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.
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
will need much
convincing. Their disposable income dropped 16% between 2009 and 2011. The
Irish people came off second worst with drop of 9%. The new draft 2013 budget
for Greece is
founded upon the expectation that its economy will shrink for a sixth year
taking it down by 25% since the 2007/2008 crash. 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.
following the same path. As is every country caught up in the globalised
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
book, “profit-based food production [is] in the
tight fist of huge corporations that have no respect or care at all for
humanity”, adding: 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.