Norm writes:

If a rightwing union-busting, welfare-eroding government openly assaults the living standards of working people, that presumably is an attempt, wise or otherwise, to manage the common affairs of the bourgeoisie by increasing capitalist opportunities for profit. If a reforming social-democratic government introduces labour legislation, a generous minimum wage, progressive welfare measures, that also is managing the common affairs of the bourgeoisie, since a happier and healthier labour force will make capitalist firms function better.

Of course, both of these cannot be true at the same time. But they can both be true at different times. And a large part of the story of post-war economic history and our current malaise reflect exactly this.

The key question is: what is the link between capitalist investment (and hence economic growth) and profit margins?

In the 50s and 60s, the link was positive. Social-democratic efforts to main full employment tended to squeeze profit margins. But this promoted investment because low profit margins were accompanied by high (expected) aggregate demand and high profit rates; this is what Marglin and Bhaduri called a stagnationist regime.

But in the 70s, this broke down. The profit squeeze no longer promoted aggregate demand, so profit rates fell and investment and growth slowed.

The solution - which Thatcherism and neoliberalism stumbled upon in the 80s - was union-busting, welfare-eroding government. In creating mass unemployment, profit margins were restored and with them investment and growth. We had, in Marglin and Bharduri's words, an exhilarationist regime.

Which brings us to our current plight. The exhilarationist regime might have broken down, just as the stagnationist one did in the 70s. Neoliberalism no longer promotes investment. Between 1981 and 2001 - roughly, cyclical troughs - the volume of business investment rose 5.3% a year. But since 2001, it has grown just 0.1% a year. And even if the OBR's forecasts (pdf) are right, it will grow just 2.7% between 2001 and 2016.

This might reflect the fact that the UK, more than other economies, suffers from the failure of neoliberalism to no longer promote investment: the industry in which we have a comparative advantage - financial services - is in decline; our main trading partner, the euro zone, suffers long-term sclerosis; and endogenous growth considerations mean we cannot conjure a vibrant manufacturing base from very little.

This poses a question which is insufficiently appreciated: what lies beyond exhilarationism? The right's answer is: nothing. It assumes that tax breaks and diminishing the welfare state will re-ignite investment. The statist left's answer is that we're seeing a return to stagnationism, in which case fiscal expansion and wage-led growth will work. But what if they're both wrong?