Wednesday, 21 June 2017

Rethinking Economics

On Saturday 1 July, students of Goldsmiths’ Rethinking Economics Society and the Political Economy Research Centre are holding a conference on ‘Rethinking Economics in a Post Truth World’.

The venue is: Professor Stuart Hall Building, Goldsmiths,

‘The Limits to Unconventional Monetary Policy’, Maria Ivanova

Brexit Panel, Will Davies, Aeron Davis, Joe Earl and Jack Mosse

‘What can Economics Learn from Anthropology?’, Massimiliano Mallona

‘Deconstructing Finance – Deregulation of Finance as contributing factor to Post-Truth Narrative’

Johnna Montgomerie, Anastasia Nesvetailova, Clea Bourne and Daniela Gabor

‘Alternative Political Economy Panel: Reinvigorating Forgotten Perspectives’

Paul Gunn, Jamie Morgan, Sara Stevano and Marissa Conway

‘Platform Cooperative Workshop’, Jack Thorpe

‘New Forms of Labour’, Ozlem Onaran

‘Global Capitalism and Finance’, Tony Norfield

‘Democratising Economics’, with

‘What does the “Future of money” actually look like’, Brett Scott

Tony Norfield, 21 June 2017

Tuesday, 20 June 2017

Twitter's Stubborn Facts

I sometimes add entries on Twitter, using @StubbornFacts. These may refer to articles or notes on this blog, but often they are links to points made by others that I find of value and which do not often hit the media headlines.

Recent Twitter entries include a note on the scale of the 18-24 youth vote in the 8 June UK general election and on developments in Middle East politics, particularly focusing on Saudi Arabian and US policy (the latest issue being their policy on Qatar). Incidentally, here is my analysis of the evolution of Saudi power in the Middle East.

Tony Norfield, 20 June 2017

Tuesday, 13 June 2017

The City, Brexit, etc

The paperback version of my book, The City: London and the Global Power of Finance, is released today. This edition contains a sixteen-page Afterword on the following topics:
  • Brexit and imperial power
  • The City, Brexit and world developments
  • Immigration and nationalism
  • Trump and the US hegemon
  • Shifting tectonic plates
These develop and update points raised before.
With a cover price of £10.99 and US$16.95 in the global book market, the paperback version of The City is currently available at the following prices:
Verso, £7.69, £9.98, $11.52
An eBook is also available.
Do your own arbitrage!

Tony Norfield, 13 June 2017

Selections from some of the reviews for the hardback edition:
“It is not every day you read a book about global finance by a banker who quotes Lenin approvingly on page two. Unlike many of those who produce Marxist critiques of financial capitalism, Norfield writes from a position of experience: he has worked in the belly of the beast, and the book is the better for it...In The City, he has done the research and pulled together the financial statistics that explain how the bloodsucking works.” – Brooke Masters, Financial Times
“Tony Norfield has provided a strikingly original take on the international financial system by placing it systematically within the world imperialist structure of power. He rejects the currently fashionable path of interpreting the ascent of finance by looking at how the leading financial sector agents, operating by way of banks, hedge funds, private equity firms, and the like, manipulate the political-economic game to increase their own personal wealth, while downplaying any useful economic functions they might be fulfilling. He insists, on the contrary, that finance be understood as a form of power deriving from the economic-cum political capacity to compete at the highest levels of global capitalism, which simultaneously endows a limited group of countries and corporations disproportionate access to the world’s resources and operates as the system’s indispensable nerve center. Norfield’s unusual clarity as both an analyst and expositor is reflected in his ability to lay out for his readers an easy-to-grasp introduction to how finance works today in the process of offering a detailed historically-rooted account of the multiple hierarchies and privileged relationships through which global economic domination is constructed and reproduced. The City is a tour de force, which will soon be recognized as a formidable challenge to conventional wisdom and an essential contribution in its own right.” – Robert Brenner, author of The Economics of Global Turbulence
“This book does the seemingly impossible: rendering finance’s mysteries transparent to the average reader, and at the same time delivering a penetrating analysis of the global economic system that will enlighten even experts. Tony Norfield has written a truly exciting and important book.” – Paul Mattick, author of Business as Usual
“The City is a valuable addition to the critical analysis of the financialisation of our world. And Tony Norfield is an experienced and radical guide to London’s role in this process. This book should be required reading for both bankers and activists alike.” – Joris Luyendjik, author of Swimming with Sharks: My Journey into the World of the Bankers
“A timely and insightful book...It is an excellent read for anyone seriously wanting to consider the financial system” – Scottish Business Insider
“With heaps of empirical research and a clear style of argumentation, he demonstrates that the City isn't a "satellite of Wall Street" as many think, but its own beast, using Britain's imperialist privilege to extract value from the world economy. Much of the book is directed against bad arguments made by the liberal-left – the distinction between "productive" capitalism and "casino" banking; the populist vitriol against "the banks" – which Norfield believes aren't just analytically false but let capitalism off the hook.” – Yohann Koshy, Vice
“An invaluable book for anyone wishing to better understand the world of finance, how the City operates and how this relates to the broader capitalist system.” – Tom Haines-Doran, rs21
“Tony Norfield has had 20 years experience in City of London financial dealing rooms, for ten years as an executive director and global head of FX strategy in a major European bank. He went on to complete a PhD in economics at SOAS, London. Above all, he is a Marxist. It’s a perfect recipe for an excellent book on modern British imperialism and the features of global finance in the 21st century.” – Michael Roberts (author of The Long Depression)
“How many Marxists are at work in the dealing rooms of the City? Presumably they keep their heads well down. Tony Norfield is—or was—one. Twenty years a trader at the centre of the financial web, he has married the insights into the workings of the system he gained to a thorough Marxist understanding of political economy. The result is this fascinating book.” – Andrew Murray, Morning Star
“Tony Norfield's opus The City takes on a big subject and makes it, well—big … Casts a new light on a well-researched subject.” – William Clutterbuck, Financial Adviser
“As England and Europe prepare to set the terms of Brexit, Norfield’s historical perspective on how England has promoted finance is fascinating.” – Tom Groenfeldt, Forbes

Tuesday, 30 May 2017

Theresa May, Jeremy Corbyn and the Turing Test

Last night on UK television there was an audience question time and an inquisitor interrogation time (from the supposedly formidable Jeremy Paxman) for both Theresa May, UK Prime Minister, and Jeremy Corbyn, leader of the Labour opposition. These were held separately, not as a debate, owing to May’s risky ineptitude and her increasingly evident weakness. Somewhat to my surprise, they showed that Jeremy Corbyn had managed to learn from his previous grillings how to handle himself much better. In particular, he passed the Turing test easily.
Alan Turing was a British mathematical genius hounded to his death by the UK authorities in 1954. As part of his contribution to understanding science, he proposed a test to judge whether the answers to questions posed could be judged as coming from a human or from a machine/computer. If the answers from the machine were answers that an observer could distinguish from those a human would give, then it had failed the Turing test. These days, many establishment politicians would fail too, as was seen most embarrassingly in the case of Marco Rubio in the US presidential election campaign in 2016, which led to his nickname ‘Marcobot’.
Theresa May, unelected UK prime minister, has also failed to pass the Turing test since her time in office. She is desperately seeking to find legitimacy in the 8 June UK general election and, in the past month especially, her PR advisers have given her a small set of vacuous phrases to use safely and not risk tripping up. So much so that a growing portion of the electorate wonders whether it is hearing a corporate answering machine: ‘Press 1 for Strong and Stable Government, press 2 to Get the Best Brexit Deal Possible, press 3 to oppose a Labour-led Coalition of Chaos’. In the TV discussion last night, Theresa May continued to fail the Turing test.
By comparison, Labour leader Jeremy Corbyn looked convincingly human. The UK media attacks on him have been so relentless – a supporter of terrorists, willing to abandon nuclear weapons, not supporting the Queen, etc – that this has raised some popular scepticism about media bias. As a result, Corbyn’s steady message in favour of national welfarism paid for by higher taxes on ‘the few’ seems to have gained some traction in an electorate worried about continued austerity. From a deficit of some 20 percentage points compared to the Conservative party a month ago, Labour is now more like 5-12 percentage points behind, according to the latest set of varied opinion polls. The Conservative message of needing a ‘Strong and Stable Conservative Government’ to lead the UK into the sunny uplands post-Brexit now looks less plausible.
This narrowing lead ahead of 8 June, compared to the previously expected devastating Conservative victory, was one factor that forced Theresa May (unconvincingly) to renege upon a manifesto commitment to curb welfare payments on older generation people who were more likely to be Conservative voters. An electoral lead of some 5%+ might still translate, although far from precisely, into a decent majority of seats for the Conservatives. But it would be far less than they had thought, and so will look like a problem for them. It would also be another stage in the disintegration of traditional UK politics.

Tony Norfield, 30 May 2017

Monday, 29 May 2017

Warming Up

After the mixed martial arts Handshake[1] bouts between The Donald and France’s new president, Emmanuel Macron, there have been further signs of strain between the US and Europe. Speaking after last week’s NATO and G7 meetings, Germany’s Chancellor Angela Merkel called the G7 meeting ‘six against one’. You can guess who the latter was. In a separate speech, Merkel also remarked:
‘The times in which we could completely rely upon others are more or less over. That’s what I have experienced in the last few days … We Europeans have to take our destiny into our own hands … of course in friendship with the US, in friendship with Great Britain, also with Russia and other countries, but we have to know that we fight for our own future as Europeans, for our destiny.’
Notably, this was an ex-UK ‘Europe’.
Trump’s America First policy questions how far the US can still pretend to act both as the referee and as the biggest player in the imperial game. But the election of Trump is not the only thing that has called into question the ‘western alliance’ of major powers. Britain’s rejection of EU membership is also a big worry for the European members, ironically including Britain itself. While Brexit does not quite hurl the UK into the mid-Atlantic, the Brits are finding it difficult to keep a happy family together by using anti-Russian propaganda and posturing at NATO. Not surprisingly, since Brexit has upset the European institutions established over decades.
Merkel’s call for Europeans to take charge of their own destiny basically means that the major continental European powers need to prepare for the breakdown of the former international order from which they had benefited. It is a striking comment from a German conservative leader, and one that fits well with a more general European concern about Trump.
Things are warming up in the oven of imperial rivalry, not just on the fringes of the imperial system.

Tony Norfield, 29 May 2017

[1] Macron won on points. The Handshake is a relatively new sport in diplomatic circles. It blends a rictus smile, white knuckle grips and macho, fake bonhomie arm slapping. The player with steadiest stance and gaze, showing the least perturbation throughout the 1-2 minute contest, wins. Points are given by the international news media and on Youtube. See here for example.

Friday, 26 May 2017

The Libyan Connection

Time and again Western security services have been shown to be up to their necks in promoting, training and giving operational support for Islamists to do their dirty work. It started in the 1950s as a strategy to mobilise the most backward and conservative sections of society against nationalist, independent and mostly progressive currents in the Middle East. They managed to destroy every single one of these currents, leaving a politically barren landscape dominated by political options that have no future and, despite their ultra-anti-Western rhetoric, which cannot fight against Western imperialism.
Then came the CIA’s war in Afghanistan in the 1980s, with the US funding Osama bin Laden’s group and other jihadis to fight the Russians. Then there was the training and deployment of thousands of jihadis to fight Serbia in the war in the former Yugoslavia. Then the training and deployment of thousands of jihadis to fight in Chechnya with the sole purpose of destabilizing Russia. Many of the latter had previously fought in Serbia. Then came Libya, where the security services sent hundreds of these operatives to undermine Gaddafi in 2011. Then came Syria, where the security services sent in hundreds of armed Libyan jihadis to fight Assad.
Not a lot of people know that many of the detainees held at Guantanamo Bay’s US military prison was or is a former CIA- or MI6-trained fighter. They sent them there because they knew they were committed jihadists, as opposed to the less dangerous Iraqi or Afghan nationalists who were just fighting to oust foreigners from their countries and had no global or ideological pretensions.
Now the web site MiddleEastEye lifts the lid on the Libyan connection to this week’s Manchester bombing that the British authorities do not want to talk about. It explains why, within hours of the attack, the security services were already declaring that a network was involved. They knew whom they were dealing with!

Susil das Gupta, 26 May 2017

Wednesday, 24 May 2017

Apple’s Core: Moribund Capitalism

Apple Inc is the world’s largest company by market capitalisation, with a value of nearly $800bn on 19 May 2017. It does not produce most of the world’s smart phones, coming in a poor second behind Korea’s Samsung, and it is not that far ahead of China’s Huawei in terms of market share. Neither is it necessarily the biggest player in other consumer electronics markets. But so far it has managed to corner the premium section of these markets, managing to get enough loyalty from customers who will pay a lot more for a product that is not so different from the (much) cheaper ones that are not quite so ‘cool’.
That is principally why Apple, with fewer than 120,000 staff and itself producing very little of the final product that it sells to consumers, can be worth in capitalist markets so much more than Foxconn. Also known as Hon Hai Precision Industry Co, the latter Taiwan-based company is its main assembler, employing more than one million workers, and is currently valued at a relatively minuscule $60bn in terms of market capitalisation. In 2016, Apple’s operating income was $60bn compared to some $4bn at Foxconn, endorsing the market valuation ratio ($800/$60bn).
These points are another sign of the distortion of social value by imperialism, and another day I may write more about the social and economic mechanisms behind this. For now, though, I want to focus on the financial aspects of Apple’s business, mainly using information from its latest annual report.
Most radical, critical commentaries on Apple focus, reasonably enough, on how it uses cheap labour in Asia to boost its profits. What I want to deal with instead are the details in Apple’s accounts that show how its close integration with the world of finance complements and reinforces its commercial power. For example, its use of bond market issuance and equity buybacks to boost revenues for its investors; its huge investments in financial securities, ones that rival the holdings of major investment funds; its use of financial derivatives for both hedging and speculating in financial markets; and its large cash holdings, which are explained both by the nature of its business operations and by developments in world markets.

Debt issues, equity buybacks

Apple has been one of the corporations that has found it more advantageous for its shareholders to raise cash via issues of bonds and other debt securities rather than to issue new equity. Issuing new equity means that a given amount of profit has to be shared between a larger sum of shares held by investors, potentially reducing the rate of return for existing investors, and also their percentage holding in the company unless they buy more shares. However, with interest rates on corporate debt so low, it has made sense for Apple to issue debt, pay the interest and use the new funds to buy back existing equity. Assuming that the rate of return on its regular business was higher than the yield on the bonds, this also helped to keep the payments to shareholders buoyant.
Apple repurchased common stock in each of the 2014-16 financial years: 489 million shares in 2014, 325 million in 2015 and 280 million in 2016. Share issues also took place in those years, but they were small scale, only some 10-15% of the buyback totals. The net effect was for the total number of outstanding shares to fall from 6.3 billion in September 2013 to 5.3 billion in September 2016, a significant drop of 15% in just three years.
Funds for the share repurchases should be seen as principally coming from the debt issues, including short-term commercial paper, although the numbers for the whole gamut of business operations are interlinked. For example, Apple reports that in its 2016 financial year funds worth $29.7bn were used to repurchase common stock, $12.2bn were used to pay dividends and the net proceeds from issuing longer-term debt were $25.0bn.
The scheme of share buybacks continues and, as of September 2016, ‘only’ $133bn out of a total of $175bn authorised by Apple’s board had been completed – a total that was raised from $140bn in April 2016, and could be raised yet again. In addition, Apple has another element of this plan, something it calls a ‘capital return programme’, which is expected to reach $200-250bn by March 2018. The missing element is the (strongly implied) promise to boost dividend payouts. In 2013, total dividends paid were $10.6bn, rising to $12.2bn in 2016. So, with the falling number of shares, earnings per share have been rising rapidly: from $6.49 in 2014 to $8.35 in 2016, a rise of nearly 30%.
This helps explain the astronomical stock market valuation for Apple, one that has increased by some 60% over the past year. It can use the financial markets to boost the returns to its owners, quite apart from the other commercial and political means available to it as a leading corporate power. But what this really reflects is the nature of moribund capitalism today. Having got in a pickle with a big drop in operating income (down 16% to $60bn in 2016), and with net sales declining by 8% in 2016 – led by a 12% slump in the value of sales for Apple’s main product, iPhones – the company adapts to these setbacks more by financial operations than by innovation or investment.

Investment in securities

While iPhones do not generate for Apple as much revenue as before – just $136.7bn in financial year 2016 compared to $155bn in 2015 – the company has been able to depend upon its financial investments to try and fill the gap. As of September 2016, it held $20bn of cash, $47bn of short-term marketable securities and a massive $170bn of long-term marketable securities, including US Treasuries and corporate bonds. In 2016, these generated $4bn of interest and dividend income. In the same year, Apple’s accounts also benefited from an extra $1.6bn of unrealised gains on marketable securities it held.
Apple uses its subsidiary, Braeburn Capital,[1] an asset management company based in the low-tax US state of Nevada, to manage its vast security holdings. These assets rival those of the biggest financial companies, and Braeburn has been called ‘the world’s biggest hedge fund’,[2] and also the world’s biggest bond fund.[3] Another angle on Apple’s operations in this area is shown by considering its financial dealings: in its 2016 year it bought $142bn of marketable securities, received $21bn of funds from those it held that had matured and also sold another $91bn of securities, no doubt keeping Braeburn’s dealers busy.
Compare these numbers to Apple’s investment in research and development. In 2016, it spent $10bn, up from $8bn in 2015 and $6bn in 2014. Big money, and big increases, but still pretty small for a so-called IT company, given that it was less than 5% of total net sales revenue.

Financial derivatives dealing

It is also worth noting Apple’s involvement in financial derivatives to give an example of how all major capitalist corporations use these, not just the supposedly peculiarly evil banks. Apple, like other corporations, uses financial derivatives to hedge against unfavourable moves in interest rates and exchange rates, and also for more speculative purposes. Accounting rules try to separate the two uses, but in reality there is no distinct dividing line.
In the case of derivatives used for hedging, they may make gains or suffer losses. But these should roughly balance the losses or gains on the underlying assets, liabilities or cash flows that are being hedged by the derivatives. For example, if Apple owns a fixed income asset (a corporate or government bond security), then its market price will fall if interest rates rise. However, it could use financial derivatives to hedge against this risk. It would take a derivative position (in swaps, futures or options) whose market price will rise as interest rates rise, so that it would generate a gain in its derivative position to offset the monetary loss on the bond. It is a similar thing for foreign exchange exposures. Simply put, if Apple’s US dollar-based accounts would be hit badly if the value of the US dollar rises against the Chinese renminbi, the euro, or sterling and the Japanese yen, then it makes sense for Apple to hedge the risk with derivative contracts. It would take derivative positions whose value would rise as the dollar’s value rises in the market, thus offsetting, or at least reducing, the potential loss on its underlying business.
The basic idea behind hedging is to offset the likelihood of a loss, but this usually also means giving up on any further potential gains beyond what the existing structure of market prices allows. For example, interest rates or the US dollar’s value might fall, but the extra gains for Apple from these developments will be lowered or eliminated if it hedges against their rise with financial derivatives. The underlying business would gain, but the derivative contracts being used as a hedge would show a loss, cancelling this out.
On 24 September 2016, the notional value of foreign exchange derivatives contracts held by Apple for hedging purposes was $44.7bn. There was also $24.5bn of interest rate contracts. This gives a measure of the scale of the financial risk that was being hedged.
So much for hedging. Speculation with financial derivatives is also a possibility for large corporations. It is one they often use, since their finance departments are commonly seen as profit centres that also have to make a dealing profit in addition to playing their financial function for the firm. Here the word speculation is not used for these derivatives transactions, and they are put under the more polite designation of ‘derivative instruments not designated as accounting hedges’. As of 24 September 2016, Apple held a notional value of $54.3bn of foreign exchange contracts under this heading.
In Apple’s 2016 ‘consolidated statement of comprehensive income’, the accounts record that while it lost $734m on its financial derivatives positions, net of tax, it gained a greater $1,638m in the unrealised extra value of the marketable securities that it held. The balance is not always positive – it was a negative $424m in 2015 – but that’s just one of the risks of dealing in capitalist markets.

Big cash assets, but many liabilities

Apple’s huge cash holdings have gained a lot of attention. Not surprisingly, since at the end of its 2016 financial year it held a little over $20bn in cash and cash equivalents (meaning cash and securities with less than 3 months to maturity), and another $47bn in short-term marketable securities (less than 12 months). The other big chunk of assets held consists of its long-term (more than 12 months) marketable securities, at $170bn. These figures make Apple’s ‘property, plant and equipment’ asset value of $27bn look like a very small part of its overall business. More than six times the value of Apple’s ‘production’ assets is held in financial securities!
But let us not ignore Apple’s various liabilities. An implicit one, an obligation for survival not an accounting item, is the need to keep shareholders happy with dividend payments and share buybacks, as noted above. Then there is Apple’s formal accounting liability resulting from its issuance of debt, valued at $75.4bn on 24 September 2016. These debts have to be serviced and eventually repaid. It also had a ‘non-current’ liability of $36bn (mainly tax that was owed) and total current liabilities of $79bn for accounts payable, accrued expenses, commercial paper outstanding, etc.

Moribund Capitalism

It looks like Apple has a lot of cash available, something that, in another universe, might enable it to reduce its premium prices from their near-absurd levels or to pay more taxes. However, when the full scope of its operations is understood, the constraints of the capitalist market can be clearly seen. Apple’s business is not only one of trying to secure its position in a segment of the consumer technology market. More and more it has become a major financial player, and one that has run out of ideas to develop its formerly core business. Instead it keeps its investors happy with share buybacks and a ‘capital return programme’. It remains the biggest capitalist corporation by market value, although as a monopolistic player it has a lack of incentive to expand production. These features illustrate the moribund nature of contemporary capitalism.

Tony Norfield, 24 May 2017

[1] The name seems to have been chosen because it sounded better than Granny Smith, Cox, or other varieties of apple.

Sunday, 14 May 2017

Lenin in London

Lenin stayed in London during 1902-03, using the time to write for and edit Iskra, while also studying in the British Museum library, riding around on buses, learning English and trying to avoid proletarian food. An address he stayed at, perhaps the only one, was 30 Holford Square, WC1, in Islington, while he also worked in the office of a socialist publisher in Clerkenwell that is now the Marx Memorial Library at 37a Clerkenwell Green, EC1.
Holford Square was bombed during the Second World War, and the building in which Lenin once lived no longer survives. What does survive, however, is a commemorative bust of Lenin that in 1942 the Soviet Ambassador to the UK, Ivan Maisky, unveiled in the square, facing number 30. This was a time when Britain’s relations with the Soviet Union had thawed, following Germany’s breaking of the German-Soviet Non-Aggression Pact with Operation Barbarossa in mid-1941. With Russia now an ally in the war, it was time for Britain to be friendly. Nevertheless, the memorial to Lenin was repeatedly vandalised and it had to be moved.
Russian émigré architect, Berthold Lubetkin, was commissioned to build a block of flats on the bomb-damaged site for working class accommodation. It was an ambitious and effective design, although its scope was later limited by lack of sufficient funding. The name for the block was going to be the Lenin Court, but the Cold War had made this impossible by the time it was opened in 1954. Instead it was named to commemorate the pugnacious, pro-imperialist, anti-communist Labour statesman, Ernest Bevin, who had died in 1951.
Here is a link to a Pathe News report on the 1942 Lenin commemoration at Holford Square, with a hilarious upbeat, upper class commentary.
This is the Lenin bust, now held in the Islington Museum, St John Street, EC1:

This is Bevin Court today:

Tony Norfield, 14 May 2017

Wednesday, 26 April 2017

Capital 150

On the 150th anniversary of the publication of Volume 1 of Marx's Capital, there is a two-day conference to discuss the importance of this work for understanding the world today. This international conference is held on 19-20 September 2017, sponsored by the Department of European and International Studies, King’s College London, and blog.

Venue details: Student Central (formerly ULU), Malet Street, London WC1E 7HY

Speakers include:
  • Tithi Bhattacharya
  • Guglielmo Carchedi
  • Eduardo da Motta e Albuquerque
  • David Harvey
  • Michael Heinrich
  • Paul Mattick Jr
  • Fred Moseley
  • Tony Norfield
  • Lucia Pradella
  • Michael Roberts
  • Beverly Silver
  • Raquel Varela
The cost of attending is £10 for the two days. Other details including booking can be found here.

Tony Norfield, 26 April 2017

Tuesday, 18 April 2017

A May Election in June

Prime Minister Theresa May has called a UK general election on 8 June. Given the 2011 law on fixed term elections, which means that it should have instead been in 2020, this was a surprise announcement. The brought forward date has to be agreed by Parliament first, but this will very likely happen, given that the Labour Party must back it or else appear afraid to go to the electorate. However, the bigger questions are what this election will be about and what it reflects about British politics today.
The news media were puzzled, if not annoyed, in the hour or so ahead of May's Downing Street statement. Why did they not know before what was going to happen, or even have any clue? Surely this was not a declaration of war, or the UK’s own missile strike somewhere?! Could it be a resignation? Her slightly unsteady gait and frail looking pose had already led to gossip that she might be about to step down due to ill health. Surely, sacking Boris Johnson as Foreign Secretary would not demand a Downing Street declaration. A few minutes ahead of time, the tip off came to limit the media’s blushes of ignorance: it was to call a snap UK general election!
Outside 10 Downing Street, May did another of her performances trying to look a determined and decisive leader. But she remained unconvincing to anyone who has paid attention to events. The snap election was claimed to be necessary to bring about a more strongly positioned government to secure successful Brexit terms with the EU – more of a majority than the comfortable Conservative Party one of 17 House of Commons seats.[1] She claimed there was too much opposition to her planned good deeds in this negotiation within the existing parliament. This rather overlooks the problem that it does not matter what the Brits want, whether 100% of their MPs or not. What matters in the Brexit negotiations is what deal will be agreed by the 27 countries in the rest of the EU.
The UK election has instead been called for another reason, basically the dire state of the British Labour Party. Unable to act as an opposition, Labour has slipped in UK opinion polls and May stands well ahead of Labour’s Corbyn. Labour looks unlikely to win back any seats in Scotland after its huge losses to the Scottish National Party in 2015, and the Conservatives have little more to lose there. Changes in Wales or Northern Ireland will make next to no difference to the UK result. Meanwhile, in the main voting country, England, Labour is in dire straits, having been eaten by UKIP and the Conservatives in 2015, and still looking vulnerable to the Conservatives in the lead up to June 2017. The latest polls show the Conservatives with around 44-46% of the UK vote and Labour with 25-26%.
Tactics based on the latest opinion polls are not the best strategic guides, and things could go wrong for May’s latest gambit. Although probably not much wrong, given the politics of the populace. While just under half the UK voting population is not pro-Brexit, and this could grow now that some of the economic consequences for jobs are dawning, there remains a strong base of anti-immigration Brexiteers among English voters, one to which the Labour Party adapts rather than challenges. For example, so far Labour leader Jeremy Corbyn has avoided talking much about immigration: saying it is OK loses him votes; saying it is not OK would embarrass his conscience. A view on Brexit also gets little look in, apart from how it must be the best deal possible, for similar reasons. The trial of moving from being an inconsequential backbencher shuffling in the dust of a moribund left to leading, or even managing, the views of the electorate has clearly been too much for him.
The forthcoming UK general election will be both low level tragedy and farce, and tales told by many media idiots, full of sound and invented fury, signifying nothing new.

Tony Norfield, 18 April 2017

[1] It is possible, nevertheless, that this majority might have been reduced in coming months. Police investigations are taking place into Conservative Party overspending in a number of constituencies in 2015. This could have rendered invalid some Conservative victories, produced new by-elections and cut their majority.

Friday, 7 April 2017

Trump, Syria & the Middle East

The US has hit Syria’s Shayrat military air base near Homs with 59 Tomahawk cruise missiles. Whether there is any more to come nobody can say because the strikes do not appear to have much logic to them and so war aims cannot be drawn from political objectives.
But the central weakness flows not from Trump’s knee-jerk response but from the dubious nature of the event that provoked it. A chemical attack by Syria simply does not make sense. Assad has virtually won his war by sheer perseverance, western incompetence and Russian help. At the least, he has no viable opponents on the ground. His strategy is to sit it out while his opponents exhaust themselves, realise the futility of their actions or just leave the country. The West, when it tried at last to put down some sort of marker in a war it could do nothing about, defined the use of chemical weapons as a red line. The Russians agreed and Assad followed through. He gave them up in a quid quo pro negotiated by the Russians. In return, the West abandoned ‘regime change’ in all but words. Both sides kept to the agreement. Why would Assad now use a weapon that could only provoke the West and which is of very limited military use, and one day ahead of a major international meeting on Syria held in Brussels? Former Congressman Ron Paul, a leading, although sometimes critical Trump supporter, argues that the chemical attack is ‘false flag’ operation: “It doesn’t make any sense for Assad under these conditions to all of a sudden use poison gases – I think there’s zero chance he would have done this deliberately”.
Far from showing Trump’s willingness to ‘go to war’ – reversing his supposed ‘isolationism’ which, in any case, was a silly and unrealistic proposition – the bombings instead show the West’s very limited options in Syria. If the West really wants to eliminate Assad, why slam 59 missiles into an isolated airfield? Why not do some real damage, and show ‘global leadership’, by destroying Assad’s military command and control structure?
The plain fact is that while America has the military means to obliterate whatever it likes, both America and the West as a whole has very little power to influence events.
The West would not be able to contain the fall out if Assad were forcibly removed
The US probably has the capacity to ‘take out’ Assad in a surgical strike, or seriously to degrade his already limited military capacity, though his regime is pretty smart and also has Russian assistance. But how would his removal by force affect regional players?
For example, Iran is currently a stabilising force in the region since it wants to rebuild its relationship with the West and wants to show that it can be a trusted, competent and effective regional manager. A significant section of the Iranian elite, and the Shia community in the region, do not believe this can be pulled off and that such a strategy will only weaken Iran in the long run since Western imperialism cannot change its nature.  How would killing Assad alter this critically-balanced situation? Almost certainly not in the interests of the West. Eliminating Assad by force, and the fall out that comes after it, would significantly alter Iran’s position as a regional manager.
Furthermore, Turkey is currently playing a very dangerous game in pursuit of establishing itself as the main player and arbiter in the region. Its overriding goal had been to join the European Union. But it has abandoned all hope of joining by negotiation. It has realised instead that potential EU entry is not about reason or willingness to be reasonable, but about power. It thinks it has a much better chance of forcing a better long-standing deal with Europe by establishing its status as the region’s key pacifier and manager, which Europe desperately needs. This has led it to meddle in regional politics in hugely irresponsible ways that are often counter to western interests and alarm the West. Indeed, Turkey is now the main obstacle to a settlement in Syria.
It is very likely that Assad’s removal would embolden Turkey to be even more reckless. Turkey would almost certainly want to take a major position in a post-Assad Syria, if not to subjugate Syria under its control, which would immediately snarl up all regional relations. This would reproduce Turkey’s inability to reach a settlement with the Kurds on a much grander scale.
Then there is Russia. The West has been forced to establish an uneasy and very limited ‘partnership’ with Russia, given that it has been unable to handle on its own the mess it has made of the Middle East. This has obliged the West to accept that Russia is a legitimate regional player and to accept its more active military presence in the Eastern Mediterranean – something unthinkable in the Cold War years. Russia plays a peculiar role in the region. Most of the regional players are anti-Russian, but they want Russia to serve as a counterweight to the power of the West. Iran is by no means a Russian ally, but it benefits greatly from Russia’s presence in the region. Assad’s violent removal would not only be a defeat for Russia, it would perturb regional relations.
What replaces the Assad regime?
If the Iraq war and its fall out has shown the West anything, it is that military action alone cannot achieve stability and war has unexpected consequences. As Napoleon once said of the limitations of war, “you can do anything with bayonets except sit on them”. War can be the continuation of politics by other means if there is a plausible political settlement at the end of it. Clausewitz in reverse does not work.
Perhaps all this explains the almost apoplectic Western response to Syria, including that of western liberals and former radicals. It is a response born of their frustration about the absence of a military or political solution they can be in charge of, rather than a willingness to go to war.

Susil Gupta, 7 April 2017

Thursday, 6 April 2017

Fed Mountaineering

The US Federal Reserve has stopped so-called quantitative easing, namely the buying of US Treasuries and mortgage bonds. But it has not yet allowed the maturing assets to run off its balance sheet. Instead it has reinvested funds to keep the outstanding sum of assets pretty stable since 2014, at around $4.2 trillion. As recently as the end of March 2017, the Fed still had $2,464bn of Treasury notes and bonds plus $1,769bn of mortgage-backed securities on its books, totalling $4,233bn. In 2017, the Fed is likely to begin reducing this mountain, while trying to avoid an avalanche.

The following chart shows how the mountain grew after the 2007-08 crisis struck:

A Fed study in 2012 estimated that for every $300bn of Treasury bond purchases, yields fell by some 30 basis points. This was believed to be due to a 'stock effect' that lowered the supply of bonds in the market, raised their price and so reduced yields. This is only one influence on the market, but it is evident that there will be upward pressure on yields once the Fed starts selling off its accumulated stock.

The potential impact is widespread. It will run from higher US government borrowing costs and higher mortgage rates to higher corporate bond yields (since these have the government yield as a baseline). Interest rates in international markets will also be influenced by the level of US rates. This is especially so for the more vulnerable 'emerging market' economies. All of these have huge levels of debt that are likely to become more expensive to service.* Much of the latter's debt is also US dollar-denominated, which puts them at further risk if their currency values fall.

Tony Norfield, 6 April 2017

Note: * See the reviews of debt trends in a range of countries in the September 2016 articles on this blog.

Wednesday, 8 March 2017


I will be presenting on a panel at Manchester University's 2017 Post-Crash Economics Society Conference, held on the weekend of 18-19 March.

The panel topic is 'The Global Power of Finance', and the session is held in room 3.213 in the University Place building in Oxford Road M13 9PL, from 14.00-15.30 on Saturday 18 March.

Some organisational and booking details are given here, together with a link to the programme. I reproduce the latter below, but the text may not be clear.

Tony Norfield, 8 March 2017

Sunday, 5 March 2017

The Politics of Counting Billions of Beans

Just in case you were one of the half dozen or so people who thought that Brexit would be a simple affair, the UK's House of Lords European Union Committee has produced a report. Published yesterday, Brexit and the EU Budget is a 65-page analysis, with hyperlinks to the detailed evidence given on more than 70 questions and references to a multitude of EU-related documents. As one expert witness put it, there are 'many unknowns'. The chairman asked: 'Are these known unknowns or unknown unknowns?' The response was: 'All of them'.

The report covers the UK's potential liabilities to the EU and details the kinds of asset over which it might have a claim. Estimates in the media have claimed the net UK exit 'bill' as being anywhere from zero to 60 billion euros or more, and these different takes are analysed. However, the general conclusion is that all of this comes down to politics and a trade-off between different areas as part of the broader exit negotiations. It is not a thrilling read, but an instructive one that spells out the complex web of relationships within the EU.

Tony Norfield, 5 March 2017

Wednesday, 1 March 2017

What is Marx’s Value Theory Worth?

At a recent talk I gave on imperialism, there was an interesting question raised on what I thought about Marx’s theory of value. This seemed to be prompted by my reference to Marx’s theory, while I spent little or no time using the terminology in Capital. So the logic of the question was: what is the point of Marx’s theory if one can do without it when explaining what is going on in the world?
Partly, the question is answered by saying that one does not always have to use specialist terminology to express ideas. For example, I have found it to be simpler in presentations to avoid Marx’s term ‘fictitious capital’, because that concept would take some time to explain properly and most people are not familiar with it. Even those who are commonly misunderstand it. Instead, I usually develop the same ideas more directly through discussing the role played by equities and bonds and their relationship to what the economy produces. However, the question needs to be put in a broader context.
Marx’s value theory analyses social labour under capitalism and the increasingly odd forms that it takes as capitalism develops: from being represented in the prices of commodities, to being the source of interest, profits, dividends, rents and tax revenues, to underlying, in an even more distorted fashion, the prices of financial securities. Marx’s theory shows how the capitalist market gives the system a particular dynamic, one that leads to the monopolisation of production and the creation of a world market as capital accumulates. The labour embodied in commodities may not tally directly with the prices they command in the market, but those prices remain strongly influenced by changes in social productivity. Furthermore, we get a longer-term process by which barriers to capitalist production are set by the tendency of the rate of profit to decline. Since the logic of capitalist production is to make a profit, this is the key underlying problem for capitalism as a social system. It is one that the (sometimes) well-meaning reformers of the system do not want to contemplate, so they exclude this from their analysis or go out of their way to deny this does, or even could, happen.[1]
These fundamental features of capitalism analysed by Marx remain in place, although the system has of course developed a great deal in the 150 years since Capital was written. However, the changing forms of capitalism have led many to argue that Marx’s theory is outdated or invalid today. But a proper Marxist analysis examines the dynamic of the system and the new forms that evolve out of the old, rather than simply to judge whether contemporary capitalism fits completely with an earlier conception of it.
In Capital Volumes 1, 2 and 3, Marx did not investigate relationships between countries in the world market. Some of this was done outside the three volumes, and plans for later volumes included a more systematic coverage of the state, foreign trade and the world market. So, for example, in Capital there was no real discussion of colonies, just brief mentions, nor much on monopoly or national differences in wages.
Lenin updated aspects of Marx’s work in his 1916 pamphlet Imperialism, drawing on other analyses. He correctly put greater emphasis on the division of the world economy between oppressed/oppressor nations, the territorial division of the world between the major powers, the propensity to war, on monopolies, bank/industrial capital and a ‘financial oligarchy’. This was a key advance in the analysis, and consistent with the idea of Marx’s value theory as being a theory of the evolution of and barriers to the capitalist system – hence Lenin’s term ‘moribund capitalism’. Many aspects pointed out by Lenin remain relevant today, even though these century-old forms have, of course, also developed. There is now a largely post-colonial world, although many countries are still clearly underdogs in the imperial hierarchy. There remains a propensity to war, but now with many wars by proxy, sponsored by the major powers.
I have some differences with Lenin’s analysis, as explained in my book, The City: London and the Global Power of Finance, especially on his understanding of finance, which was taken largely from Hilferding. However, perhaps Lenin’s greatest weakness was his analysis of the ‘labour aristocracy’, the unconvincing notion of how a labour elite getting the benefits of imperial privilege influences the broader working class with their pro-imperialist views. Even in Lenin’s time it would have been more convincing to have taken into account how the mass of people in rich countries were patriotic for their own reasons, ones that had a strong basis in reality rather than a supposedly infectious ideology. They saw, and still see, their economic interests tied up with that of their own states, and benefit in their wages and welfare conditions from this imperial privilege. That is another sign of how it is important to conduct a thorough analysis.
I rely on Marxist concepts as starting points for understanding the world today because they provide the best way to explain what is going on. However, this is not to say that one can find the detailed answers in a particular volume of Capital. To think so would be almost as bad as believing in the prophecies of Nostradamus. Instead, the significance of Marx’s theory is that it so clearly spelled out the dynamic of capital accumulation that, much more than one might think plausible, his analysis provides key building blocks from which to understand major features of the world economy today.
Whether I use terms from Marx’s value theory in my analysis, and which terms, depends on the context in which I make my argument and how much time there is to do so. In any case, Marx’s work is used as just described. His concepts, like Lenin’s, might need to be amended – perhaps even rejected – according to an assessment of how the world has developed since they wrote.
The observation that capitalism in various forms has been around for several hundred years is commonly seen as an argument that it will go on forever: that it is an eternal, natural system for organising the economy. While economic crises are an undeniable reality and sometimes bring protests, there remains little understanding or acceptance of the Marxist conclusion that capitalist social relations are an increasingly dysfunctional, reactionary way in which to organise the affairs of humanity.

Tony Norfield, 1 March 2017

[1] I have little confidence in being able to track movements of the rate of profit through official statistics, although one does get indications of the underlying movements from the behaviour of major capitalist companies and reports of investment that suggest a rising organic composition of capital. Official data are focused on an individual country, and do not fully allow for international influences, something especially important for the US. Statistical conventions for counting the ‘value added’ by the financial sector make things worse, as exemplified by UK GDP income data in 2008 showing a higher operating profit for UK banks when the company reports, and Bank of England data, showed a very sharp drop, often into losses! This is apart from the multitude of accounting tricks that large corporations use to relocate the origin of their profits, including through tax havens.

Monday, 27 February 2017


It took me a while, but I have finally used the Blogger system for accessing past and current contributions on this blog by topic, identified by the label attached to each post/article. So, assuming it all works, if you want to find out what I have written in the past six years about various things, around 90 labels are listed at the end of the main page.

The labels are ordered in terms of the frequency with which the labels have been used. At present, 'Imperialism' is at the top, 'BRICS' is close to the middle and 'value chains' is at the end. Greece, Saudi Arabia, Norway, pirates, Donald Trump, the Ottoman empire and commercial capital also feature on the list. It is slightly arbitrary, since one can overdo or underdo the labels, or use one term rather than another for basically the same thing. Nevertheless, I hope it will give interested readers an easier way around the six-year list of articles and comments.

Just as a note, I have deleted no previous articles or comments. Where I have made more than minor stylistic changes to the original text to clarify the wording (there were a couple of cases where I corrected a point originally made) I have indicated that with a comment in the relevant post.

Tony Norfield, 27 February 2017

Wednesday, 15 February 2017

The Anti-Russia Syndrome

I normally cast aside explanations of events based on the psychology of the actors, but this has been hard to do in recent months. How else, apart from signs of paranoia, can one explain the never-ending stories in the mainstream media about the Russian menace?
A constant tirade against Russia emanates from television and radio channels, and from all the ‘quality’ newspapers and reporters. (See this Youtube video of Putin explaining that the BBC’s John Simpson has no ‘common sense’). Only the topic changes with the times. One early focus was Russia’s intervention in Crimea/Ukraine, which upset US and European strategy. The next was how Russia’s support for Assad in Syria unravelled and sidelined disastrous western policy. One of the latest is the election of Trump, billionaire-in-chief of the US hegemon. A shocked US political elite can only put down Trump’s election to the nefarious Russkies, not to domestic political reaction. Right on cue, a British ex-MI6 agent provided a dossier of ‘evidence’ to ‘demonstrate’ that Putin was in a position to blackmail Trump! If that were not bad enough to show how the commies were undermining western liberal democracy, new stories are about Russian support for Marine Le Pen’s Front National in France and other rightwing parties in Europe.
The anti-Russia syndrome reflects two things outside the realm of psychosis. Firstly, it is a sign of big power frustration with a permanent member of the UN Security Council that can veto US-led UN resolutions and which can also back up its policies with military firepower. Secondly, the chronic phase of the crisis persists, and this is straining the political infrastructure, as most clearly seen with the Brexit and Trump votes. ‘Anti-communism’ is one of the few comfort blankets that the western powers can cling on to in these troubling times and pretend that they are all still in the same gang.
Take the UK government, for example. No longer invited to any EU soirées, the UK has to grandstand at NATO. The UK Ministry of Defence today declared that one of its key objectives for this week’s NATO summit in Brussels was
“to ensure the Alliance continues to make progress on taking forward the ambitious agenda agreed at Warsaw, in particular on modern defence and deterrence towards Russia. On that front (literally), the enhanced forward presence of NATO battlegroups is deploying this Spring to the Baltic States and Poland, with the UK proud to be leading the formation in Estonia, one of our most effective Allies in the Helmand campaign.”
The anti-Russian strategy has been a hallmark of British imperialism ever since the October revolution of 1917, and it has helped shape, or has been used in, almost all of its other policies. From the late 1930s/early 1940s, Britain focused upon splitting India into two countries, so as to make the new Pakistan a bulwark against any Russian incursion into its interests in the Indian subcontinent and the Persian Gulf. Britain also feared Soviet involvement to stymie its attempts to re-establish its colonial empire (and those of other powers) in the late 1940s. Britain went out of its way to support Moslem fundamentalism in the Middle East and North Africa as a counter-weight to local demands for freedom from foreign domination, usually put forward by secular nationalists, and it justified this by using the fear of ‘communist subversion’, even when that was completely unfounded. Similarly, Britain used the Soviet threat as a way to get the Americans to back its policies, as with the US involvement in the 1953 coup that overthrew Mossadegh in Iran. There were many other such initiatives, as documented in Stephen Dorrill’s MI6: Fifty Years of Special Operations.
Russia has completely embarrassed British and American political strategy at a time when Britain wants to hold on to its role as facilitator for that strategy in European and beyond. Now, post-Brexit, the Brits are high and dry, but Theresa May hopes to continue to hold hands with Donald Trump over NATO.

Tony Norfield, 15 February 2017

Thursday, 9 February 2017


Next Thursday, 16 February, I will be giving a lecture on 'Capitalism, Imperialism and Finance' at the University of Sussex, Falmer, near Brighton.

The session is run by their Centre for Global Political Economy, and Sam Knafo will be a discussant.

It is from 5-7pm, the location on the campus being Essex 18.

If that's convenient for you, I look forward to seeing you there.

Tony Norfield, 9 February 2017

Wednesday, 1 February 2017

Finance and the Imperialist World Economy

I will be giving a lecture next week at King's College, London, on Wednesday 8 February.

The session is from 6pm to 8pm, and is part of a series of seminars at King's on Contemporary Marxist Theory.

The seminars are open to the public, but arrive in time to get signed in if you want to attend.

Venue details:
342N Norfolk Building (entrance on Surrey St)
King's College London, Strand, London WC2R

Summary of topics:
This paper discusses how the financial system both expresses and reinforces the power of major countries. Developing Marx’s theory by examining bank credit creation, bond and equity markets, the paper shows how what Marx called the ‘law of value’ is modified by the evolution of finance. To understand imperialism today, one has to recognise how financial markets help the centralisation of ownership and control of the world economy. They are also an important way in which the US and the UK siphon off the world’s resources. The question of Brexit and the City of London is also discussed.

Tony Norfield, 1 February 2017

Saturday, 21 January 2017

Trump, Brexit, Nationalism and ‘Neoliberalism’

In the wake of Brexit, European political developments and Trump now being POTUS #45, surely it is time for the left that goes on about ‘neoliberalism’ to wake up instead to the emerging nationalist economic policies in the rich imperialist countries. Unwelcome as it may be, these policies are backed by the mass of the people in such countries, not simply by a small bunch of reactionaries. Furthermore, the nationalism of one imperialist power is, as one would expect, opposed by another, so it is also a time for the left to consider whether it will play a part in siding with one of these or rejecting all of them. That often turns out to be difficult. As with some parts of the left-wing vote for Brexit in the UK, there is often an attempt to adapt to reactionary nationalism by claiming that it represents an opposition to the established political order that can be turned to radical ends. (Which, however, is not to say that voting for EU membership was a progressive option – so I abstained)
The term ‘neoliberalism’ describes the changes in economic policy after the 1970s. I do not use it for several reasons. Firstly, there was not much of a change and what change did occur did not start from the Thatcher and Reagan governments after 1979-81. Secondly, the most important reason for the new stance in capitalist economic policy was derived from the new imperatives of the global capitalist economy, riven by crises from the late 1960s, not from a policy ‘coup’ by arch conservatives or due to the domination of government economic policy making by reactionaries. Thirdly, the perspective of people arguing for the notion of ‘neoliberalism’ is to argue for alternative and more progressive policies, but under a capitalist government and/or in a capitalist economy. Nostalgia for an illusory past – a more caring capitalism – was their common trait, and they also ignored how pressures from the global economy on policymakers led to the ‘neoliberal’ policies.
A number of articles on this blog have covered the question of the ‘China price’ and the benefits that inhabitants in the rich powers have gained from the import of cheap goods produced by super-exploited labour elsewhere. Although it is an uncomfortable fact for radicals in rich countries, this has also underpinned the complaint by workers that their jobs and living standards are being undermined by low-cost imports. In a related fashion, a more strident complaint from these workers is that the problem is migrants who will work for less than them. I would be generous here and describe these complaints as economic nationalist, and not necessarily racist, although sometimes they are.
In recent years, the ruling elites in several rich countries have adapted to these popular complaints, even if they had previously been at the forefront of promoting free trade and global economic connections. In democracies, popular opinion ends up influencing the political stance of the government. This has been behind Trump’s support in the US, Brexit in the UK, Marine Le Pen in France, Geert Wilders in the Netherlands, etc. Much of the anti-Moslem sentiment in Europe and the US is also due to a resurgence of such economic nationalism. Not that Moslems can rationally be seen as an economic threat, but they provide a convenient focus when the issue is to ‘protect our way of life’ from foreign influences.
The real challenge to the left in many rich countries comes not from the ruling class, or its policies, but from their inability to take on reactionary popular sentiment in the mass of the population. Instead, mostly they focus on their own version of progressive policies that their national capitalist state should implement, whether taking over banks or diverting public spending to better causes. That is why most radical invective around these issues will use the more acceptable pejorative term ‘racist’, rather than the often more accurate term ‘nationalist’. With this approach, they will be wrong-footed by the new, more strident nationalist stance of Trump for the US and likely similar positions taken in other major powers.

Tony Norfield, 21 January 2017

Tuesday, 17 January 2017

Theresa May's Brexit Speech

In her much-heralded Brexit speech today, UK Prime Minister Theresa May continued to adopt the pose of the strict headmistress delivering an address on the school’s achievements. She attempted to be bold and proud, but avoided mentioning that no prizes have been won this year and the school trip abroad is now cancelled owing to insufficient funds. The speech was long on rhetorical cliché, yet short on detail that could not have been deduced from what has already been reported. However, there was a clear statement that the UK would not aim to stay in the EU single market after Brexit and, more interestingly, another implicit threat to the EU on what would happen if there were no good deal for the UK in the forthcoming negotiations.
She seems finally to have got the message from other EU political leaders that membership of the single market is part of a broader agreement that includes freedom of movement for people too. She may also have been informed that the existing EU customs union agreements (eg for Turkey) are based on trade in goods. They do not include services, and would not help the UK’s interest in maintaining financial services access to the EU market. So the PM declared that there will be no such membership, and neither will there be any payments to the EU budget for these things. Brexit means Brexit!
Then came the brazen bit: ‘as a priority, we will pursue a bold and ambitious Free Trade Agreement with the European Union’. The great thing about this is that, because it is not called being a member of the EU single market, it will presumably cost nothing! Nothing at all, since although the UK plans to repeal the European Communities Act as part of the exit, it will at the same time ‘convert the “acquis” – the body of existing EU law – into British law’. So, you see, everything can really remain the same. Well, except that, not being an EU member, the UK can avoid paying anything into the EU (except for some specially considered exceptional cases), can control EU immigration and can pay no attention to the European Court. Which EU member state would not see that as completely reasonable?
If the rest of the EU did not agree that this was a wonderful solution to an intractable problem, then there was the threat, one initially posed by Chancellor Philip Hammond in his recent interview with the German newspaper, Welt am Sonntag. The newspaper stated that ‘your government sees the future business model of the UK as being the tax haven of Europe’. Hammond did not deny this, but indicated that it could happen if they were ‘forced to do something different’. Hammond said
‘If we have no access to the European market, if we are closed off, if Britain were to leave the European Union without an agreement on market access, then we could suffer from economic damage at least in the short-term. In this case, we could be forced to change our economic model and we will have to change our model to regain competitiveness. And you can be sure we will do whatever we have to do. The British people are not going to lie down and say, too bad, we’ve been wounded. We will change our model, and we will come back, and we will be competitively engaged.’
Theresa May was clearer on this ‘change our model’ option in her Brexit speech when she said that ‘no deal for Britain was better than a bad deal for Britain’
‘Because we would still be able to trade with Europe [even with no deal]. We would be free to strike trade deals across the world. And we would have the freedom to set the competitive tax rates and embrace the policies that would attract the world’s best companies and biggest investors to Britain. And – if we were excluded from accessing the Single Market – we would be free to change the basis of Britain’s economic model.’
Britain is the second largest EU economy, and the one with the second largest net EU budget payments after Germany, so it does have some negotiating power. But it is still in a relatively weak position compared to the other 27 states negotiating as a bloc, especially if it does not want to make any payments to the EU. The UK government is obviously not promising to change the capitalist economy, but merely to change or cut some taxes and regulations that would make domestically-based business ‘more competitive’ – meaning more attractive for business. This would be a problem for the rest of the EU, since they would either lose out or also have to adapt to these changes, so it is a credible, if desperate, negotiating tactic.
A big problem for the global capitalist system is that the UK moves are helping to undermine the existing structures of international political-economic relations that have been slowly built up over decades. This makes the international policies of all major states up for grabs, and we can obviously add in Trump's US to the mix. Partly in compensation for this, PM May went on about how much she valued the partnership with Europe and how Britain was important for European ‘security’ in terms of its permanent membership of the UN Security Council, nuclear weapons and ‘intelligence capabilities’.
These are more signs of how the chronic economic crisis is leading to growing tensions in capitalist policy making. In Britain’s version of the economic nationalism being introduced by Trump, Theresa May uses blather about a ‘fairer Britain’, rather than a strident ‘Make GB Great Again’, if only because she knows there is a more vulnerable position to protect and no ability to force unilateral deals. We will see more arguments and conflicts between the major countries in the years ahead.

Tony Norfield, 17 January 2017