The fact that western capitalism is in a severe crisis is now so commonplace that it’s become almost a cliché. In 2008 the global financial system stood on the brink of collapse and the rescue measures undertaken by panic-stricken governments will burden their economies for years to come.
Economists and analysts of a neo-conservative, economically liberal frame of mind have nothing to add to our understanding of this. Their models simply cannot explain why a system based on de-regulated market activities can ever get into crisis – and why it cannot rediscover the path to prosperity if the state is gradually dismantled and market forces let loose.
But economists and analysts tuned to Keynesian and reformist thinking are much closer to reality: their criticism amounts to saying that the wrong kind of policies – deregulation of markets, liberalisation of the financial system, shrinking the state and the scandalous growth in inequality – had already undermined the system’s stability. In a word: the wrong policies have been pursued for 30 years and a disastrous set of policies has been enacted since the outbreak of the crisis but the system can only be stabilized once the right policies are in place.
But let’s take a closer look at the world: Here’s Spain, with its ghost houses, monuments to a failed fresh start, stretching all along the beaches for kilometer after kilometer; or let’s cast a glance at the ‘solidarity’ clinics in Greece over-crowded by people with no health insurance; at rural America, where the jobless numbers refuse to go down despite growth on tick; at our inner cities in northern Europe where everything seems to be stable but we very quickly get to feel that things are not really progressing, it’s at best stagnation with ever-harsher competition for decent living standards and, along with that, rampant resentment without any confidence in the future. Briefly put: it ain’t working properly any more. So the question is: what if Keynesian tools don’t do the trick anymore?
The American economist Robert Brenner noted such a development as long as 20 years ago in his book The Economics of Global Turbulence – and forecast a crisis-ridden future. It was Brenner who coined the concept of “secular stagnation”: a phrase now spoken aloud by all mainstream economists.
The charm of Brenner’s analysis lies in that it explains the end of the post-war boom and the start of the slow decline through endogenous tendencies or the logical in-built dynamics of capitalism. And thus the conclusion follows: Even if they’re only crudely true then these critical tendencies cannot simply be wished away through a different set of policies because developed capitalism, for technological as well as economic reasons, is hitting limits that no longer allow for high rates of growth and productivity increases.
“The image I have of the end of capitalism — an end that I believe is already under way — is one of a social system in chronic disrepair” is how the German social scientist Wolfgang Streeck put it two years ago. A permanent quasi-stagnation with at best mini-growth rates, explosive inequality, privatization of all and sundry, endemic corruption and plunder, where normal profit expectations get ever lower, a consequent moral collapse (capitalism is more and more linked to fraud, theft and dirty tricks), the West getting weaker and weaker, staggering along as it foments disintegration and crisis in trouble spots on its periphery.
The Nobel Prize winner for economics, Paul Krugman, like Larry Summers, paints a picture of “permanent slump.” Bill Clinton’s treasury secretary – truly no leftie – uses the phrase of “secular stagnation” as a self-evident truth – meaning that the long centuries of dynamic capitalist growth could come to an end.
The renowned economist Robert J Gordon has also investigated in a much-discussed paper whether – at least in the USA – “economic growth is over.” Growth rates took on dynamic pace in 1750, reached breakneck speed in the mid-20th century and have since gone down in successive periods. The great innovations that bring both productivity progress and growth – they may be history: “The growth of productivity … slowed markedly after 1970.”
The third industrial revolution, with computerization and concomitant labour saving, also demonstrated its essential effects between 1960 and the late 1990s but has practically come to a standstill since the nineties. Despite superficial impressions, the past 15 years may have produced practically no more genuinely productive innovations. “Invention since 2000 has centered on entertainment and communication devices that are smaller, smarter, and more capable, but do not fundamentally change labour productivity or the standard of living in the way that electric light, motor cars, or indoor plumbing changed it.”
READ MORE: Caputalism: Will Capitalism Die?
Economists and analysts of a neo-conservative, economically liberal frame of mind have nothing to add to our understanding of this. Their models simply cannot explain why a system based on de-regulated market activities can ever get into crisis – and why it cannot rediscover the path to prosperity if the state is gradually dismantled and market forces let loose.
But economists and analysts tuned to Keynesian and reformist thinking are much closer to reality: their criticism amounts to saying that the wrong kind of policies – deregulation of markets, liberalisation of the financial system, shrinking the state and the scandalous growth in inequality – had already undermined the system’s stability. In a word: the wrong policies have been pursued for 30 years and a disastrous set of policies has been enacted since the outbreak of the crisis but the system can only be stabilized once the right policies are in place.
But let’s take a closer look at the world: Here’s Spain, with its ghost houses, monuments to a failed fresh start, stretching all along the beaches for kilometer after kilometer; or let’s cast a glance at the ‘solidarity’ clinics in Greece over-crowded by people with no health insurance; at rural America, where the jobless numbers refuse to go down despite growth on tick; at our inner cities in northern Europe where everything seems to be stable but we very quickly get to feel that things are not really progressing, it’s at best stagnation with ever-harsher competition for decent living standards and, along with that, rampant resentment without any confidence in the future. Briefly put: it ain’t working properly any more. So the question is: what if Keynesian tools don’t do the trick anymore?
The American economist Robert Brenner noted such a development as long as 20 years ago in his book The Economics of Global Turbulence – and forecast a crisis-ridden future. It was Brenner who coined the concept of “secular stagnation”: a phrase now spoken aloud by all mainstream economists.
The charm of Brenner’s analysis lies in that it explains the end of the post-war boom and the start of the slow decline through endogenous tendencies or the logical in-built dynamics of capitalism. And thus the conclusion follows: Even if they’re only crudely true then these critical tendencies cannot simply be wished away through a different set of policies because developed capitalism, for technological as well as economic reasons, is hitting limits that no longer allow for high rates of growth and productivity increases.
“The image I have of the end of capitalism — an end that I believe is already under way — is one of a social system in chronic disrepair” is how the German social scientist Wolfgang Streeck put it two years ago. A permanent quasi-stagnation with at best mini-growth rates, explosive inequality, privatization of all and sundry, endemic corruption and plunder, where normal profit expectations get ever lower, a consequent moral collapse (capitalism is more and more linked to fraud, theft and dirty tricks), the West getting weaker and weaker, staggering along as it foments disintegration and crisis in trouble spots on its periphery.
The Nobel Prize winner for economics, Paul Krugman, like Larry Summers, paints a picture of “permanent slump.” Bill Clinton’s treasury secretary – truly no leftie – uses the phrase of “secular stagnation” as a self-evident truth – meaning that the long centuries of dynamic capitalist growth could come to an end.
The renowned economist Robert J Gordon has also investigated in a much-discussed paper whether – at least in the USA – “economic growth is over.” Growth rates took on dynamic pace in 1750, reached breakneck speed in the mid-20th century and have since gone down in successive periods. The great innovations that bring both productivity progress and growth – they may be history: “The growth of productivity … slowed markedly after 1970.”
The third industrial revolution, with computerization and concomitant labour saving, also demonstrated its essential effects between 1960 and the late 1990s but has practically come to a standstill since the nineties. Despite superficial impressions, the past 15 years may have produced practically no more genuinely productive innovations. “Invention since 2000 has centered on entertainment and communication devices that are smaller, smarter, and more capable, but do not fundamentally change labour productivity or the standard of living in the way that electric light, motor cars, or indoor plumbing changed it.”
READ MORE: Caputalism: Will Capitalism Die?
