Skip to content

UK economy running on empty

Marxist Analysis · 2026-05-13

Core Argument

The article argues that the British economy is trapped in a structural crisis masked by two temporary props: the super-exploitation of labour through wage suppression and precarious work, and an unprecedented expansion of cheap credit that has sustained "zombie firms" while inflating speculative asset bubbles. The central claim is that these props are exhausted — wages cannot be squeezed further, household debt has reached pre-2008 levels, and productivity growth has flatlined — meaning the underlying crisis of overproduction is now more severe than in 2007-08. The article insists that no reformist programme can resolve this contradiction within capitalism, because the system's own logic compels the state to defend profits over living standards. Only the expropriation of the banks and monopolies under a socialist plan can break the impasse.

Theoretical Grounding

The analysis is rooted in Marx's theory of crisis, specifically the tendency of the rate of profit to fall and its manifestation as a crisis of overproduction. The article deploys this not as a mechanical prediction but as an explanation for why cheap credit and quantitative easing failed to revive productive investment — capital flowed into fictitious capital (stock markets, speculation) rather than the real economy because the underlying conditions for profitable accumulation were absent. The concept of "zombie firms" draws on Marx's observation that credit can temporarily suspend the law of value, allowing unproductive capitals to survive beyond their economic usefulness, only to deepen the eventual reckoning. The argument that profits have risen while productivity stagnates is a concrete illustration of Marx's insight that absolute surplus value extraction (lengthening the working day, intensifying labour, suppressing wages) can temporarily compensate for a failure to raise relative surplus value through investment. The piece also implicitly draws on Lenin's theory of imperialism in its treatment of migrant labour as a reserve army deployed to undercut domestic wages, though this remains underdeveloped.

Conjunctural Relevance

The article was published in October 2017, at a specific conjuncture: Theresa May's government was reeling from a disastrous party conference, the OBR had just downgraded its growth forecasts, and the IMF had predicted UK GDP growth would trail Greece's over the following five years. The piece identifies several concrete data points that remain structurally significant:

  • UK productivity grew at only 0.2% per year over the preceding five years and had fallen 0.3% in the last year — the worst performance of any G7 economy since 2007.
  • UK infrastructure was rated second-worst among G7 members, and total R&D investment (1.7% of GDP) lagged far behind OECD leaders.
  • Unemployment had fallen to 4.3% (a 1970s low) while real wages had contracted — making the UK the only "advanced" economy where wages fell during a growth period, matched only by Greece.
  • Household debt had already surpassed 2007 levels, with savings at a record low.
  • Moody's had just downgraded the UK's credit rating, citing the "easing of austerity" — a sign that the bond markets were already disciplining any departure from pro-capitalist orthodoxy.

The article's political conclusion — that a Corbyn-led government would face the same fate as Venezuela's if it merely taxed rather than expropriated — reflects the immediate conjuncture of Corbyn's rising poll numbers and the left's debate over the limits of reformism.

Where the Argument Continues

The article leaves several threads open that are developed elsewhere in the IDOM corpus:

  • The concept of "zombie firms" and the role of ultra-low interest rates in sustaining unproductive capital is explored in greater depth in IDOM articles on central bank policy and the global debt supercycle, particularly pieces analysing the Bank of England's and ECB's quantitative easing programmes.
  • The relationship between the UK's productivity crisis and its position in the global division of labour — the deindustrialisation of the British economy and its reliance on financial services — is gestured at but not theorised. This is taken up in IDOM analyses of British imperialism and the City of London's role as a global hub for fictitious capital.
  • The argument that a Corbyn government would be blocked by capital is developed in numerous IDOM articles from 2017-2019, including detailed analyses of the "capital strike" against the 2019 Labour manifesto and the role of the bond markets, the Bank of England, and the civil service in disciplining reformist governments.
  • The comparison with Greece is a recurring theme in IDOM's analysis of the Eurozone crisis and the Syriza experience, which serves as the central case study for the limits of reformism within the capitalist state.

Connections

  • Marx, Capital Volume 3, particularly the chapters on the tendency of the rate of profit to fall and the role of credit in temporarily suspending crises — the theoretical foundation for the "zombie firm" argument.
  • Lenin, Imperialism, the Highest Stage of Capitalism — for the analysis of how finance capital and the export of capital displace productive investment domestically.
  • The IDOM article "The Productivity Puzzle and the Crisis of British Capitalism" (2016) — a precursor that develops the same data in greater theoretical depth.
  • The IDOM series on quantitative easing and fictitious capital (2015-2018) — for the argument that central bank policy has created a "debt supercycle" that postpones but deepens the crisis.
  • The IDOM analysis of the 2019 Labour manifesto and the "capital strike" — for the concrete demonstration of how capital would resist even a moderate reformist programme.
  • The Against the Stream episode "Greece: The Limits of Reformism" — for the comparative case study that underpins the article's political conclusion.

Key Quotes

  1. "The culprit, as the OBR notes, is the 'sustained weakness in investment' by UK businesses, i.e. the complete failure of British capitalists to invest in developing the real economy."

  2. "This has given the UK the dubious honour of being the only 'advanced' country in which wages have contracted whilst the economy was growing. Only Greece, which saw its GDP collapse after the 2009 Euro crisis, could match the size of the wage cut faced by British workers."

  3. "Instead of prompting an influx of productive investment from companies benefitting from cheap credit, the low cost of borrowing has simply allowed many so-called 'zombie firms' to stagger on, neither growing or collapsing, neither alive or dead."

  4. "In reality, all that has been achieved in the period since the crisis is a postponement of a further crisis by means of cheap credit and a pitiless squeeze on workers. The underlying crisis of overproduction, caused by the inability of the market to absorb all that is produced, is if anything even greater now than in 2007/08."

  5. "Faced with growing political pressure, Hammond and the Tories may choose to raise public sector pay to a level above inflation (although not by much we suspect), but the money spent on this will undoubtedly then be recouped from elsewhere, such as through the ongoing inhuman assault on vulnerable benefit claimants."

  6. "The incredible hoard of wealth which has been quite literally robbed from the workers since the crisis (and before) must not simply be taxed. It must be seized and the banks and monopolies nationalised to fund a vast campaign of investment and development throughout the economy under a socialist plan of production."