(Harry Shutt, "The Trouble With Capitalism: an Enquiry into the Causes of the Global Economic Failure", Zed Books, 1998, pp. 194-196) RETREATING TO DETERMINISM Confronted with the obstinate refusal of growth to revive, a significant number of economists and others have been inclined to flirt with quasi-metaphysical theories which supposedly give grounds for expecting a spontaneous recovery in the global economy irrespective of the revealed current tendency of market forces. According to such theories economic growth is governed by very long cycles (of fifty years or more), which their advocates claim can explain the ups and downs of the world economy at least since the Industrial Revolution, and that these unfold more or less independently of any 'man-made' events or influences such as world wars, political changes or innovations in technology. To anyone who recognises economics to be a social science -- and hence inherently subject to the unpredictable actions and reactions of ever-changing human society --such attempts to subject it to a series of rigid laws of motion can scarcely seem worthy of a moment's consideration. That some respectable academics have allowed themselves to take such theories seriously is thus only of interest as an indicator of how far some will go to avoid addressing the harsh realities of systemic failure. An even more desperate response of some economists, manifested in 1997 to the failure of the longed-for growth revival to materialise, has been to claim that it is actually happening but that somehow the statistics have failed to record it -- or are inherently incapable not doing so. The main basis for these rather nebulous assertions appears to be that the large productivity gains resulting from the information technology revolution must be resulting in higher levels of output --or that, at the very least, the benefits to consumers resulting from the increased efficiency and convenience of the goods and services affected (such as that provided by cash-dispensing machines) ought to be reflected in a higher rate of economic growth than that actually recorded -- rather than in an increased capacity surplus. These claims have been advanced mainly by Wall Street economists -- with the blessing of none other than Chairman Alan Greenspan of the Federal Reserve Board (the US central bank) -- in an effort to convince the investor community that the huge surge in stock prices (which had doubled in just over two years since 1995) did not overstate the true value of the underlying assets. The most bizarre aspect these arguments is that they amount to a repudiation of one of most elementary tenets of market economics, namely that the only activities that count for the purposes of measuring total output income are those that are actually paid for and can thus be valued terms of a common monetary unit of account. As such they seem unlikely to convince serious investors that there is any hidden real value in corporate equities. Rather their significance lies mainly demonstrating the extent to which highly qualified economists are prepared to sacrifice their intellectual self-respect in order to serve the interests of a beleaguered financial establishment. CONCLUSION: NO WAY OUT If we concede that it is difficult, if not impossible, to give definitive explanations for why particular past surges in economic growth happened when they did, we must also concede that the possibility of another one occurring 'spontaneously' in the near future cannot be excluded. Yet the analysis presented in this chapter unquestionably indicates stronger grounds for expecting it not to occur. Moreover this conclusion is reinforced by consideration of the huge scale the growth needed to reverse the slide to disaster. To put this in perspective, it should be noted that, even though growth rates recorded by OECD countries since the mid-1970s averaging some 2.5 per cent a year -- have been low by the standards of the 1950s and 1960s, they appear to be very much in line with the norm for industrialised countries over the hundred years prior to World War II. Despite this, as we have seen, they have been insufficient to prevent either a growing underutilisation of both capital and labour or, largely because of this capacity surplus, a rapid rise in both public and private indebtedness. It follows that a revival growth will have to be sustained at a rate high enough to permit the elimination of both the capacity surplus and the existing debt, while at the same time being consistent with continued high returns on capital, if a disastrous fall in financial asset values is to be avoided. It is difficult to estimate exactly what the minimum average growth rate needed to meet all these requirements would be. Yet there can be no question but that it would have to be at least as high as the 5 per cent average real rate recorded in the 1960s -- and perhaps even higher, assuming a continuing rise in the productivity of capital and labour. Furthermore, it would probably need to be sustained at that average level for at least ten to fifteen years before something like balance was restored. Many have until recently argued that the supposedly dynamic economies of East Asia -- which have consistently recorded such high growth rates since the early 1980s -- could provide both the example and the 'locomotive' power to restore sustained dynamism to the world economy. However, the record of Japan -- whose model of development they are seeking to emulate -- gives little ground for optimism, since it has gone from being the fastest growing industrialised economy in the 1970s and l980s to one of the slowest growing in the 1990s, as it stagnates under a mountain of bad debt. In fact, as noted in Chapter 10, there have been increasing signs since 1995 that South Korea, Thailand and other Asian 'tigers' are likewise set to move to a lower growth path because of problems not dissimilar to those affecting Japan. Thus an assessment based on historical evidence and analysis of the more recent conjuncture of economic forces leads us to the conclusion that only a veritable miracle could avert an eventual (and perhaps quite early) world-wide financial and economic collapse such that the organs of state (whether national or international) will be too impoverished to prevent. For in order to continue paying for the consequences of the surplus of capital -- by bailing out insolvent institutions (and countries) and otherwise subsidising profits -- as well as that of labour (through higher welfare bills), governments would be forced to raise taxes substantially. Yet this could now only be done at the cost of either sharply reducing corporate profits. thereby undermining asset values anyway, and/or further squeezing of personal incomes, thus engendering still weaker consumption growth and greater social deprivation. Faced with such an insoluble dilemma political attention must soon begin to focus on alternatives to the profits system. Louis Proyect (http://www.panix.com/~lnp3/marxism.html)
