Gross Domestic Product (GDP) is a statistic to which much importance is attached by the high priests of capitalism, our celebrated economic ‘experts’ and central bankers with their panels of expert advisers. Estimates of the growth or decline in GDP in the previous quarter are eagerly awaited, and forecasts for the coming year and beyond are given much credence and lead to sighs of relief when, as with the recent forecast for UK GDP from Moody, they predict growth of 1.2% for 2017, only slightly lower than the 1.5% forecast for 2016. The collective group-think is that, while the UK economy is slowing down, the EU Referendum result will not, as previously feared, trigger a recession. This confidence is buttressed by forecasts of GDP growth in the rest of the world, the recent fall in the value of the pound and the Bank of England’s further resort to ‘quantitative easing’ – the strategy whereby the government, in effect, prints money and lends it to the commercial banks without any strings attached.
Capitalist economies are, of course, always driven by such vague sentiments, reinforced by the wisdom of ‘experts’ who actually have little understanding of how their economies really work or when the next crisis will hit. Moody’s forecast assumes that another financial crash of the kind experienced in 2007 and 2008 won’t occur. Considerations such as the instability of the Euro, the house price bubble and bankers’ continued addiction to casino and arbitrage activity instead of investment in productive enterprises are simply ignored. Also disregarded, perhaps because it is simply too painful for the ‘experts’ to contemplate, is the much greater difficulty governments and central banks will encounter if a crisis in the banking and finance sector occurs sooner rather than later. Next time it won’t be so easy to lay the burden on ordinary workers and their families. That trick can only be played when memories have faded.
The tendency for capital to over-accumulate and resort to speculative activity as the rate of profit declines makes another economic crisis inescapable. It may not arise in 2017, but it’s coming.
Finally, a brief note on GDP. GDP is arrived at by summing the value added from separate commodity generating activities across the economy, thereby avoiding double counting the production of commodities used in subsequent production. It thus represents the income available to a nation to pay wages, capital costs, taxes and (most important to capitalists) profits. It is a useful measure of the scale of an economy, but it has several shortcomings. In particular:
- it fails to measure inputs and outputs at their true economic cost. In particular, no allowance is made for the damage to the environment caused, for example, by CO2 emissions;
- there is no allowance for depreciation of plant and machinery. If this were done GDP would be a good first order estimate of surplus value – a key measure in Marxist economics which bourgeois economists prefer to ignore – assuming that is they understand what it is;
- GDP, even after deduction of depreciation, requires a deflator before it can be used as an efficiency measure. The available deflators such as hours worked have limitations; and
- the statistic tells us nothing about how GDP is shared between capitalists and workers.
For those interested in these more technical matters, I will post a short piece shortly on the Communist University in South London website.
A posting by Nigel Green
Writing in this weekend’s Morning Star ( 10/11th May 2014) Natasha Hoarau daughter of the late, great Bob Crow, says that her Dad who did so much exposing the EU empire for what it is – an undemocratic club for big business bosses – “had no time for UKip”.
She points out that while Bob’s union the RMT “campaigned vigorously on the streets for public ownership of our transport networks”, Brussels based Ukip MP’s were demanding that “member states follow EU rail directives imposing privatisation and fragmentation across the EU”.
Natasha emphasizes that Ukip “aims to add to the austerity measures being imposed on us, not fighting against them.”
The BNP and NF are open extreme right neo-fascist racist groups with violent thugs in their membership. These organisations should have no place in any fair – minded society based on peace, justice and equality. However, we are not getting very far if their support simply transfers to Ukip. Although not fascists as such UKip are a hard right, anti-immigrant outfit and as we keeping hearing on the mainstream media, contain large numbers of racist bigots.
They are also rampant neo-liberal free marketeers, who hate the public sector and workers rights. Apart from wanting to dismantle any vestige of public ownership of our transport systems, Ukip would:
• make it easier for employers to fire staff
• cut Statutory Maternity Pay by more than half
• hand over the NHS to private companies, leaving little left other than the NHS logo
• introduce a flat rate of tax for everyone, which would hurt the poorest much more
• scrap rules which prevent corporate tax avoidance
• scrap the legal right to four weeks paid holidays, statutory sick pay and redundancy pay
(Source: Labour Research May 2014)
The Communist Party says these measures will be catastrophic for working people, men and women alike, and completely opposes every one of them.
The Party welcomes the launch of the ‘No to EU, yes to Workers rights’ platform this week, who are standing in the Euro-elections on 22 May. ‘No 2 EU’ includes Communists on the slate. So if you want Britain to leave the EU, but in conditions that favour working people and public ownership, and in conditions favouring a socialist non-racist exit, then vote for ‘No 2 EU’.
I am especially pleased to report that In London, Natasha Hoarau is standing on the ‘No 2 EU’ slate in place of her father. So good luck to Natasha and all ‘No 2 EU’ candidates.
The debate on the left about the merits of continued membership of the European Union is often clouded by considerable naivety about the scope to reform the EU from within and shift it in a more progressive direction. The chimera of a ‘Social Europe’, promoted in the 1980s by Jacques Delors, then President of the EU Commission, did much to foster this confusion. But we should be under no illusions about the possibility of changing the EU into an organisation defined by social justice and fairness. The EU is using the financial crisis to intervene ever more decisively in the economies of member states, in favour of monopoly capital and the wealthy and to the detriment of ordinary people.
The recent speech by European Commission president Jose Manuel Barroso, in which he outlined his vision for a federal Europe, with full fiscal and political union to be delivered via a new EU Treaty, is simply the latest step in the forced march towards a near-total loss of national sovereignty over internal economic affairs.
I wonder if part of the problem when discussing these issues in progressive circles rests with the confusion in some people’s minds between a legitimate sense of internationalism and interest in European culture on the one hand and a failure to recognise the capitalist underpinning of the EU on the other; allied with a degree of nervousness about being associated with the reactionary, knee-jerk xenophobia and chauvinism of UKIP and others on the right.
But there are sound, progressive reasons for wanting to leave the EU and reshape our economy on the lines of the People’s Charter. Samir Amin has just written a thoughtful article in Monthy Review, which is a useful contribution to the debate, available at:
And, of course, if you haven’t read it already, do get hold of a copy (now updated) of John Foster’s pamphlet, ‘The European Union: for the Monopolies, against the People’, available from Party HQ, for an excellent discussion of the history of the EU and the implications of continued membership.