Capital and Brexit

Capital and Brexit


Published by Laghamon at Shakespir

By Ed Conduit

August 2016 edition


Shakespir Edition Licence Notes: this book is produced in the general interest and may be freely copied.


The Author

Ed Conduit has practised as a clinical psychologist for forty years and has further degrees in lecturing, computer science and linguistics. He has no formal training in economics, but thinks that social democrats at the present time are obliged to try to understand money. His professional habit of trying to empathise with diverse peoples helps him achieve the national outlook of people in many nations.


Ed’s other e-book on politics and ecology is “Unsustainable Population”. He has also written e-books on linguistics: “The Black Country Dialect”, “Lakeland Language” and “The Iceland Bus”. His work on health psychology was printed in 1995 as “The Body Under Stress”.

The author may be contacted at: [email protected] 

Future iterations of this book will include analysis and data from readers


Table of Contents

[][] Preface

[]Harry Potter and the QE App

[]The alphabet and magic

[]Now read on

[]The triumph of Capitalism

[] Capital, surplus value, rents

[] Capital, Comecon, war communism

[]The European Union

Economic liberalism delivers the goods

Capital out-competes the economic plan; 1991


Commoditisation of housing

Energy, water, transport

Lending to consumers

2008: risky loans

US consumers, walk away mortgages

The Greek bubble

The return of patrimonial wealth

Lending to nation states

Socialisation of Capital’s losses

Public debt keeps on growing


Printing money

Will the EU collapse under its debt mountain?

Migrant labour

The healthy worker

Wages and competition for jobs



Scottish nationalism: resist austerity

The Norman conquest of Scotland

Scots ethnolinguistics

The Holyrood budget

English nationalism: resist migrant competition

The return of class struggle?

Labour’s lack of economic theory

Subjectively: anti-foreigner; “give us back our country”

Objectively: anti-Capital

What is to be done?



[] Preface

This little book offers a political-economic analysis of changes between the credit crisis of 2008 and the EU referendum vote of 2016. Capital is the main driving force of the global economy is that investors can make money by lending. Capital is not a conspiracy, although it leads to conspiracies. It is more like a mould, which grows where water and nutrients can be found. In the nineteenth century Marx and Engels described how capital grew by employing workers, whose work produced goods that could be sold for more than they earned in wages. At other times it involves rents; stereotypically this means payment of money to use a house or workplace, but it extends to other forms of rental. Lending capital to consumers so that they can buy goods on credit led to a major crisis in 2008. Governments everywhere chose to take on large chunks of Capital’s losses and add them to their national debt. While private wealth of the richest 1% recovered rapidly after 2008, government public spending remain compromised by debt. The need to issue gilts is then a further investment opportunity for Capital, and is fuelling the steady rise of patrimonial wealth, as Piketty calls it.

The Brexit result largely represents the votes of the native-born English working class. While the subjective state is merely angry and anti-foreigner, objectively it will cause major damage to British managers of capital. The renewed feeling of being “English” follows the revival of the feeling for being “Scottish”. There is a shared economic determinant, which is the decline in housing, schools and welfare, which had seen huge improvements under the Labour government after 1997. In the short term the Scottish region of the UK can maintain services by a large allocation from the Westminster government. Unfortunately, this adds to the UK public debt, which has been rising by £5,170 a second under the Conservative-led governments. English regions cannot easily follow the Scots belligerence about public expenditure, so English nationalist feeling is to seize back contributions to the EU. In the middle term neither aspiration will add to public wealth and return Britain to the relative economic comfort of the early 21st century.

Therefore, governments after 2016 have to reclaim some of the outflow of public wealth to private pockets. Public housing and utilities can potentially increase revenues to government without increasing their cost to the consumer. Withdrawal from the EU is likely to sharply reduce the finance and insurance sectors in the UK, so recovery will ned to come from other sectors. The fall in the pound will create increased inward tourism and a price advantage to UK exports such as aerospace engines and pharmaceuticals. These and other ideas that would allow wealth distribution and debt reduction are expanded

Harry Potter and the QE App

In this story the people of the world are enslaved by debt. Everybody seems to need borrowed magic. The young magicians must find a powerful maker of spells called the QE App. But first they must learn the history of magic.

The alphabet and magic

Every young person with an interest in magic knows that spells are made up of words, and words are made up of letters. In very old times people did not have magic; they just ate what they could find and got themselves warm in caves or by fires. Later they found some bits of metal, such as tin or copper, were quite useful as well as having a magic shine. Two metals were not very useful but seemed to contain magic from the skies: gold was thought to be the sweat of the sun and silver the tears of the moon. People started to swap bits of gold or silver for things which are useful, and this was the earliest form of magic. Later on they found that letters of the alphabet store magic as well, and these were easier to carry than lumps of gold and silver. At first there were only lowercase letters, and each had the same amount of magic in it. Most people were similarly poor letter ps, which is why we say as like two peas in a pod. Then some letters – b, d, and k – thought themselves a bit better and took magic from the ps. The ks were particularly greedy, took all the gold and silver they could find, and called themselves kings.

Later still some letters found they could increase their magic by becoming uppercase. By this time some ps where digging metals from the ground. It was dangerous, so they needed pit props and buckets and so on. Some of the bs and ds said they would provide these if the miners would work for them for a wage. This is how the ws started. A w dug out coal and gave it to a c who owned the mines, who gave some of it back as wages. The coal was used for heating, so the mine was called a fuel stop. The ws started to get suspicious because fuel sounds like “fool” in the speech of the lower cases, so the cs changed the name to “full stop”.

Society started to divide according to punctuation marks – full stop, semicolon and comma. As everybody knows, a full stop has to be followed by capital. The cs found that by putting down full stops they could turn themselves into capitals and take some magic from the ws each time they did it, so they were called Capitalists. The ws started to grumble about this and tried to organise themselves into political parties to get some of the magic back. One political party were the Semicolons, a name which means they wanted ws to become semi coal owners. Another political party wanted to abolish capitals altogether and replace them by commas, so they were called Commanists.

A certain Mr Marx spend a lot of time in libraries trying to work out how this magic accumulation worked. Young people will know his name, because he had lots of grandchildren like Groucho and Beppo who made funny films. As everybody knows, there is a lot of magic lurking in libraries and ghostly spectres manifested themselves to him. Mr Marx wrote a ghost story called the Commanist Manifesto, which starts like this: “there is a spectre hanging over Europe-the spectre of Commanism”.

Then some greedy Cs tried to get magic from ps and ws in other countries, especially the Dark Continent. They got cross with each other and eventually there was a big war, called the war to end all wars. Nobody really won the war, so they all stayed cross and had to have another war to end all wars. One country thought they should have won the war to end all wars and started conquering other countries. They called themselves the nzs, but then found a letter from an Indian alphabet like this: 卍. Every sensible magician knows better than to use another magician’s alphabet. It turned out that the NZ fighters could only capture magic by killing the people who had it. All the other countries got very worried about this and fought back. They forgot about the capital problem for a while and whether they were lower case or uppercase. Some of the people who would have been capitalists learn to fly on small fast dragons, call Spitfires. People watching said “Phew! They’re fast!”, so the riders were called The Phew.

The lower cases in one country managed to get rid of the Capitalists. The other capitalists did not like this, so they had another war to put the cs back. Even more people died, including most of the ws. The lower cases did not really get control. A new letter k bossed them about and chose some really big letters for the country: CCCP.

When the war to end all wars (part two) was over, the cases got along better for quite it a few years. There was a lot more magic and everybody got some. But the magic of capitalisation had not gone away. Some capitalists discovered that houses could be made to produce magic. This was a bit of a surprise, because bricks and stones don’t usually have any magic.

Then a fairground magic trick invented by a Mr Ponzi became popular: ws were persuaded to borrow a bit of magic and told how they could make more, but really they were giving away magic to the people who lent it. This all went quite happily for a few years, until the borrowers found they could not give the magic back, and then the capitalists found that a w’s house did not really have any magic. There was a big crisis and lots of magic disappeared. The capitalists got the arch magicians to swap the weak magic for some government magic. And this is where the story of the QE app starts.

Now read on

One day Draghi, the grandest wizard in Europe, is heard to say “I hereby create eighty billion euros by quantitative easing”. Draghi used three capital letters together to hold this huge amount of magic, like this: ECB.

Soon the ECB is buying assets with this magic money and nobody notices. Harry and his chums discover that certain grand wizards perform this trick with a magical device even more powerful than the elder wand: the QE App. These grand wizards lead a secretive existence as governors of central banks. With the App a governor can perform a spell called Quantitative Easing, in which money is created from vacuum. The novice wizard Tsipras from Syriza learns in Magic 101 that the spell can be used in reverse. Tsipras and utters the words “debt national Greek abolish hereby I”. But he does not know the password.

Harry is tempted to help young Tsipras, but then learns a darker secret about the money system. The muggles’ money says on it “I promise to pay the bearer on demand the sum of twenty pounds”, and they believe the bank has gold in a remote stronghold called Fort Knox. But Harry finds out that the gold standard spell was lost in the Bretton Woods and Fort Knox is empty. Magic is now only fiat money. (This name is thought to mean “let it be” in the Ital tongue. The Fiat was a carriage which often broke down so a husband got cross and kicked its wheels; his wife said “let it be”.) Now fiat magic holds society together only because all muggles believe in dollar equivalence.

The QE App is dangerous. When the QE spell is used properly by a grand wizard, only a little of the magic leaks out as inflation. Using the QE spell backwards releases unpredictable magical energy. When the renegade wizard Landsbanki of the Land of Ice cast it, he got one letter wrong. He tried to type “send cash in Euros”. But his Icelandic keyboard did not have a “c”, so its effect was “send ash to Europe”. It unbound the ancient curse of Eyjafjallajökull and struck down all flying creatures. No foreign wizard could pronounce the name of the upstart from the Land of Ice, until a coven of warlocks from the Skandi lands managed to summon up the twin sons of Thor. Magni and Móði hurled themselves into the rent in the fabric of the world, where they turned into trolls of stone.

The lava stopped for a while, but wizards more careful. Farage, the leader of the small wizards has been heard rehearsing the small spells: “smoky British pubs are restore-ed” and “VAT is henceforward abolish-ed!” These do not concern the wizards much, but rumours started of a new curse “I hereby invoke article 50”. The wizards calculate that if this curse were used, all the magic of the City of London would fly in two milliseconds at the speed of light to Frankfurt.

Harry wants to help the muggles of Angle-land, but does he dare? Once before a wizard from the Ice Land tried to cast a spell which unbound the sleeping giant Laki, who spewed fire and ash onto Europe. Then the muggles of French-land lost their wheat harvest. Having no bread or cake, soon they were revolting. If Harry makes a mistake, will the strongest binding spell of the world, trust in fiat currency exchange, be undone?

Now we have a similar story for older readers. Back to ToC

The triumph of Capitalism

Capital, surplus value, rents

The central mechanism of Capitalism according to Karl Marx was the extraction of surplus value form wage labour. To make a profit on his capital, the investor had to sell goods made by the worker at a higher price than he paid the worker. This relationship is inherently tense as competition forces down the price of goods and workers try to increase their access to food and housing.


Capital can also achieve a profit on investment by rents and trade. Rents are basically payments for housing, but can also to mean payments for use of land and many other activities. Trade typically involved the capitalist lending money to a ship owner to sell goods in the Orient and return goods for sale in Europe. There was a considerable risk-perhaps 3 to 6% - of shipwreck, which would be a disaster for the individual ship-owner but a manageable risk for the capitalist The Dutch East India company typifies this.


Marx expected the proletariat everywhere to be forced into increasing desperation, when they would have “nothing to lose but their chains” and try to seize private wealth for the common good. In practice only one major country had a proletarian revolution – Russia. Almost immediately the “dictatorship of the proletariat” was challenged by wars of intervention by European capitalist powers. In this war the Russian working class was essentially wiped out. The Soviet Union survived somehow, but was ruled by a small party elite no longer regulated by the proletariat and turned into a repressive police state. Nonetheless, did manage to greatly increase productivity. The planned economy greatly increased productivity and the standard of life workers and peasants. For example, by producing steel for tractors the productivity of a farmer could be increased eightfold. Russia before the revolution had been mainly peasant society, with only 5% of the population employed in urban industry.


European socialists had expected that Germany would undergo a proletarian revolution, with all yes the advantages of a productive economy and a large working class. This did not happen despite the famine after the First World War, currency hyperinflation and widespread misery. The disastrous blind alley of national socialism was one of the consequences.


War communism

Planned economies work well in some environments. War communism is particularly effective. Despite the catastrophic errors of the USSR when Hitler invaded, it was able between 1941 and 1943 to produce more tanks and planes than Nazi Germany, which had 20 million men under arms. An economy with a large military can stimulate the other sectors of the economy. Until about 1970 North Korea actually had a higher standard of living than South Korea. Thereafter centralised economic direction in the form of Gosplans became less and less competitive. There is now a marked lack of theoretical understanding of how the state should interact with the market. Market forces for food, cars and consumer goods have clearly delivered benefits. In the case of rail, energy supply and housing the advantages of the market over state monopoly are more doubtful.


Planned economies worked most efficiently in times of war preparation. The USSR, UK both became very efficient under “war communism”. Amazingly, North Korea was prosperous than the south till 1970. Thereafter production of consumer goods outweighed military preparedness as the economic driver.

Capital out-competes the planned economy

The European Union started as a customs union between France and Germany coal and iron. It became amazingly successful as more and more countries wish to partake in the peacetime economic growth that it symbolised. It appeared that economic liberalism would generate prosperity for all the citizens of Europe.

Capitalism simply out-competed Comecon by 1991. Goods such as Lada or Praktica cameras had to be sold below the cost of their manufacture to acquire foreign exchange to buy computers. The collapse of Comecon symbolised by the fall of the Berlin wall led in most of its countries to a rapid inflow of capital and increase in consumer goods. So far, so good. The problem which had become hidden Capitalism simply out-competed Comecon by 1991. Goods such as Lada or Praktica cameras had to be sold below the cost of their manufacture to acquire foreign exchange to buy computers. The collapse of Comecon symbolised by the fall of the Berlin wall led in most of its countries to a rapid inflow of capital and increase in consumer goods. So far, so good. The problem which had become hidden in the European Union is that its underlying driver is for capital to gain a return on investment. This would reappear in 2008.


_ Commoditisation of housing_

Privatisation of state assets was proceeding in several EU countries after 1980. Under the Thatcher government property turned from places where we live and work into a commodity that returns rent. The policy was promoted in terms of “the individual’s right to buy”, but its main effect was to turn houses into a commodity which would generate rent. The housing market in the UK has been very successful for buy-to-let capital. Private renting in the UK has yielded around 8% return on capital for the last two decades, compared with 4.5% average, and the 4% of Standard Variable Rate mortgage repayments. Affordable housing is avoided because of low returns, so the supply of property well below demand. There is a pool of over 600,000 permissions to build in the UK, which the nine big builders in the FTSE250 are not using because they say there is “no demand”. This improbable statement means that very few couples can contemplate the £210,000 for an average house. (Recall that gold bars in Fort Knox used to serve a similar purpose.) “Generation rent” is obliged to pay 40% of income to private landlords.

Public housing is perhaps the simplest strategy for the government increase its revenue while also providing for low earners. The exchequer previously acted as lender to local government for house building. Loans were typically over 60 years and attracted 1% or 2% interest. The exchequer could do so again and would act as banker and local authorities as borrower. Rent returns would be used to pay off central government’s gilts, or kept for future investment in housing stock. This would restore the role of local government as a public (avoiding the word "council") housing provider and discontinue the Thatcherite approach to sale of council houses. The exchequer itself is too clumsy a manager to initiate investment. Capital generally pursues the strategy of privatising profit and socialising loss, so the state merely becomes a milch cow if tries to implement economic plans. Local government and some quangos are in a better position to advance loans against business plans. The market is more efficient at the local level, so the role of the state should be restricted to setting quality and safety standards.


Houses in London have become like gold jewellery. Gold cannot really be used for practical purposes, but it retains or increases its exchange value. Many investors see owning property and keeping it empty in London as an investment. Apart from well-known purchases by Saudi princes, the Guardian produced a map of property developments in London by foreign corporations. This diversion of housing resources will aggravate the already enormous bubble of London property prices. Government for London could selectively impose higher taxation of empty property, or require appropriate occupancy. Birmingham was named in January 2015 as the next major target for foreign property investment. The Guardian newspaper often reports on the movement of Capital into UK property.


The property market UK continues to be a lucrative form of investment, often at the expense of low and middle earners.


Energy, water, transport

All public selloffs starting with council houses were at one third below realistic value. The actual loss of public assets needs to be calculated. Gas, water, and electricity now return interest to shareholders rather than the state. Water is perhaps the utility where market forces have lest effect: there is one distribution network with little possibility of introducing customer choice. A pseudo-customer OFWAT was created. Water privatisation also involved a large fixed network of pipes going into houses and factories. There are 32 suppliers (of either fresh water or sewers, or both) but they are monopoly companies and not in competition. In the absence of any price completion, Ofwat exerts some pressure on behalf of consumers. Bills in 2015 were expected to fall by an average of 2%. Birmingham and Manchester in Victorian times built dams and pipes which allowed them to become big cities, yet these assets have been sold off. While there is unfairness here, it is doubtful that government could generate revenue by increasing its intervention in water supply.

Energy is also dominated by fixed generation and distribution networks, slow innovation and much influence from central planning. Choices between renewables, gas, nuclear and coal are more influenced by policy than price to the consumer. It is not surprising that utilities rapidly settle down into oligopolies – six major suppliers in the UK – with no real market choices. Oligopolies, which means “rule by a few” were also the way the Russian energy market settle down after privatisation. The multitude of tariffs do not conceal the fact that there are differences of only a few per cent between customers’ bills. The big six work together to maintain their margins at about this level. Most of the profit used to be made between wholesale arms (generation) and retailers. As this declined after 2009, profit made at domestic supply retail was increased. All suppliers are constrained by the wholesale spot price of gas, but this was fairly stable and is currently declining. Ofgem says major energy companies’ profits could rise to £114 per household in 2015, up from £77 a year ago.


The energy industry provides a fairly simple example of transfer of state wealth to private wealth, depriving the government of revenues of about £1 billion a year. Little or no benefit accrues to consumers, as there is no competition. If the government were to retake the distribution network from the big six, it could take the 3.9% average profit they make. It would need to avoid large contract penalties and legal costs if it did so.


Rail was the most visible sell-off a public asset, and calls to reverse this are still loud. Tariq Ali regards renationalisation of rail as the main priority and says “the government should just do it”. Rail is in serious competition with road travel, and few railways in the world are profitable. UK Train Operating Companies (TOCs) had a ‘return on capital employed’ of 147% in analysis by CRESC. TOCs have a ‘cap and collar’ relationship with the state, so that shortfalls will be subsidised and higher profits recouped. TOCs therefore aim for a moderate margin - 3.4% margin. The track owner Network Rail itself enjoys a modest 1-2% margin on the same measure. The Rolling Stock Operating Companies are much more profitable: Angel averaged a I think Sarah does a job that is timid you a phrase what exactly would 10% margin in 2011-12. The three ROSCOs - Angel, Eversholt, Portersbook - own the train fleet previously owned by the taxpayer, and lease the vehicles to the train operators. Renationalisation of Angel’s rolling stock would mean taking it from its parent company Willow Bidco, most of whose assets come from pension funds. To renationalise, the government would need to: increase its own revenue; keep penalties and transition costs low; and protect pension funds. A possible approach is to defer most of the compensation payments by some years.


However, nationalisation has sometimes been used by social democratic governments to protect workers in unprofitable industries. This is a short-term defensive solution, which may not prevent the nationalised industry losing sales to its competitors. The UK rail network after World War II had very elderly rolling stock, and was rebuilt using steam rather than diesel as many European countries did. Rail continued to lose freight and passengers to road transport. State ownership should really be considered by socialists when it can generate revenue to the exchequer greater than the investment, rather than indefinitely needing subsidies from the exchequer.

Lending to consumers: 2008

In the early 2000s capital developed a new set of investment opportunities through credit cards. Many people with no history of credit where persuaded to borrow money to buy cars and other consumer goods, and lenders thought the risk of default on these loans was small. In fact the riskiness these loans was quite high, sometimes hidden from the investor by financial devices such as derivatives. The credit crisis of 2008 has been widely examined and reported, so only a brief account is given here. A typical default on a loan in the USA involved the borrower walking away from the house on which they could no longer afford the mortgage. Whereas this is acceptable in the US property market, it then transpired that the resale value of the abandoned house did not cover the loan.

The Greek financial meltdown was also a consequence of the risky lending to consumers of the early 2000s. Due diligence would have prevented it joining the Euro. “Loans to Greece” are actually mainly loans to previous lenders, who could have been forced to take the loss. That the EU continues to play with the fiction that €323billion will somehow be repaid is disturbing. The lender is the European Investment Bank, the EU’s non-profit long-term lending institution, whose shareholders are the member states of the EU. Expulsion form the Euro was an option. Greece selling (or leasing for 99 years) of some of its largely abandoned islands such as Andros territory is a realistic way of reducing the debt. In the absence of realistic solutions, Greeks face prolonged austerity and the nation states behind the EIB must add the debt to their national borrowing.

The return of patrimonial wealth

While states struggle with their debt burden and citizen incomes decline, capital thrived. The richest 1% are increasing their share of wealth by about 10% a year. The UK currently pays £43 billion interest a year, and UK public debt continues its steady rise of £5,170 a second. Pensions, education and health for wage-earners without capital had been met by states. EU governments have generally sought to reduce services to labour by austerity. However, this cuts spending power by a similar amount (the Keynesian multiplier is near to 1.0).

Exactly in parallel with public debt to the gilt market, private wealth has been concentrated in fewer hands. The combined fortune of Britain's richest 1,000 people hit £519bn in 2014, up 15.4% on 2013. This new high doubles the figure of 2008. The number of dollar millionaires in the UK increased from 1.56 million to 2 million between 2013 and 2014.


For example, Italian Stefano Pessina, who said Ed Miliband would be “bad for British business” has personal wealth of $12.1 billion, mainly through his stock in Alliance Boots pharmaceuticals . What is he going to do with $12,000 million at age 71? Why not give half of it to the UK HMRC? Here are some of the richest UK residents in Forbes lists of British (dollar) billionaires:


1 Hinduja brothers $13.1 billion Indian trucks etc

2 Gerald Grosvenor, 6th Duke of Westminster $12.1 billion Real Estate


However, many of the richest UK residents are not citizens, so the Sunday Times Rich List 2014 includes the Hindujas and Grosvenor, but also eight non-citizens in its top 10:


Usmanov £M 10,650

Mittal family £ M 10,250

Blavatnik £ M 10,000

Bertarelli £ M 9,750

Fredriksen £ M 9,250

Reuben bros £ M 9,000

Rausing family £ M 8,000

Abramovich £ M 8,520

Weston family £ M7,300

Carvalho family £ M 6,365


The Office of National Statistics for 2012 estimates the total wealth of the top 1% as £2,152 billion, and of the top 10% as £5,280 billion. The probable public debt inherited by the 2015 government might be £1,600 billion. So if the top 10% gave up a quarter of their wealth, the national debt could be written off overnight. Is there another realistic strategy for escape from

The growing gap between rich and poor was the subject of TV programmes by Jaques Peretti in January 2015. He offered a sharp critique of the UK as tax haven for non-domiciles and the myth of the “trickle down” effect from the super-rich. Personal wealth and the top rate of personal tax are important symbolically, particularly in Britain where wealth inequality is so marked. It is less important for revenue, as rich people can generally find ways avoid taxation. The effect of the Hollande government legislating a high tax rate in France led to rich French people moving to London or Russia. So personal wealth is not the main issue. The difference between the Piketty and Peretti views is that he first is about structure – rents vs wages – not about individuals – the super-rich vs the rest of us.



The French economist Thomas Piketty argues that wealth disparity is an automatic consequence of high return on capital and low growth. Piketty bases his argument on a formula that relates the rate of return on capital ® to the rate of economic growth (g), where r includes profits, dividends, interest, rents and other income from capital; and g is measured in income or output. He argues that when the rate of growth is low then wealth tends to accumulate more quickly from r than from labour, and tends to accumulate more among the top decile and centile, increasing inequality. Thus the fundamental force for divergence and greater wealth inequality can be summed up in the inequality r > g. He analyzes inheritance from the perspective of the same formula.





What are the values of r and g? In the graph above the world rate of return is 4.5%. Kevin Green, who typifies the UK buy-to-let housing market, claims the long term interest rate in the UK is historically at 9%, so every property investment should be assessed on that basis.

Britain is claimed to be “the fastest-growing economy in Europe” by the present government. However, population growth is about 0.6%, not much lower than GDP growth. The growth rate of the UK may be 2% (2.7% less population growth of 0.6%). The real earnings of most Britons have remained the same or declined since 2008. Labour speaks of a "cost-of-living crisis". Piketty's analysis is that this cannot really be remedied without the state recouping more of private capital. Here are some ideas for a revised relationship between private and collective wealth, or what used to be called “Capital and the State”. Back to ToC


Lending to nation states

Socialisation of Capital’s losses

The preferred approach of managers of capital is “socialising loss, privatising profit”. The 2008 crisis was addressed by transferring the debt of the weakest banks to the state. The rescue packages involved states purchasing banks (RBS and Lloyds in the UK), and lending to more viable ones. Then about £30 billion was added by the government acting as ‘lender of last resort’ to RBS and Lloyds in 2008. It is generally accepted – by both Keynesians and monetarists – that central banks should maintain liquidity in this way. The Labour government in the UK and the Republican government in the US came to the same conclusion. The loans have been paid back, but the state remains the major shareholder RBS (81%) in RBS. The relentless climb in debt is now through servicing loans

The money was then borrowed by the state from the market by central banks on a less risky basis. UK gilts over 2 years attract rates as low as 0.5% but are still attractive to pension funds because of their security. These add to the national debt. As of Q1 2015 UK government debt amounted to £1.56 trillion. The EU as a whole has similar public debt to the UK – about 90% of GDP. Germany is somewhat better at 60% of GDP, Italy 132%, Greece 180%. In 2016 the ECB is creating €80 billion a month by QE. This is the amount of virtual money it takes to keep inflation slightly positive. This conceals recession as without it prices would be falling and people would defer buying in the hope of cheaper prices to come.

Public debt keeps on growing

The UK national debt was £1,506 billion on 17/03/15, growing at £5,170 per second. There is little prospect of this being reduced in the 2015-20 parliament, so all income redistribution polices are effectively stymied.


Investment in education after Tony Blair’s “Education, Education, Education” speech in 2002 was the major reason for borrowing. This brought education spending up to 5.6% of GDP, the average for industrialised countries. The concrete benefit was more numerate and literate school-leavers: 45.1% of pupils ended compulsory education with of five good GCSEs including English and maths in 2007, up from 35.6% in 1997. The previous most serious public debt was after the Napoleonic wars, when borrowing was above 200% of GDP, compared with the 100% of GDP in 2015. Repayment of war debt in the 19th century was largely at the expense of education.






Piketty argues that there are three approaches to reducing national debt: austerity, tax on capital, and inflation. Austerity is the main current approach across the European Union. Inflation is interesting and dangerous: it was been the way public debt was written off in France after 1945, but the source of misery for Germany between the wars. Inflation is not very controllable, so governments are nervous of allowing it as an instrument of policy. Inflation by increasing the money supply or quantitative easing has been used by the Bank of England, and the European Central Bank.

Borrowing has increased steadily with the Conservatives’ austerity policy. The OBR predicts continuing rise in borrowing for a further four years, then perhaps levelling off. Austerity - cuts in public employment - also reduces revenue. The net effect depends on the ‘Keynesian multiplier’. Some of the UK chancellor’s cuts have a multiplier more than -1.0, so borrowing is being increased by austerity under the Conservatives and Liberals.


There is a fourth approach to debt: sell off all public assets. The sale of all schools might in principle clear the national debt. Children would need to pay rent to whoever then owned the school. The effect on the taxpayers would not be that different from the present situation, where the expansion of education from 2002 is being paid for by the government borrowing on the gilt market. Could a European government really risk a fully private education system?


A British government with a mandate for a wealth tax would “ask” the super-rich to pay off the debt. A few might cooperate: Bill Gates, the second richest man in the world, has opted to put a lot of his fortune into malaria prevention. Most would not, so sharp public scrutiny would need to be brought to bear on any family with more than, say £5 to £10 million.

Printing money


The defining economic problem since 2008 is public debt. Debt is particularly hard to understand. Money used to be something very useful but portable, such as copper rings, that people would take in exchange for something large and less portable, such as sheep or lumber. The trust basis of money became more obvious when paper money was introduced in China around 1400. The notes carried dire threats to forgers, but that did not stop the threat, and quite soon Chinese reverted to copper and gold. We still imagine there is something of intrinsic value behind our notes, as “the gold standard” is used as metaphor for unarguable worth. It is unsettling to realise there is no longer a stack of gold behind these fiat currencies. In practice the value of a ten pound note is how many euros someone would give for it – or more importantly, how many US dollars. Despite tensions, there is enough trust in money that every country can trade.


The disappearance of the gold standard is the subject of a humorous novel called “making money” by Terry Pratchett in 2007. In the novel Moist von Lipwig is persuaded to become head of the Royal Bank of Ankh-Morpork. He is under some pressure to take the job, as his hanging for his parallel career as a burglar was faked by the patrician who is offering the job. He eventually discovers that the gold has been sold off by various quarrelsome members of the Lavish family who own the bank, but decides the country can manage quite well with printed money with no gold to back it up. Meanwhile his fiancée excavates 4,000 prehistoric golems, who then march on the city. Von Lipwig finds he is the only one who can control these creatures, who are tireless workmen but would also make excellent warriors. However he chooses to disclose to other cities that wearing a golden suit is the secret to this control, rendering them militarily useless. Ankh-Morpork is then on the golem standard.


If money is hard to understand, the national debt is even more perplexing: in June 2014 the Institute of International Finance estimated that global debt, excluding the financial sector, was equivalent to 245% of total global economic activity or GDP. It has been increasing since the financial crisis, particularly in China, and is not being paid off ("deleveraged"). Quantitative easing is one of the quirky ways government tries to increases its assets by creating money from nothing. The QE App graphic in the young persons’ story illustrates the magical way money is created by decision of the national bank.


David Graeber, professor of anthropology at the London School of Economics, spoke of “promises, promises” in a series of radio talks on the meaning of debt on BBC Radio Four in early 2015. One of the surprising promises is that obligations are remembered, but monetary equivalents of gifts are not. He refutes the idea that money grew out of barter and says that pre-money societies were based on returning an obligation, for example at time of hardship or a wedding. Blood debts are particularly quantifiable: if your kinsman kills one of my kinsmen, we both know the scale of payment that would cancel the obligation to take revenge.



Political leaders of the left continue to have difficulty thinking about money. Che Guevara, who had some relevant education, albeit as a doctor, was made head of the Cuban bank after the revolution. He did not take the job seriously; his signature on the bank notes said only “Che” – a Chilean nickname because of his Argentinian accent. He soon went off on ill-considered adventures in the Congo and Bolivia, until the CIA killed him. Socialists in the 21st century cannot be so flippant about money. Creative approaches to capital, national debt and the money supply are needed.


National debt will dog British politics in or out of the EU. Brexit will no doubt carry with it some portion of the debts of Greece, Spain, and Italy. So far we have looked at ways in which the state could increase its revenue. But what if one of these countries took an Icelandic stance and refused to pay? Quantitative easing can create money from nothing. Draghi, governor of the European Central Bank, created one trillion euros by quantitative easing. What would stop Greece metaphorically getting hold of the ECB app and using it to delete the Greek national debt with a key press?


Several countries in the past have been unable to repay their debt and asked to be absorbed. Newfoundland voted itself out of existence in 1933, as the cod revenues could not meet debts from world war one. Britain offered loan guarantees and governed directly till 1946, when Newfoundland voted to join Canada. Scotland voted itself out of independence and in favour of union with England in 1707, in return for the UK treasury accepting the cost of the Darien colony disaster. Iceland was effectively bankrupt in 2008, when the combined debt of the three largest banks was approximately six times the nation’s gross domestic product of €14 billion. The government took over banking but decided to allow the three banks to become bankrupt. The main creditors of Icesave were in the Netherlands and the UK, including some local authorities. There were strong objections to the defaults by British creditors, but also strong objections to any repayments in Iceland. Landsbanki managed to repay about half the Icesave debt in 2012.


The political problem for social democrats is how the widespread resentment of austerity and income disparity can be focussed on achievable goals. Mass movements demanding only the removal of the current leader, as Egypt’s Tahrir Square did, have little enduring effect. Removal of the shah of Iran was the demand of many sections of Iranian society, including socialist and feminists, but was effectively hijacked by a Shia religious movement. The Russian revolution of 1917 had three very clear goals: “bread, peace, and land”. Unfortunately, the middle one was unachievable, as ruinous civil war and foreign intervention followed. The Syriza-led government of January 2015 has a large popular mandate to oppose austerity and reduce the Greek debt, but a doubtful strategy of approaching each creditor nation separately. It remains to be seen how mass movements can focus on achievable political-economic goals.


A bankrupt country that refused to pay any debt might drop out of international trade for some years; it would revert to subsistence agriculture and some citizens could find various informal ways of getting foreign goods using hard currencies; this is already partly true in Greece, where patients have to source drugs from overseas. When Zimbabwe’s currency became worthless, trading continued in terms of litres of petrol. Complete default hurts many small savers as well as large governments: Wyre Forest Council in the West Midlands lost heavily in the Icesave failure, though 85% of the Landsbanki’s debt had been repaid by December 2014. Another old solution to unpaid debt was to cede territory, as Norway did with Orkney and Shetland in 1473. Greece was pasted together from 1824 onwards to include a royal family from Bavaria, Corfu which had been previously French, British and Italian, and later Italian territory in the Dodecanese. Another old remedy for unpaid debt was military invasion, but it is rather unlikely that creditors would now stage an invasion.


Will the EU collapse under its debt mountain?

The liberal trade policies of the EU have had the effect of increasing prosperity, and have been mostly liberal and humane. But the EU acts as the agent of capital: note that principle which is most controversial in Brexit negotiations is “free movement of labour”, not “free movement of workers”.

The EU in 2016 was hardly growing. The rate of growth was1.6%, but some of this was because of population growth. The EU population growth of 0.25% makes up part of the 1.6%, and the UK’s 500,000 immigrants make up half of its 2.1%. The EU average would drop to near zero after Brexit. The rate of inflation was 0.1% - just high enough that it cannot be called a recession. However, this figure was achieved by Quantitative Easing. The European Central Bank was creating €80 billion a month. When the government creates money from nothing in this way, it allows it to repay some public debt, but also causes some inflation. €80 billion a month is therefore the amount of virtual money that was being created to keep inflation slightly above zero.

Is debt and fictional money on this scale believable?

Migrant Labour

Migrant workers yield greater returns to capital because:

p<>{color:#000;}. the healthy worker effect: migrants are healthier and braver than those who stay behind

p<>{color:#000;}. they accept lower pay, often near the national minimum wage of £7.20; a permanent UK resident needs at least £1.00 in benefits on top of this to live

p<>{color:#000;}. the investor does not have to pay for their pension, industrial injuries, the small levels of healthcare or benefits migrants claim, or the cost of raising a child

p<>{color:#000;}. the immigrant’s job training was at the expense of the country of origin; the tens of thousands it cost to train a Polish plumber are a gain to the UK investor and a cost to the Polish state

Migrants are seen as a major threat by English workers. This has some unrealistic job fear aspects, but also realistic class interest aspects concerning declining wages and increased competition for housing, schools and healthcare. Personal hostility to immigrants will have no useful benefits for disadvantaged English workers; a considered approach to each of the following hypotheses should give some benefits.

p<>{color:#000;}. Immigrants have NOT displaced UK-born workers in most skilled and professional roles. The main losers are in occupations such as taxi driving- typically previous migrants. Male migrants are concentrated in the two lowest paid occupational categories (elementary and processing occupations) and in one of the highest paid occupational categories (professional), while female migrants are more concentrated in professional jobs (e.g. nurses, engineering professionals, information technology and telecommunication, and health professionals), elementary (e.g. cleaners, kitchen and catering assistants), and personal service work.

p<>{color:#000;}. Real wages in England are declining. A report by the TUC, published in July 2016, shows that real earnings have declined more than 10% since the credit crunch began in 2007, leaving the UK equal bottom in a league table of wages growth. Using data from the OECD’s recent employment outlook, the TUC found that over the same 2007-2015 period, real wages grew in Poland by 23%, in Germany by 14%, in France by 11% and across the OECD by an average of 6.7%.

p<>{color:#000;}. Capital now defines unskilled and semi-skilled work as casual and insecure, and workers as of low value and disposable. Many skilled workers have been replaced by robots. These structural changes are not the fault of immigrants, though insecure unskilled work is better tolerated by immigrants than UK-born workers

p<>{color:#000;}. UK-born workers perceive competition for education. Population growth and static expenditure are the reason that preferred school places are harder to find. Schools need 750,000 more places in a decade, according to the UK department of education. From 7.4 million in 2016, there will need to be a 10% increase by 2025. While most couples in economically advanced countries now settle for two children on average, first-generation immigrants tend to retain the higher birth rates of the countries of origin. The only way of avoiding the 10% increase in the education budget is fewer conceptions. China from 6.0 birth per woman to 1.6, and this policy has a 76% approval rating. Brazil also moved from 6.0 to 1.9 births, by massive investment in women’s health. The UK could move to a consensus that two children is the maximum and no children is a good lifestyle choice.


p<>{color:#000;}. There is a perception that reduced access to healthcare is associated with immigration, but this is not the principal cause. Population ageing is the main reason for the 5% annual rise in the NHS costs. A person entering hospital in their 80s typically has seven comorbidities and no plan for how their life should end. This author has considered the circumstances of his own death, and others encouraged to do the same.


p<>{color:#000;}. Immigration was equated with free movement of labour in the EU and will decline, but African, Indian sub-continent and Syrian migration will continue.



p<>{color:#000;}. Immigration has significantly worsened access to houses for UK-born people. Migration Watch found that 65% of UK household growth from 1996 to 2014 was from incomers. The underlying problem is that housing has been given over to the private sector, which wants tenants or mortgagees returning 8% on capital.


Scottish Nationalism

The Norman conquest of Scotland

UK politics north of the Tweed-Solway line have been dominated by a movement to return to the period before 1707, when There was an independent country called Scotland. In my book “Bannockburn: Norman v Norman!” The key historical events for this region derive from the Norman conquest of Scotland in the decade after 1124. The two leaders at the Battle of Bannockburn were both Normans aristocrats – Édouard II de Carnarvon who spoke no English and Robert de Brus, Comte de Carrick, who chose Latin when he wrote to Édouard with his claim of kingship. Where were “the English”? There had been genocide of the English after 1066 and the Saxon aristocracy were entirely dispossessed. Troops on de Brus’ side included some English – “Sassenachs” from a Gaelic standpoint – who were descendants of English refugees from Norman ethnic cleansing. Sassenachs would have called the Welsh speakers “Wallis” – the Saxon word for “Welshie”. Was William Wallace actually fighting for a revival of Cumbric Strathclyde? When the linguistic evidence is considered, Scotland might be considered like Normandy, England, Sicily and the Canary Islands: another successful land grab by a group of Norman aristocrats.


Scots ethnolinguistics

In Bannockburn I looked at five criteria for a nation: language, religion, geography, economy, and a common enemy. On most criteria the arguments for a separate country north of 55 degrees latitude on the British mainland are very weak. A distinct dialect of English, which retains more features of Old High German, was the main difference between Scots and English.

The Scots dialect of English came from Anglo-Saxon, but via Northumbrian rather than Mercian as standard English did. Scots has kept features such as the “ch” sound and the “-na” ending that disappeared from Mercian. Burns’ poetry contains many words that are closer to German or Frisian than standard English – “dicht”, “slicht” and “reekin”. Scots borrowed a little from Gaelic, but also from the Welsh spoken around Glasgow.


The Scottish National Party has harnessed many genuine grievances. There are serious declines in wealth and health, disgust at politicians and bankers, and a feeling that things will improve if there were more local control. Yet the same steady decline in wages is occurring in the nine English regions of the UK, and in most parts of Europe. We think it highly unlikely that a new nation of 5.3 million people would reverse this. If 51% of people north of 55 degrees had voted “Yes”, Scotland would now be facing enormous transition costs at the same time the value of the barrel of oil had plummeted and financial services were leaving Edinburgh. The GDP per person might have fallen 5, 10 or 20%. A Scottish government with populist credentials would probably have chosen to preserve public spending on the NHS. Having inherited its share of the loan to the Royal Bank of Scotland, the Holyrood government would have probably have resorted to a further increase in public borrowing.


The Holyrood budget

The vocal lobby by the 8% of Britons in the north has kept their funding high. Holyrood receives some £30 billion from Westminster and this has allowed it maintain public services at a higher level than most parts of England. The UK will give to Scotland £30.3 billion in 2016-17 from the total UK budget of £772 billion. While the SNP’s economic theory is “rejection of austerity”, the reality is probably that Holyrood’s expenditure is adding some £500 a second to the UK public debt. Should the Scottish region vote to become and independent country, the equitable arrangement would be to divide the assets of the UK according to population numbers – about 8% to 92%. Scotland would probably want to make continuing demands on the UK treasury, such as for decommissioning nuclear facilities at Rosyth, but that would continue to be at the expense of the working class in England. A back-of-envelope calculation suggests that Scotland would inherit debts equivalent to about five times its annual expenditure, and would need to issue its own government bonds to pay the interest. Scotland would of course want a clean balance sheet in the same way the UK will not want to take its share of Greek debt from the EU.

English nationalism: resist migrant competition

The central ideas of the Leave campaign were “defend our borders” and a points system for immigration. English nationalism appears to have a different direction from Scottish, in that its main feeling is anti-immigrant. Closer examination may show the same anger about declining wages and poorer access to schools, houses and healthcare.

The return of class struggle?

In considering political groupings since 2008, it is constructive to consider the common economic interests of social groups, rather than simply their ideas. Marx’s materialist view of history id stated succinctly thus: “Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past. The tradition of all dead generations weighs like a nightmare on the brains of the living”. The “circumstances existing already” prompted people to form into classes who have similar methods of achieving a livelihood. In his life those who lived in towns (which is what “bourgeois” means) owned most wealth as capital. Those who sold their labour were the working class. Previous classes included landowners and peasants.

The Liberal Democrats are a merger of Liberals and Social Democrats. The Liberal party grew out of the Whigs, who tended to be landowners. Prior to the industrial revolution most people had lived from agriculture, so the main classes were landowners and those who worked the land. As they ceased to be a class in the twentieth century, Liberalism is now a set of values with no definite social base.

The Conservative Party mainly represents finance capital – the big bourgeoisie – sometimes at the expense of business: see Thatcher’s desire to close coal mining and indifference to the final steel closure. There is a tension with those represent the smaller bourgeoisie and industry, who are therefore hostile to the free movement of capital represented by the EU. Their origins are in the Tories, who themselves grew from Cavaliers in the Civil War.

UKIP represents the petty bourgeoisie. UKIP MEPs for the Midlands include an umbrella shop owner, an independent travel agent, and a showroom manager. Farage is the exception having been a commodity broker. At one point most of its executive had been prosecuted for VAT evasion, indicating the tight margins they were working under, and their resentment of the big capital represented by the EU. A good source on UKIP is the highly transparent web-site www.europarl.org.uk/en/your-meps.

SNP is now the strongest voice of the 5.3 million people north of 55 degrees of latitude. It was formed through the merger of the centre-left National Party of Scotland (NPS) and the centre-right Scottish Party. It is hard to judge the true political colours of a campaign for independence. This was illustrated by the way Brexit leadership disappeared as soon as the result was announced. It appears the SNP is a public-service oriented social democratic party dependent on high revenues, as Labour was. Workers in the Scottish region have defected en masse from Labour to the SNP, presumably taking most of the Labour values with them.

Labour started as the parliamentary arm of trade unions but now has a very weak base in the smaller proletariat. Communist and Socialist parties vied to be the representatives of the working class for about a century. In Britain the Labour Party used to endorse Webb’s thesis “To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry or service.” This was often interpreted as simple nationalisation, and led to British Rail, British Gas, the National Coal Board and so on.

Labour’s lack of economic theory

The British Labour Party has abandoned any strategic sense of the state in the economy. The symbolic moment was the rejection of clause four in 1995. After the collapse of Comecon in 1991, free market capitalism was generally seen to be victorious and governments of all colours adopted the same approach: “the market will provide”. Nationalisation was dropped in a favour of a “values” statement by the Blair government, but with no systematic approach to capital and state. “Fairness” is one of those values, but the word can equally be a slogan of meritocracy: rather than meaning each person should receive the same as each other, it can mean each should be rewarded according to effort.


“The market will provide”


Labour has given up any active theory of the state and the planned economy since abandoning clause four of its constitution. It has a large membership in education and services, and historical loyalty from most manual workers, but is no longer deeply embedded in the working class. It administered the state competently on behalf of capital and most citizens between 1997 and 2008. However, it had no economic theory and has not provided a credible alternative to austerity, and has consequently haemorrhaged support. The lack of analysis was not widely evident till 2008, though the loss of accountability of Labour leaders had already become evident by the time of the Iraq war.

Whereas “the nation’s” prosperity was increasing under Labour before 2008, a decline in incomes and housing was taking place. Inequality of incomes has increased steadily since 1980, and the rise continued during the Blair government. The UK’s Gini coefficient, which is now about 0.38. The most unfair countries are Brazil (0.6), followed by Mexico, the USA and China, but other EU countries generally have less income disparity than Britain.

Subjectively: anti-foreigner; “give us back our country”

In the EU referendum England voted strongly for Brexit, by 53.4% to 46.6%. The demographics of age and region have been widely-discussed, so out interest here is social class. Declining white working class areas had very high support for leave. In Cannock Chase, Dudley, Nuneaton, Stoke and Walsall the Leave vote was more than double that for Remain. Wales voted strongly for Leave, by contrast with Scotland. A majority of English working class people who might vote for Labour voted for Brexit. Their core belief - that their poor quality of life would be improved by getting rid of immigrants - is mostly untrue, but there is a realistic class interest in it.

The vote was widely viewed as a chance to express anger. The targets of the anger included Brussels, various immigrants and “the British establishment”. There were very few positive demands. The strongest spokespersons for Leave, Mr Farage and Mr Johnson, promptly gave up their roles once the result was out. The Arab Spring should make us sceptical of mass protests without explicit goals. Millions turned out on the street to demand “removal of the leader” and “an end to corruption”. In the case of Egypt, the political effect was probably less than zero, and in Syria it was much worse. Compare the slogans of the Bolshevik revolution “Bread! Peace! Land!” Bread and Land might have worked, had Peace been achieved.


One in three people said immigration was the single biggest motivating factor for how they would vote, ahead of the economy, sovereignty and impact on public services. How exactly should the anti-immigration feeling be described? However, over half said that it had had no impact on them personally. The central feeling was control of borders. The clearest demand of the Leave campaign was for a points system on Australian lines for foreigners seeking to work in the UK. Unfortunately, this is unlikely to have much effect on reversing the economic decline of the English working class. Evidence from Migration Watch and Migration Observatory is that immigrants only occasionally displace UK-born workers. Jobs for produce picking and processing, work in care homes, and unskilled industrial work are not highly sought after. Meanwhile the more pressing problems associated with population growth – access to housing, schools and health care – will continue to deteriorate.

Objectively: anti-Capital

While the conscious values were patriotic and anti-foreigner, but its objective aspect may be a legitimate class interest in seeking to reduce competition for housing, healthcare and school places, and it will hurt Capital in the UK. Finance and insurance have been both the most important and fastest-growing sector of the UK economy. The City is likely to lose much of its business when Britain leaves. This is not a problem for big Capital, but it is a problem for people who work with and manage it, who may lose income. This will also affect return on investment in London property.

There will almost certainly be a sharp drop in GDP in the short term, and weakening of the pound in relation to other currencies. This might in principle favour the UK’s next biggest exports – aerospace engines and pharmaceuticals. The weakness of the pound might strengthen tourism to the UK, both of foreigners and Britons less unable to afford foreign holidays. London is by far the biggest capital city destination in the world, and this could increase. Universities could become more affordable, though anti-immigrant feeling might work against that. The net effect could be a recovery of manufacturing (which has declined from 44% to 11% of GDP since WWII), and of services, at the expense of Capital.

A second objective effect will be increased hostility to people of higher social status (to put it euphemistically). “The British Establishment” is perhaps most associated with public school educated politicians, but it might also include the rich, the BBC, the South-East or various other apparently privileged social groups. UKIP was successful in recruiting feeling in pubs in old urban areas, where the presence of other political influences is small. The cynicism about faraway politicians might lead to more urban grassroots organisations. Whether this would be “class consciousness” in Marx’s sense is hard to predict.

The campaign was led by petty bourgeois interest, but attracted the votes of the UK-born lower classes. The particular grievances of UKIP may be met if margins are increased, particularly by cancelling VAT. This will cause a revenue loss to the government. The grievances of workers about housing and access to services will continue. The extent to which the lower classes in England (and Scotland) are a proletariat needs to be discovered. Those who own some capital are now a much large class than in the 19th century, and those who have only the wages from their labour correspondingly smaller. It seems unlikely that the archetypal confrontation of these two major classes envisioned by Marx will occur. But politicians need to be aware of the mould growth– in the EU, the USA, China, England, Scotland – and move to actively manage capital.

Is there now an English working class? The big battalions in mining, steel and rail are now largely historical. Do workers in call centres, supermarkets or catering form a proletariat? The number of people with regular trades and organised in trade unions has fallen dramatically in recent decades. Many wage earners have turned into self-employed white van men or workers in small enterprises, not organised in trade unions, often on casual and zero-hours bases. Many of the lower classes will rarely engage in political protest, and Marx described them as “the lumpenproletariat”. Sometimes these lower classes can advance the material interests of the finance aristocracy, as when Louis Bonaparte of France in 1848 resorted to the lumpenproletariat as an apparently independent base of power. Marx refers to this coup as “the Eighteenth Brumaire” – a reference to 9 November 1799, or 18 Brumaire Year VIII in the French Republican calendar, in which Louis Bonaparte’s uncle, Napoleon Bonaparte, seized power in revolutionary France.

The direction large grassroots movements will take will take depends on which big ideas are in circulation. These ideas may be “liberty, equality, fraternity”, “bread, peace and land”, or “merely “away with the leader” or “change”.

[] What is to be done?


We think the task now is to offer a few big ideas about the generation and distribution of wealth. Any future UK government that aims to support all sections of society will need a sharp awareness of its interface with private capital. Some of that capital could be directly claimed back, particularly in the property market and utilities. The state will need to aim for a return on lending so that it can finance education, health, housing and benefits. Some resource demands can only be addressed by a more considered consensus on birth and death. A UK which is not an intimate partner in customs union will face continuing struggle for resources and their distribution, involving new waves of grassroots movements. We hope that these notes will offer some leadership ideas for the challenges ahead.




Graeber, David. (2015). Promises, promises.: a history of debt. http://www.bbc.co.uk/programmes/b05447pc


Forbes magazine. http://en.wikipedia.org/wiki/List_of_British_by_net_worth


Marx, Karl (1974). Capital. Volume One. Lawrence and Wishart.


Piketty, Thomas (2014) Capital in the 2st century. Cambridge, Mass: The Belknap Press of Harvard University.


Centre for Research on Socio-Cultural Change (CRESC) at the University of Manchester 


Office of National Statistics (2012). Distribution of wealth in the UK.





Capital and Brexit

Analysis for social democrats of economic issues in the UK after leaving the UK. It includes an allegory of money and magic for young people

  • Author: Tabiib Nafsanii
  • Published: 2016-08-06 18:50:12
  • Words: 11261
Capital and Brexit Capital and Brexit