You are struggling.
The economy is struggling.
The government is struggling to balance its books.
UK companies (non-financials at least) are in a better place. According to analysts at Shore Capital, UK companies' cash flow has grown 40 per cent since the depths of the financial crisis at the end of 2008.
So let me offer two explanations.
First, recession is good for very big business: they've slashed costs and wages, and floated their profits offshore.
Second, they don't want that to change so they argue for its continuation - hence their support for Osborne's suicidal economic policies.
Third, as Aditya Chakrabortty argued in the Guardian this week (admittedly with regard to banks, but he could have made the same point more widely) because Labour lives in fear of big business:
It means that opposition to the rule of banks isn't found in Westminster, but in tents outside St Paul's or among a few grizzled academics and NGO-hands — with no political vehicle to carry them. Meanwhile, the politicians declare that the national interest of Britain can be defined by what suits one square mile of it.
I'm happy to be one of those NGO-hands.
I just wish politicians would join in.
To read more, the answers are here.
And join the protests.
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Richard, I’m surprised you didn’t offer an additional explanation, the tax laws have been manipulated / or they have manipulated them, so they retain more profit and keep their cash in the bank. I’m sure their bank deposits are much better covered against the systemic risk of sovereign and bank collapse throughout the world than those of their workers too.
What would it take for them to be persuaded to invest their cash in the UK I wonder? Could capital controls force them to bring it back to the UK, because you can bet its hidden in any number of overseas hidey holes. Of course we could see that if your suggestions on publishing accounting details by jurisdiction were to be introduced for large corporates.
First we need to find the money
Then we have to tax it
country-by-country reporting is key to this
As much as ‘Austrian economics’ was founded with Menger’s (along with Jevons and Walras independently) ‘marginal revolution’, it was also (they won’t like this) a historical movement with a hatred of the way the banks came to stop the market from being freer in Germany in the 1870s up to WW1. This is why Hayek and Schumpeter in the Great Depression were happy to see the banks fail, to stop Germany’s bank-dominated finance-capitalism. Bagehot in 1873, living in a better country politically, was free to say that the state should step in and stop panics. Simply, Bagehot trusted the UK’s state, and Austrian economists didn’t trust the Austro-Habsburg state or the German state. The US of course saw around 10,000 of its banks, a third of their total, fail by 1933 until Bagehot was seen to be wiser than non-interventionalist Liberalism.
Now, although the West has better institutions than the Teutonic-dominated states of the later 19th century, the bank problem of politico-economic interference remains (which I think is a shadow banking problem, see Krugman blog ‘Six Doctrines in Search of a Policy Regime’). This is why Hayek was still celebrating Bruning’s austerity in Road to Serfdom in 1943. But in a democracy like the UK’s (or Weimar’s for that matter) this should not be an issue, and it is unfortunate that Hayekian historicism should have filtered down into the minds of so many politicians when the Bagehot-Keynes axis should be paramount. Indeed, for those who like this sort of thing, it’s relatively patriotic.
Cash flow increasing by 40% tells us nothing about profits. A business in decline can easily increase its cash flow tempoarily as less is invested in debtors and stock, as well as in expansion capex. What is does probably tell us is exactly why banks aren’t meeting lending targets, companies don’t want or need loans.
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