Bill Mitchell-en Britainia Handia-EB liskarra

Where has this aid been going?

The next graph breaks the total down in to the regional development objective.

And Environmental protection including energy savings. This is driving Germany’s upward trend.

And Training – hardly anything, although in the UK’s case it stands out in providing state aid to human capital development and employment (see next graph) relative to the rest. But the amounts involved are not large.

And Employment – hardly anything.

And Sectoral Assistance – hardly anything.

There are other categories such as SME and risk capital, Culture, Heritage conservation, Rescue and Restructuring, Closure aid, Compensation of damages caused by natural disaster, Promotion of export and internationalisation, etc., which have limited data available or very small amounts involved (in the main).

Second, consider the challenges into the future.

1. Addressing the years of austerity – damage to basic infrastructure, education and training, services, reversing privatisation, etc.

2. The climate challenge – a massive transformation in the production and consumption patterns is required to facilitate the transition to a low carbon-intensive economy.

3. Pandemic – and on top of that a massive health challenge, which has exposed the weaknesses in our health systems, mostly arising from austerity and the application of a ‘free market’ mentality.

What does that all imply?

Massive and continuous state outlays, the scale of which we rarely see (outside of war), will be required to provide the financial support to meet these three challenges.

The British government simply has to reject the Thatcherite narrative (which was really first rehearsed by Dennis Healey and co in the mid-1970s) and return to the sort of vision laid out by Tony Benn when he was the Secretary of State for Energy in 1976.

He issued several documents in November 1976 outlining his alternative plan for Britain, which included the rejection of any dealings with the IMF.

This was in relation to Cabinet submissions from the Chancellor (Healey) proposing to invoke harsh (neoliberal) spending cuts and depoliticise the decision by claiming that the IMF was forcing them on Britain in return for a loan that was essential because Britain (a currency issuer) had run out of money.

As a real alternative to the Monetarist direction the British Labour government was proposing to take, Benn presented a paper to Cabinet on November 29, 1976 – The Real Choices Facing the Cabinet – which proposed a six point “national recovery plan” which was characterised by:

1. Introduction of import quotas on manufactured goods.

2. Introduction of “import deposits” as an interim measure while the quotas were being worked out.

3. Introduction of capital controls to “check speculative outflows” (p.4).

4. “Reintroduction of a Capital Issues Committee” (p.4), which would serve to ensure that bank credit was directed into areas of “national priority” to reinforce the protection of the homemarket provided by the import controls. This was like a national infrastructure assessment process that is common in many countries, including Australia.

5. Reduce interest rates “for all but official holders of sterling” (p.4). In other words, provide cheap finance to industry but not provide an incentive for those foreign interests with the remaining sterling financial assets to continue selling.

6. Introduce planning agreements with industry and provide “more funds for the National Enterprise Board and the Scottish and Welsh Development Agencies” (p.4).

The intent was to “re-industrialise” Britain and rebuild its export base (p.4).

In this context, Benn argued that the IMF might extend a loan to help the plan succeed and if any additional conditions were required they should focus only on “tougher import restriction” (p.5).

I discussed that in this blog post – The British Left is usurped and IMF austerity begins 1976 (June 29, 2016).

Please also see these blog posts:

1. IMF changes tune on industry policy – shamelessly – Part 1 (April 8, 2019).

2. IMF changes tune on industry policy – shamelessly – Part 2 (April 9, 2019).

3. British Tories reject the ‘free market’ neoliberal myth (December 11, 2017).

History tells us that Labour did not follow Benn’s vision and the Winter of Discontent followed, which paved the way for Margaret Thatcher’s dreadful period in office.

Now Britain has a chance to return to that sort of state intervention – and should – to meet the challenges specified above.

It will be another sign that the paradigm shift in macroeconomics is well under way.

And a no-deal Brexit will allow the government to provide extensive state support and choose industry winners – South Korea style, in a way that the EU would never allow.

Whether the Tories have the calibre to do that properly, as opposed to just doing deals with mates in failing sectors, is another matter that I pass no judgement on at this stage.

But passively accepting a ‘free trade’ deal with the EU will not be in its interests.

Barnier is still trying to claim that the EU promotes ‘competition’, but that is just a ruse. It does not. It promotes cabals of entrenched capital interests and allows state aid, nationalisation, when it advances the interests of the elites.

There are two additional things of interest here:

1. These developments are creating massive tensions within the Conservative party itself. More government intervention is anathema to many of the Thatcher-type ideologues who are now forced to suck it up because the smarter operators in government know that they have a unique chance to play the Labour party out of the game forever in the former Labour seats that the Tories won in the December election.

That reality, alone, drives a more interventionist dynamic.

2. And what of the Labour Party? Where are they in all of this? Its new leader – a key Remainer who vowed if they win office to take Britain back into the EU is clearly being wedged by current developments.

Starmer is clearly not sure what strategy to adopt now.

He has been claiming Britain has to honour the Withdrawal Agreement but when it comes down to the next election will the British people care about that? I doubt it. They will care about how Britain is travelling in terms of work, wages, housing, energy, and health.

All of those things are within the capacity of the current government to improve.

Just like the Tories ran the “Get Brexit done” simplicity in the December election, you can see them running a “Do you support Britain or Brussels” type campaign in the next election.

Labour will lose that one too.

And where does Labour stand on the state aid question?

Mostly silent, although in a recent ITV interview (September 9, 2020)- Keir Starmer: Boris Johnson must ‘get on’ with Brexit deal and focus on fighting coronavirus – the Labour leader is still pushing the
‘free market’ line, supporting the EU’s insistence that Britain doesn’t go it alone.

Starmer has now abandoned, its seems, any call for a new referendum on Europe.

But it is clear Labour are as confused as ever.

Iruzkina:

(http://bilbo.economicoutlook.net/blog/?p=45787#comment-69900O

Derek Henry

It’s disgusting…

A complete and utter disgrace the left still refuse to have a LEXIT vision. They’ve never had one.

What makes it even worse. Is They have sat and watched the UK govt destroy every mainstream myth regarding the UK monetary system. The UK treasury and the BOE have shown quite clearly during the virus that they can do whatever it takes to make Brexit a success. They can’t run out of keystrokes.

The liberal left are a farce. Simon Wren Lewis blog of endless impending doom and his articles in the Guardian of why everyone should have voted remain. Should be enough to retire him, send him out to pasture on a farewell speaking tour in European capital cities.

(…)