In the broadest sense we are dealing with an old phenomenon. Carthage fell, Rome fell; now it is Britain’s turn.footnote＊ More narrowly it is a new phenomenon, the first instance of the threatened absolute decline of a fully capitalist social formation. The last phase of the internationalization of capital has finally subjected whole national economies of industrialized countries to the unforgiving judgments of the law of value. During the first two phases (the internationalization of the circuit of commodities and the internationalization ofthe circuit of finance) Britain, as the first industrializing economy, enjoyed large absolute and comparative advantages in production which permitted its commodities to undersell those of non-capitalist producers and also allowed it to appropriate surplus labour abroad.footnote1 The last phase, the internationalization of production, has exposed all domestic economies to the law of value, including those of the former metropolises. The increasing flexibility afforded manufacturing capital in its choice of production sites—due to technological changes making commodities lighter, production processes
These tendencies might be limited, in theory, by regional or other combinations—regional protectionism, common markets with regional compensation mechanisms, etc.—whose purpose would be to bring all the national economies of a region or bloc up to a common level of productivity and consumption norms, and to exclude products from elsewhere. Thus every European economy could aim to align its production and consumption (including ‘welfare state’ consumption) withthe norms set by the Germans, while Japanese commodities, not to mention those produced by South Korea, Brazil or other low-wage, authoritarian nics, would be excluded. But even if this were practicable—and the political and military contradictions involved are likely to prove irresoluble—a problem would remain for the weaker national economies within such blocs. How are they to create the conditions for a rate of accumulation capable of yielding the continuing levels of consumption needed for a viable liberal democracy—in face of the continuous improvement in productivity, set by the pacemakers for the bloc as a whole, which results from the inherent dynamic of capitalist production itself?
A range of different ‘accumulation strategies’ exists in theory,footnote3 but the practical possibilities are limited not only by the current balance of economic and political forces in a given country, but also by a much more complex and intractable web of norms and practices inherited from the past, which are crucial for what the French ‘regulation school’ has termed the ‘mode of regulation’ necessary for any strategy to be stabilized and sustained as a ‘regime’ of accumulation. The response of British manufacturers to the economic project of the Thatcher administration provides a striking affirmation of the contemporary importance of this constraint.
On A. Singh’s definition of an efficient industrial sector, British manufacturing has been inefficient for about a century. It is no longer able to yield in the long run ‘sufficient net exports to pay for import requirements at socially acceptable levels of output, employment and the exchange rate’, and throughout the 1970s the evidence showed clearly that this inefficiency was increasing.footnote4 The result has been a dramatic contraction of the manufacturing sector, leading to a steadily worsening balance of payments constraint. Although the measures taken by the Thatcher government to remedy the long-term weakness have undoubtedly accelerated contraction in the short term, the bulk of the decline since 1960 is attributable to long-term structural-cultural causes.
Between 1970 and 1980 (i.e. before the Thatcher government’s measures had begun to take significant effect) manufacturing output stagnated, as did gross fixed investment in manufacturing (see Table I). Employment in manufacturing contracted while productivity per person employed rose sluggishly, compared with major competitors. Private investment overseas gradually increased but was offset, during the late 1970s, by foreign investments in Britain, largely in oil exploration and extraction, which tended to conceal the extent to which manufacturing industry was no longer attracting the long-term investment needed to improve or even maintain its international competitiveness. Domestic oil and gas production eventually expanded to yield a visible trade surplus in oil and gas of some £6 billion per annum. This in turn covered the underlying deficit on the visible trade balance caused by the chronic and growing competitive weakness of British manufacturing (until the deficit re-emerged in 1983 on a scale too large to be covered by the surplus on oil).