Has the truth about the nature of the deepening global slump
finally begun to make its mark in the brains of the system’s chief analysts and
cheerleaders? We ask because some are beginning to question whether a “return
to growth” is possible, let alone likely.
Yesterday, the Financial Times’ chief economics
commentator, Martin Wolf, picked up the theme of a paper from the US National Bureau of
Economic Research. The central argument in the paper by Robert Gordon
challenges the conventional view of economists that “economic growth will
continue indefinitely”.
Gordon says that there are demonstrable limits to increases in
productivity derivable from technological innovation. These barriers include
globalisation, rising resource costs, high fiscal deficits and private debts.
Wolf describes the possibility of an end to growth as the
“heretical question”. He was writing less than 24 hours after the BBC
screened an assessment of the ideas of Karl Marx by its chief
economics editor Stephanie Flanders in which she also allowed the “it can’t go
on forever” cat out of the bag.
Though Flanders didn’t
bring this out, Marx described as his most important contribution to political
economy the discovery of the contradictory forces that give rise to the “law of
the tendency of the rate of profit to fall”.
Put at its simplest, competition obliges capitalists to invest in
productivity-enhancing technologies which, in the short-term give them cost and
price advantages over their competitors. But in the long term, that same
process reduces the rate of profit across the economy as a whole.
Attempts to overcome the operation of this inescapable law, among
them the drive for growth, are what produce not only the struggle between the
classes, but the very same barriers to growth identified but not explained in
Wolf’s account.
The attempts to overcome the law and its effects just make
everything worse. Capitalism has to grow, but each period of growth reaches its
limit, followed by capital destruction and a new turn of the spiral. Each twist
leads to greater instability, more explosive volatility, and ever more
cataclysmic events.
Gordon’s consequential prediction is for the rise in the real
disposable incomes of those outside the elite to slow to a crawl. Quite an
understatement.
It’s doubtful that the people of Greece Greece
More savage cuts are lined up. Unemployment will rise
close to 25%. No wonder that last week's General Strike saw calls for the
government to be overthrown along with its agreement with the IMF. Spain
It is 50 years since Rachel Carson’s Silent Spring launched
a conflict with the chemical industry corporations led by profit-chasing
Monsanto, Velsicol and American Cyanamid. It is 40 years since the
Club of Rome presented its shattering “Limits to Growth” using the then young
science of complex systems to show that resource limits would ensure that
growth could not continue. But, as we have seen, capital doesn’t respond to
argument.
As Monty Don, gardening expert and president of the Soil
Association, noted in response to
a revisiting of Carson
Things are worse than Rachel Carson might ever have dreaded and will certainly get worse yet before there is any hope of improvement. Will any of us have the quiet, dignified, deeply intelligent courage that lay behind her work? Capitalism cannot change track. It is condemned to measuring success and failure in terms of profit and loss. Governments have less and less power and chase after more and more control.
The answer, surely, lies not in Labour’s reactionary “One Nation”
jingoism and "responsible capitalism" but in a transfer of power from
governments and corporations into the hands of ordinary people and the building
of a sustainable, not-for-profit economy and democratic political system.
Gerry Gold
Economics editor
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