In much of the Western world the rate of profit of non-financial corporations fell steeply between 1950–73 and 2000–06—in the US, by roughly a quarter. In response, firms ‘invested’ increasingly in financial speculation, and the us government helped offset the resulting shortfall of non-residential private investment by boosting military spending (the Pentagon’s annual budget happens to be around the same as the figure put on the Treasury’s recent rescue plan).


(...) For a decade, the combined tails of the housing market and financial sector have wagged the dog of the British economy. As in the us, consumption grew much faster than gdp, financed by rising debt, thanks to booming house prices. A grateful electorate returned the Labour government to office twice in a row.