[Marxism] Fwd: The impact of Brexit | Michael Roberts Blog
lnp3 at panix.com
Sat Jun 25 06:03:29 MDT 2016
Michael Roberts warned that a Grexit would be no panacea. He has a
similar warning on Brexit:
And here is the real point. Devaluation only really affects demand. The
other side of the equation is supply and productive capacity.
Devaluation doesn’t necessarily do anything to promote investment and
higher productivity. Some even argue that devaluation can reduce the
incentive to be efficient because you become competitive without the
effort of increasing productivity. What really matters is what is going
to happen to business investment and profitability.
Higher production costs from imports, weaker demand at home and abroad
are likely to discourage UK companies from investing at home and foreign
investors from stepping in. And overall profitability of UK companies
at the end of 2015 was still below the peak of 1997, while profitability
in the key manufacturing sector for exports was half that of 1997.
If the UK tips into recession, the demand for EU exports (German cars,
French wine, Italian clothing etc) is going to weaken. And so a
recession in the UK could push the EU back too. And this is in an
environment where global economic growth has slowed to its lowest rate
since the end of the Great Recession, where global corporate profits
growth is at zero and business investment is dropping in many economies.
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