I've recently become aware of a couple of facts, or more specifically connections among facts. Supposedly income inequality in the US started to rise significantly during the 1970s. US internal oil production peaked in the early 1970s. World oil production reached a plateau in 2005 - it is unclear whether we are actually at 'peak oil' as defined by available reserves, but from a practical perspective it doesn't matter since if reserves are too costly in money and energy to recover, they don't really do any good. A couple of economic sites suggest that rising oil prices from 2005 were at least partly responsible for the timing of the 2008 recession - it was a doomed bubble in any case, but as energy costs rise, then all material costs rise as well, and at some point that simply has to effect the general economy.
So, if these are not just coincidences, they suggest that world economies will never fully 'recover' in some sense. Unemployment may go down, per capita growth measured in dollars may go up. Oil or other fossil fuels will never truly be used up. But the entire united states population, much less the rest of the world, will hardly be able to return to the profligate post-WWII era when one could buy anything on credit, and drive or fly anywhere with little regard to the effects on household budgets. And having won the 'war' on marxism, and added over a billion chinese and russian workers accepting very low salaries (compared to american workers) to the world's competitive free-market doesn't help.
On the plus side, assuming that at some point total world production of everything will contract, measured at least in terms of fossil fuels burned up, then at some point we will in fact stop exacerbating global climate change. The only issue is how bad things will be at that point. The prudent thing to do would be to plan ahead for such a world, and start conserving oil and water now, and finding an alternative economic model to material production-based growth measurements. The typical human thing would be to put head in sand, ignore facts, and starve to death or engage in endless border wars with neighbors over oil or water 50 years from now. I won't say which future I personally think is more likely, that would be too depressing (hint!)
Friday, January 27, 2012
Thursday, January 12, 2012
on capitalism
I just finished reading a book called The Future of Capitalism by Lester Thurow. He's a hard-core economist, previously Dean of the MIT Sloan School of Management. So presumably he knows what he's talking about, although also presumably he has as little clue of the future as any other "expert" in that field. But at least, there are a number of statements that he suggests are historically validated, and that I fully agree with, regarding the behavior of "pure" versus "mixed" economic systems. Since it's a library book that I am returning, this seems a great place to document those particular quotes:
1. "In capitalism there is no analysis of the distant future. There is no concept that anyone must invest in the plant and equipment, skills, infrastructure, research and development, or environmental protecion that are necessary for national growth and rising individual standards of living. There simply is no social "must" in capitalism...If capitalism is to work in the long run, it must make investments that are not in any particular individual's immediate self interest but are in the human community's long-run self-interest. How does a doctrine of radical short-run individualism emphasize long-run communal interests? Simply put, who represents the interests of the future to the present? ....If one asked what must governments do in capitalistic societies to make conditions better, the socialist answer was to own and run business firms. That answer proved to be incorrect. The right answer is to force a high level of private and public investment.
2. No one knows exactly what will happen in our society if inequality continues to rise and a large majority of our families experience falling real wages...Similarly, if the democratic political process cannot remedy whatever is causing this reality to occur within capitalism, democracy will eventually be similarly discredited...In a world where national leaders cannot deliver real-wage increases..sooner or later they, or some other newly elected leader, will start pointing the finger of blame at someone else in the hopes that their supporters will see these groups as the cause of the problems...in Congress, the poor are the enemy and must have their entitlement programs cut to save the entitlement programs for those far wealthier than they. None of these actions solves the basic problems. All are diversionary attempts to direct public anger at some powerless minority who can be blamed.
3. History teaches us that the survival-of-the-fittest versions of capitalism do not work. The free market economies that existed in the 1920s imploded during the Great Depression and had to be reconstructed by government....It is well to remember that the social welfare state was not implemented by wild-eyed leftists. Its midwives were almost always enlightened aristocratic conservatives (Bismarck, Churchill, Roosevelt) who adopted social welfare policies to save, not destroy capitalism by protecting the working class."
This book was written in 1994, but it might have been written yesterday. In the aftermath of the 2008 recession, we see many of the same reactions arising even more severely than in recessions of the 1980s and 1990s. Governments jumped in to prevent apparently complete fiscal meltdown, which was driven by inevitable investment bubbles driven by financial companies seeking purely short-term profits with an effective absence of any social policy, social obligation, or government regulation. In other words, these huge recessions are simply unavoidable in pure capitalism, they are getting worse with global money transfer capabilities, and each time government's ability to lead recovery is getting weaker. Result: blame poor people, blame muslims, blame the president, in essence everyone is blaming someone else.
The one area where this book does not seem to be right is in the inevitability of worse in the future: Why? Because it does not address the coming end to cheap oil. When transportation of goods and resources becomes too expensive, then the global economy will clearly have to break down somewhat. At some point even in the US it will be cheaper to run factories locally than to ship raw materials overseas and finished products back again. I guess this will happen within the next 50 years. But what happens when globalism in manufacturing is reduced, but not globalism in information and money transfer? That may have no precedent in human history so it's hard to say. I hope things will get better, maybe more people will go back to farming and the excess unemployment caused by too-efficient factory processes will be rendered irrelevant. It's easy to say that more education and skills training is the key, but humans fall on a normal curve for all capabilities, so there will always be some people that are not "trainable" for some activities (like me for professional music or basketball for example!)
1. "In capitalism there is no analysis of the distant future. There is no concept that anyone must invest in the plant and equipment, skills, infrastructure, research and development, or environmental protecion that are necessary for national growth and rising individual standards of living. There simply is no social "must" in capitalism...If capitalism is to work in the long run, it must make investments that are not in any particular individual's immediate self interest but are in the human community's long-run self-interest. How does a doctrine of radical short-run individualism emphasize long-run communal interests? Simply put, who represents the interests of the future to the present? ....If one asked what must governments do in capitalistic societies to make conditions better, the socialist answer was to own and run business firms. That answer proved to be incorrect. The right answer is to force a high level of private and public investment.
2. No one knows exactly what will happen in our society if inequality continues to rise and a large majority of our families experience falling real wages...Similarly, if the democratic political process cannot remedy whatever is causing this reality to occur within capitalism, democracy will eventually be similarly discredited...In a world where national leaders cannot deliver real-wage increases..sooner or later they, or some other newly elected leader, will start pointing the finger of blame at someone else in the hopes that their supporters will see these groups as the cause of the problems...in Congress, the poor are the enemy and must have their entitlement programs cut to save the entitlement programs for those far wealthier than they. None of these actions solves the basic problems. All are diversionary attempts to direct public anger at some powerless minority who can be blamed.
3. History teaches us that the survival-of-the-fittest versions of capitalism do not work. The free market economies that existed in the 1920s imploded during the Great Depression and had to be reconstructed by government....It is well to remember that the social welfare state was not implemented by wild-eyed leftists. Its midwives were almost always enlightened aristocratic conservatives (Bismarck, Churchill, Roosevelt) who adopted social welfare policies to save, not destroy capitalism by protecting the working class."
This book was written in 1994, but it might have been written yesterday. In the aftermath of the 2008 recession, we see many of the same reactions arising even more severely than in recessions of the 1980s and 1990s. Governments jumped in to prevent apparently complete fiscal meltdown, which was driven by inevitable investment bubbles driven by financial companies seeking purely short-term profits with an effective absence of any social policy, social obligation, or government regulation. In other words, these huge recessions are simply unavoidable in pure capitalism, they are getting worse with global money transfer capabilities, and each time government's ability to lead recovery is getting weaker. Result: blame poor people, blame muslims, blame the president, in essence everyone is blaming someone else.
The one area where this book does not seem to be right is in the inevitability of worse in the future: Why? Because it does not address the coming end to cheap oil. When transportation of goods and resources becomes too expensive, then the global economy will clearly have to break down somewhat. At some point even in the US it will be cheaper to run factories locally than to ship raw materials overseas and finished products back again. I guess this will happen within the next 50 years. But what happens when globalism in manufacturing is reduced, but not globalism in information and money transfer? That may have no precedent in human history so it's hard to say. I hope things will get better, maybe more people will go back to farming and the excess unemployment caused by too-efficient factory processes will be rendered irrelevant. It's easy to say that more education and skills training is the key, but humans fall on a normal curve for all capabilities, so there will always be some people that are not "trainable" for some activities (like me for professional music or basketball for example!)
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