, that Ellis cites as indicative of the collapse of capitalism.

      Sometimes I really enjoy reading some of this stuff and am probably learning new things as a result which also answers Penny’s rhetorical question of, “why do I bother?”.

      1. David Ellis says:

        From an exchange I had on the Guardian website under an article worrying about the rise of the robots.

        Me: Don’t worry. The unintended consequence of the capitalist replacing labour with machinery in order to gain a competitive advantage is that the general rate of profit declines, growth disappears, it gets overthrown.

        Ironic interjecter: That’s right. That’s why the economy has constantly gone backwards since the start of the industrial revolution.

        Me: That’s a very metaphysical approach to the problem which ignores the matter at hand. Because things were like x before they will be like x in the future. I think even you know that is b.s. Capitalism is indeed very dynamic and energetic but it must of course burn out in the end and in fact it already has. It establishes certain political-economic arrangements that initially create the conditions for a huge surge in growth such that rising productivity is matched by a growing economy hiding the unemployment that rising productivity gives rise to but it is not long before those political-economic arrangements once so facilitating become an absolute fetter to further development and they must be smashed up and pushed aside. It took two world wars and a Great Depression for America to replace Britain and Europe as the pre-eminent capitalist powers so that it could establish political-economic arrangements that favoured it and capitalism and which ushered in a new but very brief Golden Age for wage slavery. By the 70s American globalization which itself had relied on the good offices of Stalinism to establish itself was already stagnant. The thirty year bankers’ Ponzi Scam was its last throw of the dice. Bush Jnr promised a New American Century that lasted all of eight years before ending in the greatest power the world has ever seen being militarily bogged down in Iraq and bankrupted by the 2008 financial catastrophe. American globalization is rapidly unraveling and there are no possible political-economic arrangements that could give it a new lease of life available to capitalism. Even if there were it would take enormous amounts of violence to establish them and they would endure but briefly. But there aren’t and so unraveling US globalization promises a New Dark Ages. An era of unprecedented barbarism from which in all likelihood there will be no escape for human kind. If working people do not want to go to the grave with the capitalist corpse then US globalization must be transcended and the only possible force capable of that is world proletarian revolution. What I’m trying to say is that growing productivity is an absolute problem now for capitalism which is why the capitalists and their ideologues spend many sleepless nights worrying about robots.

      2. John Penney says:

        That you will indeed” learn new things” from may of the often excellent articles on this site, is indisputable, J.P. C-W.

        But that doesn’t explain your recurrent egocentric delusion that the rest of us (who want to actually assist Jeremy Corbyn in his herculean mission to shift the Labour Party leftwards), want to be regularly confronted by your posts of unceasing anti Labour Party bile.

        I suggest you continue to read widely – but post your pointless pessimism a lot less.

        1. David Ellis says:


        2. David Ellis says:

          In actual fact the only thing that has happened since Corbyn got elected is that he has moved right.

        3. David Ellis says:

          `who want to actually assist Jeremy Corbyn in his herculean mission to shift the Labour Party leftwards’

          Says the idiot who joined a party to stand against Labour only a few short months ago and has done precisely nothing to help the Labour Left regain control of the party and who, now that they have, is cheer leading their capitulations to the right.

  3. Bazza says:

    A good article by Michael and a good term capital hoarding capital. Yes state led public investment plus windfall taxes big business plus more democratic public ownership.
    And when we have sorted the global economy as a transition we consult working humanity on designing a fairer, greener economy say with working weeks of 20 hours to free humanity.
    International Solidarity!

  4. Verity says:

    I agree with much of the arguments presented in the article. They are of course repetition of the same thread which has been mentioned many times. The arguments do not suffer by repetition. But I am concerned by what looks to me like some slack use of terms. If I am correct then they could be disguising of some real problems. I am concerned that what some are characterising as ‘public investment’ actually amounts to consumption and not necessarily productive investment at all. Services is consumption – except where there is training involved.

    For instance it is surely only in a very limited sense that, ‘the desire for good health services, education, welfare, access to recreation and leisure’ is investment. Other than the training which is implicit, these the activities are ‘consumption’ are they not? If I wish for the employment of more doctors, nurses, adult care assistants, teachers and bin men (especially if accepting the imported skills of previous trained staff from low wage overseas/EU economies). In general then if I have an expansion of public services, then I am engaging in consumption am I not? No political party has any commitment to training the ‘new’, ‘young’, alienated Brits (i.e, training) when there is a plentiful supply of low earners from Eastern Europe.

    My dilemma is then, the reconciliation of the need for productive investment with an anti – austerity programme for public services. Some people may be prepared to wait ten years for the productive investment to find reflection in these services – for some their education will have ‘finished’ others in adult care will be dead. The new labour leadership has risen on the back of anti – austerity.

    Small sums may be generated from tax threshold increases to 50% (for higher earners). Some sums may be left from the reinvestment of a ‘Trident surplus’. Some sums may be gained from Google and Amazon paying some tax. Some sums may emerge from accountants gaining a conscience about masquerading ‘profits’ as a ‘loss’ in order to avoid tax. But we will be needing huge sums just to keep local governments as meaning entities. How will we be reconciling ‘productive investment’ (long term) with public sector consumption (short term)?

    1. C MacMackin says:

      A few points here. First off, providing “good health services, education, . . . access to recreation and leisure” will certainly require plenty of operating expenditure, but they will likely need some capital spending too, in order to build new facilities or upgrade existing ones. So there is SOME investment happening there.

      As for how these things would be paid for in the long run, ultimately taxes likely will need to go up for most people–a lot. I probably won’t make myself popular (even here) for saying it, but it is true. You can’t have Scandinavian social services without Scandinavian taxes. As much as I dislike indirect taxes such as VAT, let’s not forget that in Sweden VAT is 25%!

      As for what should be invested in, I have a few humble suggestions: transport infrastructure, clean energy (I’d prefer to see a focus on nuclear–although the white elephant of Hinkley C should be canceled–but have basically accepted that I will lose that battle), pharmaceutical production/development of new antibiotics, medical isotope production (there is going to be a shortage in a year or two when Canada shuts down the reactor producing 50% of the world supply), more efficient manufacturing, biotechnology, and space exploration/development (in the longer term). In short, I’d like to see money invested in industries that innovate and develop new technologies.

  5. David Ellis says:

    The stagnant 70s economy received the greatest Keynesian stimulus the world has ever or will ever see courtesy of the private finance sector handed responsibility for money supply by Reagan and Thatcher. When the UK banks went under they owed their creditors many times more than the national debt a debt which was taken on by the state and the nation. Capitalism is now stagnant and bankrupt. It is an ex-parrot. Today’s Keynesians are the most miserable illusion spreading delusionists.

    1. John Penney says:

      Why don’t you save your time, and our long-exhausted patience, by dropping the so predictable “Dave Spart” rhetoric , and just regularly post up to any article the initials “N.S.B.A.O.S.R” , David – for “No solution but all out socialist revolution” ?

      Since this is actually the entire “theoretical” scope of your schoolboy Marxism ultraleft response to pretty much any issue in any article on this site , or any of the other sites you regularly post on .

      That would leave you more time to recruit sturdy revolutionary workers for your proposed “Workers Militia” – ready for the coming October 1917 re-enactment society cathartic “revolutionary” overthrow of capitalism.

      1. David Ellis says:


      2. David Ellis says:

        Listen you stupid cunt. If I was simply all about One Solution Revolution then why would I bother arguing that Corbyn should head a labour movement leave campaign. You have zero understanding of what an ultra left is even though you were one just a few short months ago. But your ultra leftism was only ever a cover for your rancid opportunism. YOu are an agent of capital whose sole and only purpose for being in the labour movement at all is to spread his vile cynicism and opportunism.

  6. Verity says:

    My previous concern involved the implications of Services constituting Consumption – except where there is training involved (investment).

    John McDonnell’s recent statement has now answered what appeared to me at that time as slack clarity in not recognising that Services expenditure constitutes Consumption. It seems it was not slack clarity. There is unlikely to be any increases or maintenance of public expenditure (except in very special and possibly unique circumstances).

    Our desire for good health services, education, welfare, access to recreation and leisure’, ending library closures, emptying the bins weekly, provision of adult care, protections of welfare payments will be constrained by our capacity to tax or gain entry to the stores of capital hoarded by the elites.

    Dealing with the hoarded capital is an excellent discipline with which to be faced. But since it is obscured by layers of complexity and invisibility and we are faced with some of the best financial expertise available. It will take time (long time) to achieve. Will we be able to employ more tax inspectors? If so what will not spend to pay for it?

    On the other side of the equation the financial benefits of increased productive investment it will take an age to show returns even when we get it right. Productivity gains have traditionally been seen as a divided benefit – a surplus to be extracted and return to the direct producers.
    In the meantime the trade unions (largely public sector) have had at least a decade of pay constraints – with all the inequities that have been generated as a result. The living wage bill will have risen to an almost, real living levels.

    My new concern is will all those ‘blued – eyed children’ who entered Momentum (of which I am one, albeit the Judean people’s anti – EU fraction). Do they understand and accept the depth of political challenges we face? Other than the cult, ‘new person’ dimension of the message they are against austerity. Will they be up to support McDonnell when we allows threats to the valued society’s prizes? Afterall the Bankers’ Couriers in the guise of Reeves, Cooper and Leslie have no interest an alternatives to Conservatism.

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