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Editorial: The desperate need for investment in production is clear to all

THE Centre for Cities report published today details what most people will have known directly from their daily lives. Our economy has been virtually stagnant since 2010.

In some places, such as Aberdeen, people have experienced an absolute drop in income. Everywhere, failure to grow the economy at pre-2010 levels has left people much poorer than they otherwise would have been. In Burnley by £28,000 and £23,000 in Glasgow.

The long-term consequences are serious. Today almost a fifth of Britain’s population is living in “absolute poverty” without enough income to meet basic needs, according to the latest figures in the House of Commons Library.

The cause? Immediately it is inflated prices for essentials, casualised employment and the massive erosion of the “social wage” for housing, schools and social services. But fundamentally it is a lack of investment.

Unless this failure to invest (productively) is reversed, absolute poverty can only increase.

Currently, investment is mainly managed through stock exchanges. People with wealth deposit it with banks, investment companies and funds in order to secure the highest returns.

Today the top 20 international hedge funds revealed their profits for 2023 as the highest ever at $67 billion. A good slab of this money would have come from the London Stock Exchange and much of it, it was reported, simply by exploiting relative fluctuations in share prices and government bonds without investing a bean in anything productive.

Just a billion of this would have rescued the Grangemouth oil refinery; a few more ensured that Britain kept its last remaining blast furnaces in Port Talbot.

However, the real problem is not hedge funds. They play at the margin. It is the overall system for investment itself and the way these profits are made.

The UN, not generally seen as a revolutionary body, issued its Global Development Report at the end of last year. Its analysis brings to mind Lenin’s famous work Imperialism, the Highest Stage of Capitalism.

The UN report reads: “The last few years of commodity price volatility have coincided with a period of record profit growth by global energy and food traders. In the area of food trading, the four companies that conservatively account for about 70 per cent of the global food market share registered a dramatic rise in profits during 2021-2022.”

The report lists the companies in energy, fertilisers, minerals and food supply that have, it says, exploited monopoly power to “profit gouge” — producing starvation in the global South and new levels of poverty here. How do you secure that kind of monopoly power?

By, as Lenin said, the exercise of direct and indirect force over global resources, imperialism. And it is driven by another phenomenon identified by Lenin: finance capital.

These are banks and fund managers that maximise the existing wealth of rich individuals and institutions. Globally they handled investments worth $50 trillion in 2022 (the annual value of Britain’s output was about $2.4tn).

They dominate stock exchanges. They seek companies they can turn into monopolies — and, more generally, to maximise “shareholder value,” extracting dividends at the expense of investment.

Their rise to dominance since 2010 corresponds to the period in which Britain’s economy, and many others, have failed to grow,

This is why Keir Starmer needs to ensure that his Labour manifesto includes publicly controlled investment in the productive economy (particularly in areas currently monopolised or at risk) — and statutory powers for shop stewards committees to intervene in company investment policies.

Starmer will know these policies well, as he campaigned for them on the doorstep in 2017 and 2019. They are even more relevant now.

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