Well it was a landslide. It was an unprecedented result. No, I don't mean a Labour landslide or that it was unprecedented that Labour won a complete second term for the first time. No, I mean that for the first time since every person of 21 years and over was allowed to vote (and it was 1928 before women got the vote), the No Vote party polled more than the party with the largest number of votes.
In 1997, Labour polled 31% of those eligible to vote, squeaking past the No Vote party, which reached 29.1% of those registered to vote. This time, despite allowing anybody to register for a postal vote if they wanted to for the first time, and despite four years of New Labour (or maybe because of that!), the No Vote party got a massive 40.7% of those registered, while New Labour polled just 24.8%, or less than one in four. The Conservatives found that less than one in five voters was prepared to turn out and vote for them. It was landslide for the No Vote party.
What did the No Vote party stand for? The pollster organisations found three arguments dominated the views of the No Voters. First, it didn't matter whether New Labour won as it would make no difference to people's lives. Second, none of the parties would do anything for them. And third, politicians are not to be trusted as they always reneged on their promises. These were powerful enough arguments to win for the No Vote party by a wide margin for the first time in nearly a century of electoral history.
The Queen's Speech has come and gone. In this second term, New Labour says it is making a priority of delivering decent public services to the population. Better schools, a working health service and a functioning transport system within four to five years - these are the promises. As a previous column explained, after two years of cutting public services to win the support of big business of New Labour (1997-99), the government finally launched new spending programmes in 2000. Government spending expansion is supposed to rise from 2.5% a year (about the same as inflation) this year up to 4.2% a next year.
But as the Institute of Fiscal Studies has rigorously pointed out, after 2003 the government cannot sustain improved public spending without either raising the tax burden, measured as tax revenues as a share of national output, or as a share of average household income. The alternative to that is boost the underlying level of economic growth in the British economy so that national output outstrips increased spending.
That would mean the British economy would have to expand at 4-5% a year in real terms for the foreseeable future. Yet the underlying levels of economic growth in Britain seem locked at about 2.0-2.5% a year. A faster rate of growth depends on raising the productivity of the existing labour force and also increasing the amount of people employed.
The irony is that Gordon Brown has made it his key aim in the second term of New Labour to create an 'enterprise economy', with the objective of raising the UK's pitifully low productivity levels. Despite manufacturing employment declining, output per employee in that sector has risen only 1.5% a year since 1997. That compares with the 4-5% growth seen in the US. And without faster productivity, the UK cannot grow faster.
There seems little likelihood of improvement. The key to faster productivity growth is investment in new technology that will make workers more productive. Sure, you can boost output per worker by reducing the size of the workforce and making the others work harder or longer each day. But British workers already work the longest hours and have the shortest holidays in Europe. Sweating more production out of British workers has been maximised.
So there is a need to invest in new technology to create Gordon Brown's 'enterprise economy'. In 1997, British manufacturers invested £19.8bn in their companies. This year, they are likely to invest just £17.8bn. If it weren't for increased investment in the financial sector and other services, total business investment would have fallen in the last four years. The huge profits made by British business have been invested abroad instead.
And even the low growth already achieved is now in jeopardy. There was one significant statistic released quietly on Election Day. Manufacturing output in April had fallen 2% from December's peak figure and manufacturing profitability has slumped.
The reason for this slump is hidden in the statistics. The UK's very small information technology (IT) sector has nevertheless contributed 0.5% points a year to the UK's growth rate since 1997. Since 1995, IT output more than doubled while the rest of manufacturing production actually declined 1.5%. But, just as in the US, this sector is now in decline as investment in IT equipment falls back. In the last year IT manufacturing has fallen back nearly 1%, with the rest of manufacturing output being flat.
But, say the capitalist optimists, manufacturing contributes less than 20% to the UK's annual output now. It is no longer that important. The service sector- communications, transport, financial services and tourism - is now the heart and soul of modern British capitalism. But here also, there are worrying signs.
A key area for UK prosperity is the financial services sector. The UK is now the rentier economy of the capitalist world. Financial services accounted for nearly 7% of UK annual output in 2000. But in this sector, everything depends on stock markets around the world continuing to rise, particularly as the UK is a net exporter of financial services, with around 40% of its sector's sales going as exports. So any downturn in world stock markets spells doom for a very important sector of the British economy. And what have we seen since March 2000? -a general fall in world markets
And that also means a lot of jobs. Since New Labour came into office, total employment has risen 1.4m. But manufacturing has seen a loss of 250,000 jobs, while so-called service jobs have risen 1.7m. Of this increase, the financial sector took on a net 700,000 new employees.
But the fall in world stock markets last year is now telling. Nearly all of that 700,000 increase was in the years 1997-99. The big banks and financial companies in the City of London took on hardly any new employees in 2000 and they are now preparing to sack thousands this year unless stock markets pick up.
But the real impediment to the UK economy is not the failure of British capitalists to invest in the future of their national capital and preferring to invest abroad. It is the global economic slowdown and oncoming world recession. The huge economic colossus that is the United States is slipping fast into slump. And leading the way is the great saviour of American capitalism in the last five years - the hi-tech sector. The wild expectations in the internet and information technology revolution led to massive speculative investment in the new industries, particularly in 1999 and 2000. Dot.com companies were given money to burn. And burn it they did.
Now the pain has come. As Marx explained, capitalists will continue to invest money as long as they think they can make a profit on their investment. They all start off thinking they can. But in investing ever-larger amounts in capital equipment (computers, new semiconductor plants, new mobile telecom technology etc.), they increase the difficulty of delivering sufficient profit in return. Last year, the stock of investment in what Marx called 'dead capital' rose 5%, but the return on that capital stock did not rise. In other words, the profit on each new amount of investment fell.
US profitability is still at a high level historically, at around 8.5%, the highest level since the late 1960s. But it has peaked and is heading back down. Indeed, it's falling so fast that the overall mass of profits created by American workers for American big business will fall this year by around 8% before tax.
What do capitalists do when profits drop? They stop investing and they lay off workers. Both are now happening in the US. In particular, orders for new IT equipment have plunged 36% in the last four months. This collapse in the IT sector in turn has led to a huge crash in IT company shares. The NASDAQ index, which sets the overall stock market price for this sector, is down 45% from its peak in March 2000.
At the same time, companies are beginning to lay off their workers in their thousands as profits drop back. Since January, employment has dropped 900,000 in the US, a decline not seen since the 1950s! Official unemployment is on the rise, but not by much so far. That's because the number looking for work has also fallen. Many American teenagers have decided not to look for summer jobs. Once the autumn sets in, the real struggle for disappearing jobs will begin.
The most telling statistic of the American economy's future is capacity utilisation. This measures how much of the existing factories and businesses are being used. At the peak of the 1980s boom, the figure reached 85.5%. It fell to 78% in the depth of the slump of 1991. It recovered to 84.5% in mid-1990s and stayed in the 80%s until last year. This year, there has been a dramatic collapse. The May figure hit a new low of 76%, below the slump of 1991. And we are not officially in a recession in the US yet.
The American colossus is tottering. It will fall and when it does it will take out the UK and Europe with it. Already, Europe's growth rate is plunging below 2%. That does not make the prospect of closer integration with the European Union and the replacement of sterling by the Euro appear to offer any benefit to British workers and their families. And as for Japan, it has seen little growth in the last ten years and the Japanese government is now admitting that there will be no recovery this year again. Capitalism is now on the brink of global recession and Britain's New Labour government will not escape the consequences.
The No Vote party argued that politicians are not to be trusted as they won't keep their promises. And New Labour won't make any substantial difference to their lives. The economic future suggests that New Labour may confirm the No Vote cynics before this parliament is over.