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postcapitalism [2015/11/01 23:00]
will [Long waves, short memories]
postcapitalism [2016/02/20 13:44] (current)
will [Soviet transition]
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   - The Marxist critique argues that major changes in capitalism are the result of external shocks, not internal processes.   - The Marxist critique argues that major changes in capitalism are the result of external shocks, not internal processes.
 +  - Various critics have argued that Kondratieff'​s data or methods were flawed, and that waves simply don't exist at all or to the extent claimed.
   - Contemporary economist Schumpeter argued that the observed waves were caused by the evolution of technology, and the economic phenomena were merely its effects. ​ Various scholars have taken up this argument, to the present. ​ A modern follower of Schumpeter, Carlota Perez, recasts Kondratieff'​s work in technological terms. ​ For her, each wave begins not with explosive economic expansion, but with the underlying technological advance. ​ This throws out the timeline in an interesting way.  It poses the challenge that the fourth wave (1909-71 according to Perez'​s calculations) was almost seventy years long: her answer is that policy mistakes in the 1930s led to the depression lasting until 1945.  Similarly, between 1990 and 2008, there were two separate collapses in the rollout of new technology, where here interpretation leaves room for only one.  Again, the explanation is policy mistakes.   - Contemporary economist Schumpeter argued that the observed waves were caused by the evolution of technology, and the economic phenomena were merely its effects. ​ Various scholars have taken up this argument, to the present. ​ A modern follower of Schumpeter, Carlota Perez, recasts Kondratieff'​s work in technological terms. ​ For her, each wave begins not with explosive economic expansion, but with the underlying technological advance. ​ This throws out the timeline in an interesting way.  It poses the challenge that the fourth wave (1909-71 according to Perez'​s calculations) was almost seventy years long: her answer is that policy mistakes in the 1930s led to the depression lasting until 1945.  Similarly, between 1990 and 2008, there were two separate collapses in the rollout of new technology, where here interpretation leaves room for only one.  Again, the explanation is policy mistakes.
  
 > Perez'​s version of wave-theory stresses the response of governments at crisis points, but puts very little emphasis on the struggles between classes or the distribution of wealth. ​ In an almost pure inversion of Kondratieff,​ the economics are driven by technology, and technology is driven by governments.((p47)) > Perez'​s version of wave-theory stresses the response of governments at crisis points, but puts very little emphasis on the struggles between classes or the distribution of wealth. ​ In an almost pure inversion of Kondratieff,​ the economics are driven by technology, and technology is driven by governments.((p47))
- 
-  - Various critics have argued that Kondratieff'​s data or methods were flawed, and that waves simply don't exist at all or to the extent claimed. 
  
 In addition, Kondratieff hosted a seminar to debate his work a month after publication. ​ During that debate, three main critiques emerged, with varying degrees of validity: In addition, Kondratieff hosted a seminar to debate his work a month after publication. ​ During that debate, three main critiques emerged, with varying degrees of validity:
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 The upswing of the fourth wave was unprecedentedly successful. ​ Between 1948 and 1973, Western Europe grew by an average of 4.6 per cent, almost double the rate of the third wave's upswing in 1900-1913. ​ Although many of the sources of this success were common to previous waves, in various ways they were intensified in the fourth: The upswing of the fourth wave was unprecedentedly successful. ​ Between 1948 and 1973, Western Europe grew by an average of 4.6 per cent, almost double the rate of the third wave's upswing in 1900-1913. ​ Although many of the sources of this success were common to previous waves, in various ways they were intensified in the fourth:
  
-  * New technologies,​ many developed in wartime, including transistors (i.e. the industrial use of information),​ synthetic materials, nuclear power, jet engines, integrated circuits and modern management techniques. +  ​* **New technologies**, many developed in wartime, including transistors (i.e. the industrial use of information),​ synthetic materials, nuclear power, jet engines, integrated circuits and modern management techniques. 
-  * The legacy of the discovery of the effectiveness of wartime state control, which had supported +  * The legacy of the discovery of the effectiveness of wartime ​**state control**, which had supported 
-    * a successful and open intellectual property system in which discoveries were exploited in order to profit from production rather than hoarded to extract monopoly rights-based payments; and +    * a successful and **open intellectual property** system in which discoveries were exploited in order to profit from production rather than hoarded to extract monopoly rights-based payments; and 
-    * the systematisation and dissemination of management knowledge: the first serious attempts to study and document good management practices and the dissemination of these from one company to the next by management consultancies. +    * the systematisation and **dissemination of management knowledge**: the first serious attempts to study and document good management practices and the dissemination of these from one company to the next by management consultancies. 
-  * The feature that was most neglected in contemporary analysis was a conducive and stable financial system (which were all directly or indirectly part of the Bretton Woods agreement):​ +  * The feature that was most neglected in contemporary analysis was a conducive and **stable financial system**, comprising the following ​(which were all directly or indirectly part of the Bretton Woods agreement):​ 
-    * Fixed exchange rates: the 1944 Bretton Woods agreement established fixed exchange rates between all world currencies, which ensured that foreign currency transactions were dominated by trade rather than speculation. ​ It was also significant that this system was enforced by a dominant superpower; the credibility of the system increased its value. +    ​* **Fixed exchange rates**: the 1944 Bretton Woods agreement established fixed exchange rates between all world currencies, which ensured that foreign currency transactions were dominated by trade rather than speculation. ​ It was also significant that this system was enforced by a dominant superpower; the credibility of the system increased its value. 
-    * Negative real interest rates. ​ Now described as "​financial repression",​ in the US between ​1848-73, interest rates were on average 1.6 per cent below inflation, so bank savings would lose value over time.  This enabled Western countries to recover from high public debts at the end of the war (almost 90 per cent of GDP overall) to about 25 per cent by 1973.  It also forced savings into productive investment as the only means of securing a positive return, and controlled inequality. ((This feature of Bretton Woods: permanently moderate inflation across the developed world, was met with horror by right-wing economists, who confidently predicted it would lead to the end of civilisation. ​ But "​[r]ight-wing outrage over the inflationary aspect of Bretton Woods was overcome by the greatest period of stability and full production ever known."​ p83.)) +    ​* **Negative real interest rates**.  Now described as "​financial repression",​ in the US between ​1948-73, interest rates were on average 1.6 per cent below inflation, so bank savings would lose value over time.  This enabled Western countries to recover from high public debts at the end of the war (almost 90 per cent of GDP overall) to about 25 per cent by 1973.  It also forced savings into productive investment as the only means of securing a positive return, and controlled inequality. ((This feature of Bretton Woods: permanently moderate inflation across the developed world, was met with horror by right-wing economists, who confidently predicted it would lead to the end of civilisation. ​ But "​[r]ight-wing outrage over the inflationary aspect of Bretton Woods was overcome by the greatest period of stability and full production ever known."​ p83.)) 
-    * National financial systems: strict capital controls prevented international investment, so domestic savings could not seek higher returns abroad but were forced into productive investment at home. +    ​* **National financial systems**: strict capital controls prevented international investment, so domestic savings could not seek higher returns abroad but were forced into productive investment at home. 
-    * Highly regulated banks with very high reserve ratios by modern standards (28 per cent in the UK) meant that speculative lending was minimised and prevented bubbles and instability. ​ Bank loans across fourteen Western countries was just one fifth of GDP, the lowest rate since 1870.+    ​* **Highly regulated banks** with very high reserve ratios by modern standards (28 per cent in the UK) meant that speculative lending was minimised and prevented bubbles and instability. ​ Bank loans across fourteen Western countries was just one fifth of GDP, the lowest rate since 1870.
  
 ==== Breaking the wave ==== ==== Breaking the wave ====
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 > The neoliberals sought something different: atomization. ​ Because today'​s generation sees only the outcome of neoliberalism,​ it is easy to miss the fact that this goal -- the destruction of labour'​s bargaining power -- was the essence of the entire project: it was a means to all the other ends.  Neoliberalism'​s guiding principle is not free markets, nor fiscal discipline, nor sound money, nor privatisation and offshoring -- not even globalisation. ​ All these things were byproducts or weapons of its main endeavour: to remove organised labour from the equation.((pp91-2)) > The neoliberals sought something different: atomization. ​ Because today'​s generation sees only the outcome of neoliberalism,​ it is easy to miss the fact that this goal -- the destruction of labour'​s bargaining power -- was the essence of the entire project: it was a means to all the other ends.  Neoliberalism'​s guiding principle is not free markets, nor fiscal discipline, nor sound money, nor privatisation and offshoring -- not even globalisation. ​ All these things were byproducts or weapons of its main endeavour: to remove organised labour from the equation.((pp91-2))
  
-During the 1980s, many countries adopted deliberately self-destructive policies in order to deepen the recession, in order to further undermine the working class. ​ High interest rates destroyed many of the large industrial companies in which unions were strongest. ​ In Japan unions were broken by "​taking out the ringleaders and beating them physically every day until resistance stopped."​((p92) ​ But the true success of neoliberalism'​s attack on labour was at the "moral and cultural level":​ union membership drastically declined. ​ "​Across the Western world the wage share of GDP fell markedly."​((p93))+During the 1980s, many countries adopted deliberately self-destructive policies in order to deepen the recession, in order to further undermine the working class. ​ High interest rates destroyed many of the large industrial companies in which unions were strongest. ​ In Japan unions were broken by "​taking out the ringleaders and beating them physically every day until resistance stopped."​((p92))  But the true success of neoliberalism'​s attack on labour was at the "moral and cultural level":​ union membership drastically declined. ​ "​Across the Western world the wage share of GDP fell markedly."​((p93))
  
 Much of the remainder of the chapter goes through a series of graphical illustrations of the fourth wave.  One in particular is important to resolve the common misconception that it is in a ruling class'​s interests to maintain healthy growth in an economy. ​ This figure illustrates that during the upswing, 99 per cent of society enjoy steady gains in their income, but the top 1 per cent benefited little. ​ During the downswing, this relationship is reversed: 99 per cent of society see their income flatline, but after the assault on organised labour in the early-to-mid 1980s, the income of the highest 1 per cent of earners rockets. Much of the remainder of the chapter goes through a series of graphical illustrations of the fourth wave.  One in particular is important to resolve the common misconception that it is in a ruling class'​s interests to maintain healthy growth in an economy. ​ This figure illustrates that during the upswing, 99 per cent of society enjoy steady gains in their income, but the top 1 per cent benefited little. ​ During the downswing, this relationship is reversed: 99 per cent of society see their income flatline, but after the assault on organised labour in the early-to-mid 1980s, the income of the highest 1 per cent of earners rockets.
 +
 +{{ ::​income_inequality.png?​direct&​800 |}}((Source:​ Piketty, Thomas, and Emmanuel Saez, 2004, Income Inequality in the United States 1913-2002, table A4, incomes expressed in 2000 US$))
  
 Neoliberalism succeeded in destroying working-class organisation in way that has never happened before, and in the process rebalanced the entire global economy in favour of capital. ​ Kondratieff'​s theory predicted that we would see downturn and depression, but by breaking labour, neoliberalism managed to convert this into Neoliberalism succeeded in destroying working-class organisation in way that has never happened before, and in the process rebalanced the entire global economy in favour of capital. ​ Kondratieff'​s theory predicted that we would see downturn and depression, but by breaking labour, neoliberalism managed to convert this into
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 > By now, Lenin was a long way from both Marx and Engels. ​ For Marx, the working class is capable of becoming communist spontaneously;​ for Lenin it is not.  For Marx, skill is destined to disappear through automation; for Lenin, skilled privilege at home is the permanent result of colonialism abroad.((p191)) > By now, Lenin was a long way from both Marx and Engels. ​ For Marx, the working class is capable of becoming communist spontaneously;​ for Lenin it is not.  For Marx, skill is destined to disappear through automation; for Lenin, skilled privilege at home is the permanent result of colonialism abroad.((p191))
  
-Unions were important in disrupting and ending the First World War.  This began with strikes in Berlin, Glasgow and Petrograd in 1916 and '17, and a widespread mutiny in the French army in 1917.  Workplace control had been established by factory committees in Russia that later had to be dismantled in order for Lenin to consolidate power. ​ Then the opposition of German unions to the war ultimately led to its end, with revolution narrowly avoided after a mainstream socialist party joined and co-opted the rebellion.+Unions were important in disrupting and ending the First World War.  This began with strikes in Berlin, Glasgow and Petrograd in 1916 and '17, and a widespread mutiny in the French army in 1917.  Workplace control had been established by factory committees in Russia that later had to be dismantled in order for Lenin to consolidate power. ​ Then the opposition of German unions to the war ultimately led to its end, with revolution narrowly avoided after a mainstream socialist party joined and co-opted the rebellion.((Mason has written about the end of World War II on [[http://​blogs.channel4.com/​paul-mason-blog/​world-war/​1240|his blog]].))
  
 > Within forty-eight hours of the mutiny [of German naval workers], they had forced an armistice, the abdication of the Kaiser and the inauguration of a republic.((p194)) > Within forty-eight hours of the mutiny [of German naval workers], they had forced an armistice, the abdication of the Kaiser and the inauguration of a republic.((p194))
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   - From March 1921: the market for food was restored, with peasants paid for their produce. ​ Better off peasants benefited, and the price of food throttled industrial development. ​ Government bureaucracy was solidified.   - From March 1921: the market for food was restored, with peasants paid for their produce. ​ Better off peasants benefited, and the price of food throttled industrial development. ​ Government bureaucracy was solidified.
   - A dispute emerged:   - A dispute emerged:
-    - Trotsky and working class pushed for more democracy, less speculation and industrialisation through central planning+    - Trotsky and the working class pushed for more democracy, less speculation and industrialisation through central planning
     - Bukharin preferred greater restoration of markets, delayed industrialisation and support for a peasantry enriching itself, while     - Bukharin preferred greater restoration of markets, delayed industrialisation and support for a peasantry enriching itself, while
     - Stalin merely defended the interests of the established bureaucracy.     - Stalin merely defended the interests of the established bureaucracy.
  
-This was resolved ​by Stalin expelled rivals and then adopted parts Trotsky'​s proposal in an extreme and violent form, destroying the wealthier peasantry through enforced collectivisation,​ killing 8 million people in 3 years in order to kickstart industrial development which aimed to catch up with the West in 10 years.+This was resolved ​when Stalin expelled rivals and then adopted parts Trotsky'​s proposal in an extreme and violent form, destroying the wealthier peasantry through enforced collectivisation,​ killing 8 million people in 3 years in order to kickstart industrial development which aimed to catch up with the West in 10 years.
  
 > The USSR did not catch up with the West in ten years. ​ But by 1977 its GDP per head was 57 per cent of the USA's -- which put it on a par with Italy. ​ From 1928 until the early 1980s, the average growth in the USSR, according to a CIA-commissioned survey, was 4.2 per cent.  'This clearly qualified as a sustained growth record,'​ concluded analysts at the RAND corporation.((pp222-3)) > The USSR did not catch up with the West in ten years. ​ But by 1977 its GDP per head was 57 per cent of the USA's -- which put it on a par with Italy. ​ From 1928 until the early 1980s, the average growth in the USSR, according to a CIA-commissioned survey, was 4.2 per cent.  'This clearly qualified as a sustained growth record,'​ concluded analysts at the RAND corporation.((pp222-3))
  
-However, ​this study((Which may not be the most unbiased view of the Soviet economy.)) concluded that only a quarter of this growth had come from productivity increases, the rest coming from increased inputs. ​ For this reason, this growth was not sustainable -- exponential growth is not typically considered possible simply by amassing ever greater quantities of capital in this way (according to mainstream economic theory).+However, ​the RAND study((Which may not be the most unbiased view of the Soviet economy.)) concluded that only a quarter of this growth had come from productivity increases, the rest coming from increased inputs. ​ For this reason, this growth was not sustainable -- exponential growth is not typically considered possible simply by amassing ever greater quantities of capital in this way (according to mainstream economic theory).
  
 At this point the book contains an incongruous attack on state planning, which is odd for two reasons. ​ First, it seems unlikely that many readers need convincing that in 2015 a new system of state planning will rescue the  global economy. ​ Second, the entire thing is a straw man, attacking laughably weak examples of state planning (namely pre-war Soviet attempts and an academic political science project run by a couple of guys in Europe), pretending that a single failed example proves all attempts impossible and studiously avoiding credible alternatives.((More obvious examples might have been (1) economists such as Galbraith who documented how the American and British economies rapidly adopted massive state planning in response to the outbreak of the Second World War, who testified that it had turned out to be fairly straightforward in practice so long as there was a large government system in place to do the work, (2) evidence of economic planning by transnational corporations in the current global economy that is of a similar scale and similar type to that of small modern national economies, or (3) the heavy involvement of political planning in the financial systems of a wide range of modern economies ranging from China to Germany via many small developing countries, and the arguably more favourable long-term success of some of these systems compared to the "​apolitical"​ or "​unplanned"​ financial systems in the US or UK that make short-term profits by annihilating long-term viable industrial enterprises.)) At this point the book contains an incongruous attack on state planning, which is odd for two reasons. ​ First, it seems unlikely that many readers need convincing that in 2015 a new system of state planning will rescue the  global economy. ​ Second, the entire thing is a straw man, attacking laughably weak examples of state planning (namely pre-war Soviet attempts and an academic political science project run by a couple of guys in Europe), pretending that a single failed example proves all attempts impossible and studiously avoiding credible alternatives.((More obvious examples might have been (1) economists such as Galbraith who documented how the American and British economies rapidly adopted massive state planning in response to the outbreak of the Second World War, who testified that it had turned out to be fairly straightforward in practice so long as there was a large government system in place to do the work, (2) evidence of economic planning by transnational corporations in the current global economy that is of a similar scale and similar type to that of small modern national economies, or (3) the heavy involvement of political planning in the financial systems of a wide range of modern economies ranging from China to Germany via many small developing countries, and the arguably more favourable long-term success of some of these systems compared to the "​apolitical"​ or "​unplanned"​ financial systems in the US or UK that make short-term profits by annihilating long-term viable industrial enterprises.))
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 The effects of climate change are already seriously disrupting livelihoods in a large number of areas of the world. ​ In order to contain the crisis, a target of limiting the rise in global temperature to 2 degrees above the pre-industrial level has been set.  This in turn would require global emissions to peak by 2020 and fall by half by 2050.  Taking all current and planned action into account, global temperature is projected to rise by approximately 3.6 degrees. ​ This is consistent with "​severe,​ pervasive and irreversible impacts for people and ecosystems"​ according to the IPCC's 2014 report.((p246)) ​ This is a scientific report; these words are not used in order to shock or persuade -- they are the authors'​ sober and honest expectations of the consequences of our current course of action. The effects of climate change are already seriously disrupting livelihoods in a large number of areas of the world. ​ In order to contain the crisis, a target of limiting the rise in global temperature to 2 degrees above the pre-industrial level has been set.  This in turn would require global emissions to peak by 2020 and fall by half by 2050.  Taking all current and planned action into account, global temperature is projected to rise by approximately 3.6 degrees. ​ This is consistent with "​severe,​ pervasive and irreversible impacts for people and ecosystems"​ according to the IPCC's 2014 report.((p246)) ​ This is a scientific report; these words are not used in order to shock or persuade -- they are the authors'​ sober and honest expectations of the consequences of our current course of action.
  
-Market responses: subsidiescarbon ​rationing, ??, have made limited headway, but they are not proportionate to the scale of the problem, and more radical results are not possible through these mechanisms.+Market responses: subsidies ​for renewables and carbon ​trading, have made limited headway, but they are not proportionate to the scale of the problem, and more radical results are not possible through these mechanisms.
  
 > It has become common to laugh at the absurdities of the climate-change deniers, but there is a rationality to their response. ​ They know that climate science destroys their authority, their power and their economic world. ​ In a way, they have grasped that if climate change is real, capitalism is finished. > It has become common to laugh at the absurdities of the climate-change deniers, but there is a rationality to their response. ​ They know that climate science destroys their authority, their power and their economic world. ​ In a way, they have grasped that if climate change is real, capitalism is finished.
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     * Continue to permit complex financial activities under heavy regulation, with the aim of allocating investment between sectors to support innovation.     * Continue to permit complex financial activities under heavy regulation, with the aim of allocating investment between sectors to support innovation.
     * Use criminal law to enforce the basic principles of professional ethics within financial professions,​ to replace complex regulation.     * Use criminal law to enforce the basic principles of professional ethics within financial professions,​ to replace complex regulation.
-    * Address the burgeoning debt overhang by running moderate inflation to make real interest rates negative and persecute or isolate attempts to offshore wealth.((To be brutally clear, this would reduce the value of assets in pension funds, and thus the material wealth of the middle classes and the old; and by imposing capital controls you would be partially deglobalising finance. ​ But this is only a controlled way of doing what the market will do via chaos if, as S&P predicts, 60 per cent of all countries see their debt reduced to junk by 2050. [p275]))+    * Address the burgeoning debt overhang by running moderate inflation to make real interest rates negative and persecute or isolate attempts to offshore wealth.(("To be brutally clear, this would reduce the value of assets in pension funds, and thus the material wealth of the middle classes and the old; and by imposing capital controls you would be partially deglobalising finance. ​ But this is only a controlled way of doing what the market will do via chaos if, as S&P predicts, 60 per cent of all countries see their debt reduced to junk by 2050." ​[p275]))
     * In the much longer term, use carbon trading as the model for new frameworks for the state to incentivise behaviour without directly relying on money or fractional reserve banking. ​ "The objective is to maintain complex, liquid markets in tradable instruments,​ while removing the possibility that there will ever be payback in monetary form"​.((p283))     * In the much longer term, use carbon trading as the model for new frameworks for the state to incentivise behaviour without directly relying on money or fractional reserve banking. ​ "The objective is to maintain complex, liquid markets in tradable instruments,​ while removing the possibility that there will ever be payback in monetary form"​.((p283))
   * Pay everybody a basic (citizen'​s) income in order to provide space for people to engage in more non-market work and to give them the power to demand high paid, creative employment. ​ The basic income is "an antidote to... '​bullshit jobs': the low-paid service jobs capitalism has managed to create over the past twenty-five years that pay little, demean the worker and probably don't need to exist."​((p285. ​ A figure of £6,000 per year is suggested, based on the state pension, with a minimum wage of £18,​000. ​ This would diminish over time as the cost of living fell.)) ​   * Pay everybody a basic (citizen'​s) income in order to provide space for people to engage in more non-market work and to give them the power to demand high paid, creative employment. ​ The basic income is "an antidote to... '​bullshit jobs': the low-paid service jobs capitalism has managed to create over the past twenty-five years that pay little, demean the worker and probably don't need to exist."​((p285. ​ A figure of £6,000 per year is suggested, based on the state pension, with a minimum wage of £18,​000. ​ This would diminish over time as the cost of living fell.)) ​
postcapitalism.1446418825.txt.gz · Last modified: 2015/11/01 23:00 (external edit)